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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
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 Probability Labor Probability Transportation Probability Cost (5) Cost Cost (Si (Si 10 2O 11 22 12 24 25 1. Compute profit per unit for base- Base Case using most likely costs case (most likely), worst-case, and Profit = best-case scenarios. Worst Case Profit = Best Case Profit = 2. Construct a simulation model to The average profit from the simulation model should be estimate the mean profit per unit. approximately: 3. Why is the simulation approach to risk analysis preferable to generating a variety of what-if scenarios? 4. Management believes that the project may not be sustainable ifthe profit per unit is less than $5. Use simulation to estimate the probability that the profit per unit will be less than $5
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