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Statistical Analysis of Simulation Results

" A company produces a product on a number of machines. Each machine generates between $200 and $400 of revenue per day according to the uniform probability distribution. When a machine breaks down, it must be repaired, and the repair time may take 1, 2, or 3 days to be completed according to the following probability distribution:

Repair time in Days | Probability
1 | 0.60
2 | 0.25
3 | 0.15

The company would like to know whether it should purchase a back-up machine at a cost of $6000. The management has decided that if the loss of revenue due to machine downtime was $5000 or more per year, then a back-up machine should be purchased."

"In order to perform the comparison, the management decided to develop a simulation model for this situation. To develop this model, they first needed to know the time between breakdowns. According to their estimate, the time between breakdowns is between 0 and 8 weeks, with the probability increasing the longer the machine went without breaking down. Thus the probability distribution of breakdowns looked like the following: OPEN ATTACHED FILE TO VIEW IMAGE

1. Need assistance with performing an annual simulation and determine the loss of revenue due to machine breakdown. Next, need assistance deciding whether a back-up machine would be needed. Need assistance showing all work and explanation for solution.


Solution Summary

Based on available data, an statistical analysis before purchasing a manufacturing machine.