Question

The management of Brinkley Corporation is interested in using simulation to estimate the profit per unit for a new product. The selling price for the product will be $45 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated as follows:

Answer 1

b.

Labor Cost	Probability	Cumulative Probability	Interval lower value	Interval upper value
20	0.10	0.10	0.0000	0.0999
22	0.25	0.35	0.1000	0.3499
24	0.35	0.70	0.3500	0.6999
25	0.30	1.00	0.7000	0.9999

As per cumulative probability interval lower value and interval upper value is calculated. Here the random number has four decimal places.

c.

From the above table, we will simulate labour cost accordingly,

Random Number	Labour Cost
0.1091	22
0.9407	25
0.8083	25
0.0941	20