EBK MINDTAP FOR KELLER'S STATISTICS FOR
11th Edition
ISBN: 9780357110676
Author: KELLER
Publisher: VST
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Question
Chapter 7.2, Problem 67E
To determine
Expected value and variance of completion times of a project.
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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 $45 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost
are estimated as follows:
Procurement
Cost($)
10
$
11
12
Probability
0.25
0.45
0.30
Labor
Cost ($)
20
22
24
25
Probability
0.10
0.25
0.35
0.30
Transportation
Cost ($)
3
5
(a) Compute profit per unit for the base-case, worst-case, and best-case scenarios.
Base Case using most likely costs
Profit = $
/unit
Worst Case
Profit = $
/unit
Best Case
Profit = $
/unit
Probability
0.75
0.25
(b) Construct a simulation model to estimate the mean profit per unit. (Use at least 1,000 trials.)
(c) Why is the simulation approach to risk analysis preferable to generating a variety of what-if scenarios?
Simulation will provide ---Select---
of the profit per unit values which can then be used to find ---Select--- ◆ of an unacceptably low…
A new product has the following profit projections and associated probabilities:
Profit
Probability
$150,000
0.10
$100,000
0.25
$ 50,000
0.20
$0
0.15
-$ 50,000
0.20
-$100,000
0.10
Use the expected value approach to decide whether to market the new product.
Because of the high dollar values involved, especially the possibility of a $100,000 loss, the marketing vice president has expressed some concern about the use of the expected value approach. As a consequence, if a utility analysis is performed, what is the appropriate lottery?
Assume that the following indifference probabilities are assigned. Do the utilities reflect the behavior of a risk taker or a risk avoider?
Profit
Indifference Probability
$100,000
0.95
$ 50,000
0.70
$0
0.50
-$ 50,000
0.25
Explain probability and nonprobability samplingtechniques.
Chapter 7 Solutions
EBK MINDTAP FOR KELLER'S STATISTICS FOR
Ch. 7.1 - Prob. 1ECh. 7.1 - Prob. 2ECh. 7.1 - Prob. 3ECh. 7.1 - Prob. 4ECh. 7.1 - Prob. 5ECh. 7.1 - Prob. 6ECh. 7.1 - Prob. 7ECh. 7.1 - Prob. 8ECh. 7.1 - Prob. 9ECh. 7.1 - Prob. 10E
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