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Estimates of the financial information for a new product show the following information: Units Sold Probability...

  1. Estimates of the financial information for a new product show the following information:

Units Sold

Probability

Fixed cost

$8,000

600

.35

Variable cost

$6 / unit

800

.45

Revenue

$22 / unit

1000

.20

Use the random numbers .51, .97, .58, .22, and .16 to simulate five trials. What is the net profit for each trial? DO THE ENTIRE EXERCISE IN MS EXCEL.

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Answer #1

Solutions:

Units sold = { 600, if Random Number ≤ 0.35; 800
                     = 800, if 0.35 < Random Number ≤ 0.35 + 0.45 = 0.8
                      = 1000, if 0.8 < Random Number ≤ 1. }
Trial 1 2 3 4 5
Random Numner 0.51 0.97 0.58 0.22 0.16
Units 800 1000 800 600 600
Sales 17600 22000 17600 13200 13200
Variable Cost 4800 6000 4800 3600 3600
Fixed Cost 8000 8000 8000 8000 8000
Net Profit 4800 8000 4800 1600 1600
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