The management of Madeira Manufacturing Company is considering the introduction of a new product. The fixed cost to begin the production of the product is $30,000. The variable cost for the product is expected to be between $16 and $24, with a most likely value of $20 per unit. The product will sell for $50 per unit. Demand for the product is expected to range from 300 to 2,100 units, with 1,200 units the most likely.

(a)

Develop a what-if spreadsheet model computing profit for this product in the basecase, worst-case, and best-case scenarios.

If your answer is negative, use minus sign.

Best-case profit	$
Worst-case profit	$
Base-case profit	$

(b)

Discuss why simulation would be appropriate for this situation. Would simulation be a preferable approach to analyze this situation? Why or why not?

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