Question

Consider the following spreadsheet for an outsourcing decision model.

	A	B
1	Outsourcing Decision Model
2
3	Data
4
5	Manufactured in-house
6	Fixed cost	$ 60,000
7	Unit variable cost	$ 130
8
9	Purchased from supplier
10	Unit cost	$ 165
11
12	Demand volume	1,000
13
14	Model
15
16	Total manufacturing cost
17	Total purchased cost
18
19	Difference
20	Decision

We assume that the production (demand) volume is normally distributed with a mean of 1,000 and a standard deviation of 100. For the unit cost, select the triangular distribution. It has a minimum value of $150, most likely value of $165, and a maximum value of $190. The number of trials per simulation is equal to 5,000 at a Sim. Random Seed of 1. Run the simulation and answer the following question(s) using the Risk Solver Platform.

 

What is the cost difference lower cutoff in thousands of dollars if the likelihood is 60%?

Approximately 29.67

Approximately 13.56

Approximately 22.45

Approximately 38.97

Approximately 25.43

Answer 1

approximately 29.67%

The cost difference lower cutoff in thousands of dollars according to the question if the likelihood is 60% will be qpproximately 29.67.