Chapter 13
Solutions:
1.
a.
Profit
=
(249 
c
1

c
2
)
x
 1,000,000
=
(249  45  90) (20,000)  1,000,000
=
$1,280,000
(Engineer's)
b.
Profit
=
(249  45  100) (10,000)  1,000,000
=
$40,000
(Financial Analyst)
c.
Simulation will provide probability information about the various profit levels possible. What if
scenarios show possible profit outcomes but do not provide probability information.
2.
a.
Let
c
=
variable cost per unit
x
=
demand
Profit
=
50
x

cx
 30,000
=
(50 
c
)
x
 30,000
b.
Base case:
Profit
=
(50  20) 1200  30,000 = 6,000
Worst case:
Profit
=
(50  24) 300  30,000 = 22,200
Best case:
Profit
=
(50  16) 2100  30,000 = 41,400
c.
The possibility of a $41,400 profit is interesting, but the worst case loss of $22,200 is risky.
Risk
analysis would be helpful in evaluating the probability of a loss.
3.
Random Number
Direct Labor Cost
0.3753
$45
0.9218
$47
0.0336
$43
0.5145
$45
0.7000
$46
4.
a.
Sales
Interval
0
.00 but less than .08
1
.08 but less than .20
2
.20 but less than .48
3
.48 but less than .72
4
.72 but less than .86
5
.86 but less than .96
6
.96 but less than 1.00
b.
2, 5, 2, 3, 2, 4, 2, 1, 1, 2
c.
Total Sales = 24 units
13  2