Low-cost, high-volume sales

32. A hardware compa

Distribution of sales For one such product,
Value Prob Price low or high. If sales ar
for $10 per unit. If sal
Low the company will be a
High variable cost per unit
Mean being $7.50, and a 25
$30,000.
Distribution of variable cost per unit a. Use simulation to e
Value Prob
b. Find a 95% interval
interval such that abo

c. Now suppose that a

Mean equal to their respecti
uncertainty. Determin
Annual fixed cost
d. Can you conclude fr
profit from a simulatio
Simulation for part a each input assumes it
Units sold Fixed cost Variable cost Revenue Profit

Annual profit for part c, no uncertainty

Units sold Fixed cost Variable cost Revenue Profit
32. A hardware company sells a lot of low-cost, highvolume products.
For one such product, it is equally likely that annual unit sales will be
low or high. If sales are low (60,000), the company can sell the product
for $10 per unit. If sales are high (100,000), a competitor will enter and
the company will be able to sell the product for only $8 per unit. The
variable cost per unit has a 25% chance of being $6, a 50% chance of
being $7.50, and a 25% chance of being $9. Annual fixed costs are
$30,000.

a. Use simulation to estimate the company’s expected annual profit.

b. Find a 95% interval for the company’s annual profit, that is, an
interval such that about 95% of the actual profits are inside it.

c. Now suppose that annual unit sales, variable cost, and unit price are
equal to their respective expected values—that is, there is no
uncertainty. Determine the company’s annual profit for this scenario.
d. Can you conclude from the results in parts a and c that the expected
profit from a simulation is equal to the profit from the scenario where
each input assumes its expected value? Explain
Scheduling telephone operators
33. W. L. Brown, a dire
Distribution of number of calls per hour must determine how
Calls Probability schedule during each
estimates that the num
80 0.10 hour of a typical eight
120 0.40 probability distributio
160 0.30 operator can handle 1
200 0.15 company $20 per hou
is assumed to cost the
300 0.05 Considering the optio
16 operators, use simu
Calls per hour per operator operators that minimi
Cost per hour per operator costs plus lost profits)
Cost per lost call
Values to try
Number of operators

Simulation
Number of calls Lost calls Lost call cost Operator cost Total cost
33. W. L. Brown, a direct marketer of women’s clothing,
must determine how many telephone operators to
schedule during each part of the day. W. L. Brown
estimates that the number of phone calls received each
hour of a typical eight-hour shift can be described by the
probability distribution in the file P10_33.xlsx. Each
operator can handle 15 calls per hour and costs the
company $20 per hour. Each phone call that is not handled
is assumed to cost the company $6 in lost profit.
Considering the options of employing 6, 8, 10, 12, 14, or
16 operators, use simulation to determine the number of
operators that minimizes the expected hourly cost (labor
costs plus lost profits).