The management of Madeira Computing is considering the introduction of a wearable electronic device with the functionality of a laptop computer and phone. The fixed cost to launch this new product is $300,000. The variable cost for the product is expected to be between $167 and $247, with a most likely value of $207 per unit. The product will sell for $300 per unit. Demand for the product is expected to range from 0 to approximately 20,000 units, with 4,000 units the most likely. (a) Compute profit (in $) for this product in the base-case scenario. $ (b) Compute profit (in $) for this product in the worst-case scenario. $ (c) Compute profit (in $) for this product in the best-case scenario. $ (d) Model the variable cost as a uniform random variable with a minimum of $167 and a maximum of $247. Model the product demand as 1,000 times the value of a gamma random variable with an alpha parameter of 3 and a beta parameter of 2. Construct a simulation model to estimate the average profit and the probability that the project will result in a loss. (Use at least 1,000 trials.) What is the average profit (in $)? (Round your answer to the nearest thousand.) $ What is the probability the project will result in a loss? (Round your answer to three decimal place

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter15: Decision Analysis

Section: Chapter Questions

Problem 5P: Hudson Corporation is considering three options for managing its data warehouse: continuing with its...

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The management of Madeira Computing is considering the introduction of a wearable electronic device with the functionality of a laptop computer and phone. The fixed cost to launch this new product is $300,000. The variable cost for the product is expected to be between $167 and $247, with a most likely value of $207 per unit. The product will sell for $300 per unit. Demand for the product is expected to range from 0 to approximately 20,000 units, with 4,000 units the most likely.

(a)

Compute profit (in $) for this product in the base-case scenario.

(b)

Compute profit (in $) for this product in the worst-case scenario.

(c)

Compute profit (in $) for this product in the best-case scenario.

(d)

Model the variable cost as a uniform random variable with a minimum of $167 and a maximum of $247. Model the product demand as 1,000 times the value of a gamma random variable with an alpha parameter of 3 and a beta parameter of 2. Construct a simulation model to estimate the average profit and the probability that the project will result in a loss. (Use at least 1,000 trials.)

What is the average profit (in $)? (Round your answer to the nearest thousand.)

What is the probability the project will result in a loss? (Round your answer to three decimal place

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