Introduction to Management Science 12th Edition by Bernard Taylor

Exercise 11

In Problem, assume that the sales volume for Western Outfitters Store is normally distributed, with a mean of 600 pairs of jeans and a standard deviation of 200; the price is uniformly distributed, with a minimum of $22 and a maximum of $28; and the variable cost is defined by a triangular distribution with a minimum value of $6, a maximum of $11, and a most likely value of $9. Develop a simulation model by using Crystal Ball (with 1,000 trials) and determine the average profit and the probability that Western Outfitters will break even.
Problem
The Western Outfitters Store specializes in denim jeans. The variable cost of the jeans varies according to several factors, including the cost of the jeans from the distributor, labor costs, handling, packaging, and so on. Price also is a random variable that varies according to competitors' prices. Sales volume also varies each month. The probability distributions for volume, price, and variable costs each month are as follows:


Fixed costs are $9,000 per month for the store.
Simulate 20 months of store sales and compute the probability that the store will at least break even and the average profit (or loss).