Develop a simulation for the following problem The managemen

Develop a simulation for the following problem. 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 S30.000. The variable cost for the product is uniformly distributed between S16 and S24 per unit. The product will sell for $50 per unit. Demand for the product is best described by a normal probability distribution with a mean of 1200 units und a standard deviation of 300 units. Use simulation trials to answer the following questions: What is the mean profit for the simulation? What is the probability that the project will result in a loss? What is your recommendation concerning the introduction of the product?

Solution

a)mean profit= selling price - cost price

cost price=(16+24)/2=20

profit=50-20=30

b)Probability= amount greater than 50/ total amouunt

=50/100=0.5

c)The recommendation is to have more budget so that if any material is not good, another can be brought up without having to add more money.This will help the business to keep a margin before investing into a project in order to ensure right profit is made.