Stahlmaere Inc. is a start-up company that manufactures simple machines. It is i

Question

Stahlmaere Inc. is a start-up company that manufactures simple machines. It is interested in analyzing the profit from a new machine using Monte Carlo simulation. It wants to investigate the profit resulting from a selling price of $175 per unit. The setup and advertising costs are known to total $35,000. They assume that the demand for the product is normally distributed with a mean of 1200 units and a standard deviation of 100 units. The company estimates that the raw material cost per unit is uniformly distributed between $5 and $7. The labor cost per unit is assumed to follow a discrete uniform distribution from $10 to $15.

A junior analyst has devised the following Excel spreadsheet that simulates a single scenario using the information given above:

Copy-and-paste the above information into cells A1:B8 of an Excel spreadsheet. Then use a data table to repeat the simulation 1000 times. From the simulation results, estimate Stahlmaere's expected mean profit.

Understanding that simulation is random in nature and that your estimate is unlikely to match any of the answer choices exactly, choose the answer choice that is closest to the estimated mean profit.

Question 7 options:

$180,000

$90,000

$50,000

$150,000

$120,000

Selling price per unit = 175 Set up and advertising cost = 35000 Demand = =NORM.INV(RAND(),1200,100) Raw material cost per unit = =5+(7-5)*RAND() Labor cost per unit = =RANDBETWEEN(10,15) Profit = =(B1*B4)-B2-((B5+B6)*B4)

Explanation / Answer

Selling price per unit = 175 Mean Profit 153222.75 Set up and advertising cost = 35000 The closest value is $ 150,000 Demand = 1397.15 Raw material cost per unit = 5.2052 Labor cost per unit = 15 Profit = 181271 Simulation Profit 181271 1 166114 2 156291 3 155921 4 124807 5 166186 6 154125 7 145448 8 129313 9 156229 10 144547

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