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The management of Brinkley Corporation is interested in using simulation to estimate the profit per unit for a new product. The selling price for
The management of Brinkley Corporation is interested in using simulation to estimate the profit per unit for a new product. The selling price for the product will be $45 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated as follows Procurement Cost ($) Probability Labor Cost ($) Probability Transportation Cost (5) Probability, 10 0.20 20 0.10 3 0.75 11 0.45 22 0.20 5 0.25 12 0.35 24 0.40 25 0.30 (a) Construct a simulation model to estimate the average profit (in $) per unit and the variance of the profit per unit. (Use at least 1,000 trials. Round your answer to two decimal places.) average variance What is a 95% confidence interval (in 5) around this average? (Round your answers to two decimal places.) (b) Management believes that the project may not be sustainable if the profit per unit is less than $5. Use simulation to estimate the probability that the profit per unit will be less than $5. (Use at least 1,000 trials. Round your answer to three decimal places.) What is a 95% confidence interval around this proportion? (Round your answers to three decimal places.)
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