(All answers were generated using 1,000 trials and native Excel functionality.)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 $45 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated as follows: ProcurementCost ($)ProbabilityLaborCost ($)ProbabilityTransportationCost ($)Probability100.25200.1030.75110.45220.2550.25120.30240.35    250.30    (a)Construct a simulation model to estimate the average profit per unit. What is a 95% confidence interval around this average? Round your answers to two decimal places. Lower Bound: $ Upper Bound: $

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Asked Dec 11, 2019
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(All answers were generated using 1,000 trials and native Excel functionality.)

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 ($)

Probability
10 0.25 20 0.10 3 0.75
11 0.45 22 0.25 5 0.25
12 0.30 24 0.35    
    25 0.30    

 

 

(a) Construct a simulation model to estimate the average profit per unit. What is a 95% confidence interval around this average?
  Round your answers to two decimal places.
  Lower Bound: $
  Upper Bound: $
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Expert Answer

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Step 1

Expected value of profit can be calculated by using formula: Selling price - Expected value of Procurement cost - Expected value of Labour cost - Expected value of Transportation cost

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Labor Transportation Procurement Probability Probability Probability Cost ($) Cost ($) Cost ($) 3 10 0.25 20 0.1 0.75 4 11 0.45 22 0.25 0.25 5 12 0.3 24 0.35 25 0.3 Expected value SUM((A3 B3)+A4 B4)+(AS 85)) SUM[[C3"03)+(C4*D4)+(CS"DS)+(C6*D6)) -SUM[(E3"F3)+[E4"F4)) -45-88-D8-FB 10 Profit 11 12 13

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Step 2

Expected value of Profit = $45 - $11.05- $23.4 - $3.5 = $ 7.05

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Labor Transportation Procurement Probability Probability Probability Cost ($) Cost ($) Cost ($) 2 0.25 20 0.1 0.75 10 11 0.45 22 0.25 0.25 0.35 12 0.3 24 25 0.3 Expected 8 value 11.05 23.40 3.50 9. 10 Profit 7.05 11 12

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Step 3

Confidence Interval can be calculated by using the formula shown below

...
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Confidence Interval = Mean ±Z_o5/2 In

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