A building project requires the use of a special brick.
a) The most likely brick price is $120.00/ton but this price is volatile and fluctuates. The most optimistic price is $80.00/ton and the most pessimistic price is $180.00/ton. (Note there are 3 data points in for this estimate.)
What is the expected price of the brick?
b) Also, I'm uncertain how much of the brick I'll need. I have to wait and see what the building site conditions are like and what changes the owners have in mind. I think I'll most likely need 36 tons but could require as little as 28 tons, or as much as 56 tons.
How much of the brick can I expect to use?
c) Based on the estimates, what is my expected cost for the brick using the COMPLEX method?
a. The formula for the Expected price of brick is (a + 4m + b)/6
Where a = optimistic price, b = pessimistic price and m = most likely price
Most likely brick price: $120.00/ton
Most optimistic price: $80.00/ton
Most pessimistic price: $180.00/ton
Expected price of brick per ton = (a + 4m + ...
The solution computes for the expected price of bricks and the quantity of bricks to order given the most likely, most optimistic, and most pessimistic price scenarios.