Simulation & Probability
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Develop a worksheet for this problem. Safety First is considering the introduction of a new product. The fixed cost is $30,000 to begin the production. The variable cost is uniformly distributed between $16 and $24 per unit. It will sell for $50 per unit Demand for this product is best described by a normal probability distribution with a mean of 1200 units & a std deviation of 300 units. Use 500 simulation trials to answer these questions:
1. What is the mean profit for the simulation? Answer is approx. $6,000; simulation results will vary with most simulations having a mean profit between $5,500 & $6,500.
2. What is the probability the project will remain in a loss? 120 to 150 of the 500 simulation trials should show a loss; so the probability of a loss should be between .24 & .30
3. What is your recommendation concerning the introduction of the project? This project appears to risky
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