The Western Outfitters Store specializes in denim jeans. The variable cost of the jeans varies according to several factors, including the cost of the jeans from the distributor, labor costs, handling, packaging, and so on. Price also is a random variable that varies according to competitors’ prices.
Sales volume also varies each month. The probability distributions for volume, price, and variable costs each month are as follows:
Sales Volume . Probability
300 . .12
400 . .18
500 . .20
600 . .23
700 . .17
800 . .10
1.00
Price . Probability
$22 . .07
23 . .16
24 . .24
25 . .25
26 . .18
27 . .10
1.00
Variable Cost . Probability
$ 8 . .17
9 . .32
10 . .29
11 . .14
12 . .08
1.00
Fixed costs are $9,000 per month for the store.
Simulate 20 months of store sales and compute the probability that the store will at least break even and the average profit (or loss).