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 2100 units, with 1200 units the most likely demand.
a. Develop the profit model for this product.
b. Provide the base-case, worst-case, and best-case analyses.
c. Discuss why simulation would be desirable.