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The management of Brinkley Corporation is interested in using simulation to estimate the profit per unit for a new product. Probability distributions for the purchase cost, the labor cost, and the transportation cost are as follows:
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PurchaseCost ($)
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Probability
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Labor Cost ($)
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Probability
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TransportationCost ($)
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Probability
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10
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0.25
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20
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0.10
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3
|
0.75
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|
11
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0.45
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22
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0.25
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5
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0.25
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|
12
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0.30
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24
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0.35
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|
|
|
|
25
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0.30
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|
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Assume that these are the only costs and that the selling price for the product will be $45 per unit.
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Provide the base-case, worst-case, and best-case calculations for the profit per unit.
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Set up intervals of random numbers that can be used to randomly generate the three cost components.
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Using the random numbers 0.3726, 0.5839, and 0.8275, calculate the profit per unit.
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Using the random numbers 0.1862, 0.7466, and 0.6171, calculate the profit per unit.
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Management believes the project may not be profitable if the profit per unit is less than
$5. Explain how simulation can be used to estimate the probability the profit per unit will be less than $5.