***READ And follow all directions*** Please answer questions with the answers an
ID: 3199231 • Letter: #
Question
***READ And follow all directions***Please answer questions with the answers and put the answers in the picture where they belong
Answers only Please don’t make it confusing Please be clear Please write or type neatly 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 $28,000. The pected to be between $21 and $32 with a most likely value of $27 per unit. The product will sell for $45 per unit. Demand for the product is expected to range from 300 to 1800 units, with 1200 units the most likely demand Let c-variable cost per unit. x demand a. Develop the profit model for this product. Enter your answer in the form of an expression. (Example:(+10)x800) Profit a b. Provide the base-case, worst-case and bst-case analyses. For those boxes in which you must enter subtractive or negative numbers use a minus Base case: Profit Worst case: Profit Best case: Profit c. Discuss why simulation would be desirable. A simulation the probability of each scenario
Explanation / Answer
(a)
Let c = variable cost per unit
x = Demand
Profit = 45x - cx -28000
= (45-c)x - 28000
(b)
Base case :
Profit = (45-27)1200 -28000
= -6400
Worst Case:
Profit = (45-32)×300- 28000
= -24100
Best case :
Profit = (45-21)×1800 -28000= 15200
(c)
The possibility of $15200 profit is interesting , but the worst case loss of 24100 is Risky. Risk analysis would be helpful in evaluating the probability of a loss.
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