Simulation Questions Case Study Solution

Part 1:

In this part, the simulation model has been built, in which the range of the demand has been taken from 9000 to 17000 cases; while the average capacity has been considered as 11000 cases (the sum of 75% of 12000 cases and 25% of 8000 cases). In addition to this, 2000 cases have been outsourced at the price of 6.5 dollars per case. The increase range in fixed and variable unit costs are considered from 8% to 12%, which have been calculated by adding and subtracting the 2% standard deviation from 10% mean.

The assumption which has been taken in this simulation is that the company can produce a maximum of 11000 cases and can sell the maximum unit of 11000 cases, and the cases in which the company is outsourcing; remaining demands are not fulfilled by the company. After that, the number of cases sold has been multiplied by the sales price per case, to get the total revenue. Proceeding which, the total costs have been calculated by adding the fixed costs, variable costs and outsourcing costs at one place. In order to get the profits for the company; the total cost has been deducted from the total revenues, which is 12,066 dollars.

Table 1:

Average Profits 12,066
Standard Deviation 2,532
Confidence Interval
Lower Case 9,533
Upper Case 14,598
Number of Cases in Which Profit >20000 0
Probability 0.00%

Furthermore, in order to get 95% confidence interval; the standard deviation has been calculated, which has been further added and subtracted from the average profits, in order to get the upper and lower range of the 95% confidence interval that is from 9533 dollars profits to 14598 dollars profits. In all the simulation analysis; the total profit is not exceeding form 20000 dollars, which shows 0% probability of the company to enjoy the profits of more than 20000 dollars…………………………………..


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