The management of Madeira Manufacturing Company is considering the introduction of a new product. The fixed cost to begin the production of the product is $35,000. The variable cost for the product is uniformly distributed between $17 and $25 per unit. The product will sell for $51 per unit. Demand for the product is best described by a normal probability distribution with a mean of 1,400 units and a standard deviation of 400 units. Develop an Excel worksheet simulation for this problem. Use 500 simulation trials to answer the following questions:
What is the mean profit for the simulation? Round your answer to the nearest dollar.
Mean profit = $
What is the probability that the project will result in a loss? Recalculate the numerical value of probability in percent and then round your answer to the nearest whole number.
Probability of Loss = %
What is your recommendation concerning the introduction of the product?
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