Sunseel Industries Produces Different Types of Raw Materials and It

Essay

Sunseel Industries produces different types of raw materials and it is interested in using simulation to estimate the profit per unit for its new product X. The selling price for the product will be $40 per unit. Probability distributions for the raw material cost, the production cost, and the marketing cost are estimated as follows. $$\begin{array} { | c | c | c | c | c | c } \hline \begin{array} { c } \text { Raw Material } \\\text { Cost } ( \$ )\end{array} & \text { Probability } & \begin{array} { c } \text { Production } \\\text { Cost } ( \$ )\end{array} & \text { Probability } & \begin{array} { c } \text { Marketing } \\\text { Cost } ( \$ )\end{array} & \text { Probability } \\\hline 16 & 0.20 & 10 & 0.25 & 5 & 0.40 \\\hline 18 & 0.30 & 11 & 0.45 & 6 & 0.60 \\\hline 20 & 0.35 & 12 & 0.30 & & \\\hline 22 & 0.15 & & & & \\\hline\end{array}$$ ​
a. Compute profit per unit for the base case, worst case, and best case.
b. Construct a simulation model to estimate the mean profit per unit.
c. Management believes the project may not be sustainable if the profit per unit is less than $2. Use simulation to estimate the probability the profit per unit will be less than $2.