The management of Madeira Computing is considering the introduction of a wearable electronic device with the functionality of a laptop computer and phone. The fixed cost to launch this new product is $300,000. The variable cost for the product is expected to be between $166 and $246, with a most likely value of $206 per unit. The product will sell for $300 per unit. Demand for the product is expected to range from O to approximately 20,000 units, with 4,000 units the most likely. (a) Develop a what-if spreadsheet model computing profit (in s) for this product in the base-case, worst-case, and best-case scenarios. base-case worst-case best-case
The management of Madeira Computing is considering the introduction of a wearable electronic device with the functionality of a laptop computer and phone. The fixed cost to launch this new product is $300,000. The variable cost for the product is expected to be between $166 and $246, with a most likely value of $206 per unit. The product will sell for $300 per unit. Demand for the product is expected to range from O to approximately 20,000 units, with 4,000 units the most likely. (a) Develop a what-if spreadsheet model computing profit (in s) for this product in the base-case, worst-case, and best-case scenarios. base-case worst-case best-case
Chapter6: Systems Of Equations And Inequalities
Section6.2: Two-variable Linear Systems
Problem 9ECP
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Transcribed Image Text:The management of Madeira Computing is considering the introduction of a wearable electronic device with the functionality of a laptop computer and phone. The fixed cost to launch this new product is $300,000. The variable cost for the product is eoxpected to be
between $166 and $246, with a most likely value of $206 per unit. The product will sell for $300 per unit. Demand for the product is expected to range from o to approximately 20,000 units, with 4,000 units the most likely.
(a) Develop a what-if spreadsheet model computing profit (in s) for this product in the base-case, worst-case, and best-case scenarios.
base-case
worst-case
best-case
(b) Model the variable cost as a uniform random variable with a minimum of $166 and a maximum of $246. Model the product demand as 1,000 times the value of a gamma random variable with an alpha parameter of 3 and a beta parameter of 2. Construct a
simulation model to estimate the average profit and the probability that the project will result in a loss. (Use at least 1,000 trials.)
What is the average profit (in s)? (Round your answer to the nearest thousand.)
What is the probability the project will result in a loss? (Round your answer to three decimal places.)
(c) What is your recommendation regarding whether to launch the product?
O while the average profit is fairly high, the probability of a loss is greater than 10%, so Madeira Computing may not want to launch
product if they have low risk tolerance.
O The average profit is extremely low, and the probability of a loss is greater than 10%, so Madeira Computing should not launch this product.
O The average profit is fairly high, and the probability of a loss is less than 10%, so it appears to be a good idea for Madeira Computing to launch this product.
O While the probability of a loss is less than 10%, the average profit is extremely low, so it may not be worthwhile for Madeira Computing to launch this product.
O The average profit is in the negative, so Madeira Computing should not launch this product.
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