Risk analysis

process of predicting the outcome of a decision in the face of uncertainty

difference between expected value of a decision alternative and the payoff that may actually occur.

What-If Analysis
generating values for the probabilistic inputs (direct labor cost, parts cost, and first-year demand) an

BEST CASE SCENARIO (best estimate)

 Profit 114
15000
1710000
1000000
Ne Profit 710000

Less: Fixed Cost

Estimate first year probability

Probability of Incurring losses?

Make use of simulation approach:

Using simulation perform many what if scenarios:

done base,best,worst
randomly generate values for probabilistic inputs.
to generate, we must know the pobability distribution for each probabilisti
 Probability Distribution
1. Discrete probability distribution- assign prob.
Direct Labor Cost
43
44
45
46
47

Cumulative Probability
0.1
0.3
0.7
0.9
1

Example:
Random No. 0.29
c1 $44

Parts Cost Uniform Probability Distribution

$80-$100
20 possible values
1/20 probability

Parts cost = SV + RAND()*(LV-SV)

small value
large value

C2 = 80 + (Random #*(LV-SV))
Example
Random # 0.343
c2 86.86

Demand Normal Probability Distribution

 x=Z+m
Example Random # 0.805

z-value 0.86
x 18870
generated first-year demand

Chances of losing money:

89.80% probability of profit
10.20% probability of loss
 yoff that may actually occur.

ost, parts cost, and first-year demand) and computing the resulting value for the output (profit)
 Worst Best
47.00 43.00
100.00 80.00
1,500.00 28,500.00
153,000.00 3,591,000.00
1,000,000.00 1,000,000.00
(847,000.00) 2,591,000.00

babilistic inputs.
obability distribution for each probabilistic approach.
n- assign prob.
Probability (assigned)
0.1
0.2
0.4
0.2
0.1
1
Range
From To Cost Unit
0 0.1
0.1 0.3
0.3 0.7
0.7 0.9
0.9 1

Parts cost
this is probability

units

1000000
c1 $44
c2 86.86
x 18870
Net Profit
 500
785234
2367058
698457
51
10.20% probability of a loss
 Parameters
Selling Price per unit $249
Administartive cost $400,000
Advertising cost $600,000

Probabilistic Inputs
Direct Labor Cost/Unit Probability Parts Cost (Uniform Distribution) Demand (Normal Distribution)
$43 0.1 Smallest Value $80 Mean
$44 0.2 Largest Value $100 Std Deviation
$45 0.4 Parts Cost=SV+RAND()*(LV-SV) Demand=NORMINV(RAND(),mean,std dev
$46 0.2
$47 0.1
Total 1.00

Sample Computaion with Excel

Parts Cost (Uniform Distribution)
RN Parts Cost/unit Direct Labor cost/ unit (Discrete
0.7976 $95.95 Distribution)
RN Labor Cost
Demand (Normal Distribution) 0.7952 46
RN Demand
0.4929 14,920
Probability Table for Direct Labor Cost/unit
Cummulative
Direct Labor Cost/Unit Probability Probability From To
$43 0.1 0.1 0 0.1
$44 0.2 0.3 0.1 0.3
$45 0.4 0.7 0.3 0.7
$46 0.2 0.9 0.7 0.9
$47 0.1 1 0.9 1
Total 1.00 3.00

3 Trials Simulation
Direct Labor
Trial RN Cost/Unit RN Parts Cost/Unit
1 0.8523 46 0.8272 $97
2 0.2789 44 0.4533 $89
3 0.5349 45 0.6197 $92

500 Trials Simulation

Direct Labor First Year
Trial Cost/Unit Parts Cost/Unit Demand Net Profit $
1 46 $99 14,386 $491,699
2 45 $89 18,049 $1,073,014
 3 43 $88 10,975 $289,626
4 43 $96 15,944 $760,114
5 46 $99 24,740 $1,580,007
6 44 $95 15,823 $744,197
7 45 $88 16,408 $908,307
8 45 $87 22,287 $1,603,436
9 44 $86 15,187 $801,049
10 45 $88 13,753 $599,492
11 45 $99 17,156 $798,912
12 46 $88 19,428 $1,236,651
13 44 $96 18,351 $992,565
14 45 $99 20,269 $1,134,696
15 45 $100 16,163 $682,481
16 45 $86 21,739 $1,564,487
17 43 $90 7,409 ($138,598)
18 46 $87 12,619 $467,558
19 46 $93 16,282 $797,990
20 45 $91 25,363 $1,865,714
21 46 $86 21,722 $1,536,109
22 44 $83 14,643 $791,282
23 46 $86 18,707 $1,194,600
24 45 $89 18,054 $1,071,603
25 45 $80 13,837 $711,226
26 45 $90 22,382 $1,558,644
27 45 $92 14,268 $604,324
28 45 $100 13,203 $375,144
29 46 $85 15,839 $873,901
30 44 $83 21,847 $1,658,656
31 45 $96 12,220 $314,825
32 45 $81 15,184 $867,611
33 45 $97 11,657 $241,930
34 45 $98 15,647 $653,364
35 45 $91 12,681 $438,677
36 47 $81 9,368 $136,015
37 47 $92 14,627 $613,551
38 45 $94 14,636 $610,376
39 44 $100 20,102 $1,113,460
40 45 $87 17,021 $999,657
41 44 $86 19,783 $1,346,719
42 46 $86 11,896 $388,776
43 45 $88 19,815 $1,290,385
44 45 $84 14,987 $792,078
45 45 $90 10,492 $196,957
46 45 $96 22,408 $1,414,048
47 44 $89 21,998 $1,560,773
48 45 $84 12,944 $551,294
49 47 $99 16,348 $688,572
50 46 $100 11,313 $168,903
51 47 $87 24,061 $1,764,888
52 44 $96 23,871 $1,599,151
53 45 $80 15,433 $909,810
54 45 $84 17,438 $1,084,627
55 47 $96 23,708 $1,510,188
56 45 $85 18,237 $1,175,758
57 45 $83 13,908 $685,209
58 45 $97 15,072 $609,328
59 46 $96 12,443 $328,156
60 46 $90 21,292 $1,402,620
61 44 $81 14,728 $825,754
62 47 $93 17,613 $918,737
63 44 $87 22,054 $1,594,965
64 43 $85 10,999 $325,971
65 45 $88 13,221 $539,564
66 45 $98 18,824 $994,355
67 46 $86 9,925 $160,253
68 46 $99 10,836 $124,468
69 46 $99 19,223 $996,321
70 45 $84 20,685 $1,492,053
71 45 $99 13,952 $461,144
72 47 $83 19,278 $1,302,445
73 45 $94 7,566 ($165,422)
74 45 $88 8,302 ($40,052)
75 46 $95 14,380 $554,088
76 45 $91 17,970 $1,029,823
77 44 $95 15,735 $732,440
78 45 $91 10,967 $237,784
79 47 $92 13,383 $472,469
80 43 $88 15,764 $853,278
81 46 $98 21,718 $1,281,898
82 45 $97 14,544 $558,585
83 47 $87 15,779 $813,731
84 45 $92 16,721 $870,366
85 43 $96 20,373 $1,231,797
86 47 $100 13,069 $333,486
87 44 $90 21,585 $1,481,592
88 45 $96 13,768 $484,494
89 43 $98 15,643 $687,420
90 45 $98 15,806 $674,581
91 47 $85 9,542 $114,558
92 46 $91 6,266 ($297,387)
 93 44 $92 11,856 $337,120
94 44 $91 13,466 $529,178
95 47 $92 16,093 $769,901
96 43 $89 16,161 $894,838
97 47 $86 18,814 $1,188,332
98 46 $81 16,236 $983,576
99 47 $80 16,232 $977,846
100 45 $81 9,642 $187,526
101 43 $86 23,248 $1,799,124
102 46 $84 15,538 $853,111
103 44 $97 11,898 $285,911
104 46 $90 14,577 $648,094
105 46 $99 13,197 $372,637
106 45 $97 16,163 $732,008
107 45 $91 19,014 $1,150,817
108 44 $96 15,858 $730,866
109 46 $87 14,924 $733,757
110 45 $99 8,019 ($157,807)
111 45 $88 14,958 $733,569
112 47 $93 8,498 ($69,553)
113 43 $100 16,517 $754,951
114 45 $99 17,722 $858,213
115 47 $98 13,531 $403,458
116 45 $96 17,447 $875,570
117 45 $88 14,204 $644,876
118 46 $91 19,466 $1,182,611
119 45 $91 4,744 ($465,443)
120 45 $91 16,522 $871,812
121 47 $82 12,739 $534,359
122 44 $85 10,217 $227,154
123 45 $94 17,029 $879,366
124 45 $88 13,487 $566,713
125 46 $81 19,557 $1,391,402
126 45 $94 11,425 $259,910
127 46 $83 13,867 $666,140
128 44 $83 19,924 $1,424,494
129 44 $88 16,211 $904,330
130 44 $86 13,356 $593,176
131 44 $90 15,580 $786,338
132 45 $82 24,303 $1,960,448
133 45 $92 17,386 $953,986
134 46 $99 15,242 $586,673
135 44 $89 10,961 $273,825
136 45 $91 10,334 $166,805
137 44 $99 12,294 $300,492
138 45 $97 16,555 $779,512
139 43 $88 19,424 $1,287,658
140 45 $95 5,085 ($445,918)
141 47 $82 23,046 $1,767,591
142 43 $82 19,906 $1,466,738
143 44 $86 18,256 $1,167,214
144 45 $84 11,633 $401,254
145 46 $91 16,885 $889,590
146 45 $80 12,656 $568,749
147 45 $97 6,097 ($347,819)
148 46 $92 15,516 $726,775
149 44 $95 14,239 $565,065
150 45 $88 12,498 $446,317
151 44 $99 15,272 $621,896
152 46 $99 19,146 $989,033
153 43 $94 13,110 $469,744
154 47 $88 8,261 ($59,784)
155 45 $86 12,274 $452,284
156 44 $81 21,186 $1,634,146
157 45 $97 15,246 $634,454
158 46 $97 10,744 $142,070
159 45 $96 11,224 $211,741
160 47 $81 13,238 $595,845
161 44 $87 17,770 $1,095,801
162 46 $92 15,976 $770,639
163 47 $88 20,346 $1,326,631
164 45 $91 10,815 $218,541
165 47 $93 20,401 $1,220,065
166 45 $89 20,044 $1,305,474
167 44 $85 18,200 $1,190,158
168 46 $85 14,941 $766,066
169 44 $91 13,840 $571,796
170 45 $86 11,568 $364,994
171 46 $92 14,012 $562,105
172 45 $80 16,910 $1,089,683
173 46 $97 21,839 $1,308,571
174 46 $89 16,131 $844,299
175 45 $88 17,133 $993,497
176 47 $88 4,283 ($512,762)
177 45 $96 10,849 $174,073
178 43 $86 12,424 $487,219
179 46 $100 8,237 ($151,163)
180 46 $87 19,635 $1,279,058
181 45 $82 15,811 $930,371
182 45 $88 15,906 $850,892
183 44 $99 12,535 $324,147
184 43 $100 8,691 ($77,596)
185 44 $89 6,283 ($271,739)
186 43 $98 19,910 $1,152,518
187 43 $91 12,067 $389,880
188 43 $91 7,414 ($150,394)
189 45 $98 13,744 $463,629
190 45 $83 18,117 $1,183,317
191 45 $91 12,480 $412,946
192 43 $94 12,314 $379,079
193 44 $82 15,700 $936,370
194 43 $100 8,524 ($95,998)
195 45 $86 16,698 $964,333
196 44 $85 20,120 $1,410,083
197 43 $96 13,763 $516,146
198 44 $89 10,145 $179,737
199 45 $86 8,458 $1,837
200 44 $88 10,764 $259,081
201 43 $98 13,753 $490,433
202 45 $89 18,944 $1,174,589
203 47 $99 10,478 $74,825
204 43 $99 13,090 $401,806
205 45 $99 19,532 $1,045,869
206 44 $84 20,084 $1,430,984
207 44 $82 13,930 $711,290
208 44 $97 16,691 $797,277
209 44 $96 17,628 $920,653
210 44 $96 9,200 $4,112
211 45 $90 15,786 $806,869
212 43 $91 12,418 $432,561
213 46 $84 10,768 $284,684
214 43 $88 6,582 ($226,379)
215 47 $99 9,732 $6,202
216 46 $83 12,908 $543,735
217 47 $81 11,814 $429,360
218 47 $81 18,010 $1,182,021
219 46 $84 18,985 $1,262,120
220 46 $88 8,980 $35,732
221 45 $97 15,717 $676,907
222 43 $88 10,926 $284,405
223 46 $84 18,110 $1,157,452
224 46 $95 21,065 $1,285,116
225 47 $87 7,919 ($88,056)
226 43 $84 5,589 ($318,739)
227 44 $94 13,839 $530,400
228 45 $100 12,441 $298,857
229 46 $83 18,503 $1,222,187
230 46 $98 11,111 $168,642
231 45 $95 7,844 ($145,320)
232 43 $83 14,162 $742,647
233 44 $82 22,999 $1,836,263
234 43 $92 10,823 $235,542
235 45 $98 14,591 $543,413
236 46 $98 16,644 $744,711
237 46 $90 16,365 $848,111
238 45 $89 25,246 $1,903,565
239 45 $84 13,191 $589,187
240 46 $84 15,826 $884,668
241 44 $97 12,598 $359,579
242 45 $93 11,239 $252,270
243 43 $97 24,369 $1,652,858
244 46 $86 8,736 $24,306
245 47 $90 15,025 $682,654
246 45 $98 22,300 $1,358,173
247 47 $89 20,024 $1,266,294
248 46 $100 13,346 $375,648
249 47 $86 10,376 $201,533
250 46 $95 19,536 $1,116,900
251 44 $91 12,197 $392,880
252 45 $86 4,433 ($477,530)
253 44 $84 2,756 ($665,645)
254 44 $88 11,260 $318,985
255 45 $96 19,206 $1,075,486
256 45 $82 15,259 $868,249
257 45 $97 18,638 $991,826
258 44 $91 18,512 $1,109,992
259 45 $98 20,365 $1,164,773
260 46 $87 11,530 $338,635
261 45 $84 18,981 $1,278,162
262 45 $92 15,188 $693,725
263 43 $97 11,138 $211,953
264 44 $94 6,998 ($220,967)
265 45 $93 15,893 $771,353
266 47 $82 8,880 $62,345
267 45 $95 16,767 $831,264
268 45 $92 23,223 $1,595,544
269 45 $81 6,659 ($179,036)
270 44 $86 14,262 $690,718
271 46 $87 11,637 $351,880
272 44 $88 14,243 $666,615
273 44 $97 18,848 $1,033,110
274 46 $89 11,892 $352,986
275 43 $82 14,808 $842,460
276 45 $100 17,703 $845,667
277 47 $85 14,877 $738,094
278 47 $92 23,454 $1,577,104
279 47 $82 9,421 $132,308
280 44 $83 16,718 $1,043,751
281 46 $80 17,616 $1,163,986
282 46 $89 15,039 $714,428
283 44 $86 8,232 ($18,393)
284 45 $83 19,975 $1,417,001
285 43 $84 11,282 $381,751
286 47 $81 12,994 $567,175
287 45 $82 13,513 $654,894
288 45 $82 16,483 $1,015,194
289 43 $82 15,115 $876,735
290 45 $88 10,237 $184,293
291 44 $82 23,754 $1,922,470
292 46 $86 16,897 $983,571
293 45 $96 22,812 $1,458,102
294 44 $93 13,533 $521,528
295 46 $95 26,393 $1,858,019
296 46 $87 16,365 $903,852
297 44 $82 4,811 ($409,810)
298 47 $90 14,521 $629,192
299 45 $83 16,947 $1,044,632
300 45 $83 10,520 $276,968
301 45 $81 21,313 $1,615,660
302 45 $99 12,865 $349,001
303 46 $94 16,196 $760,552
304 43 $93 19,760 $1,223,645
305 43 $85 19,817 $1,406,711
306 45 $91 16,626 $878,958
307 46 $94 8,000 ($128,916)
308 43 $95 12,533 $395,549
309 45 $86 21,093 $1,496,375
310 45 $90 14,554 $653,051
311 46 $87 8,520 ($10,141)
312 44 $91 8,256 ($54,709)
313 46 $94 13,360 $457,496
314 44 $97 15,286 $653,262
315 46 $91 21,213 $1,368,395
316 45 $91 13,267 $493,017
317 44 $92 16,061 $822,525
318 47 $99 7,703 ($209,089)
319 45 $98 17,188 $822,268
320 43 $82 6,312 ($219,648)
321 45 $94 14,468 $584,983
322 45 $85 21,220 $1,523,060
323 43 $89 19,680 $1,306,389
324 44 $85 16,876 $1,019,372
325 44 $90 16,958 $941,780
326 43 $82 7,284 ($93,385)
327 46 $90 17,752 $1,014,100
328 45 $85 13,296 $586,324
329 47 $96 15,322 $620,377
330 44 $89 8,410 ($25,881)
331 47 $97 15,807 $656,301
332 45 $87 17,717 $1,069,133
333 45 $92 13,641 $529,261
334 47 $99 14,357 $477,852
335 45 $98 10,811 $143,683
336 46 $83 8,164 ($23,539)
337 47 $81 17,543 $1,129,898
338 45 $97 16,801 $794,852
339 45 $84 16,086 $924,287
340 43 $91 21,178 $1,444,579
341 44 $91 12,813 $465,331
342 46 $83 10,132 $214,456
343 46 $96 17,963 $930,053
344 46 $98 16,757 $763,989
345 46 $99 24,945 $1,586,134
346 45 $89 12,758 $471,416
347 46 $91 14,333 $599,550
348 47 $96 7,826 ($172,100)
349 45 $95 9,338 $19,442
350 46 $81 9,874 $203,003
351 46 $91 16,788 $875,788
352 44 $99 12,606 $340,491
353 45 $81 8,739 $71,363
354 45 $86 10,315 $221,771
355 44 $92 17,502 $970,406
356 45 $83 11,948 $443,933
357 44 $97 18,773 $1,021,118
358 45 $85 15,415 $841,934
359 47 $97 26,266 $1,747,871
360 44 $95 18,692 $1,057,793
361 45 $87 16,511 $930,491
362 45 $89 12,486 $432,425
363 46 $81 17,264 $1,109,047
364 43 $99 16,044 $711,344
365 44 $84 14,883 $805,236
366 44 $87 12,166 $432,957
367 45 $82 20,449 $1,495,336
368 43 $82 11,824 $470,381
369 44 $98 14,682 $567,994
370 46 $99 13,420 $395,826
371 46 $88 14,428 $655,071
372 45 $84 20,345 $1,443,230
373 45 $93 12,128 $345,308
374 43 $97 9,337 $16,036
375 43 $95 14,568 $617,468
376 45 $93 15,176 $680,731
377 46 $98 18,760 $961,673
378 44 $89 21,585 $1,506,706
379 46 $98 9,556 $3,773
380 43 $87 14,923 $770,252
381 45 $91 20,082 $1,265,155
382 45 $83 13,587 $639,418
383 45 $86 16,846 $984,513
384 45 $96 6,453 ($305,386)
385 47 $88 13,508 $545,320
386 44 $95 10,759 $186,260
387 45 $88 6,129 ($289,808)
388 44 $83 12,318 $508,314
389 47 $86 8,958 $41,695
390 47 $96 13,128 $393,122
391 44 $87 17,098 $1,012,242
392 44 $94 12,055 $342,252
393 45 $88 10,682 $234,740
394 45 $89 20,341 $1,333,452
395 46 $90 13,229 $499,052
396 43 $96 11,696 $290,576
397 47 $92 17,227 $901,603
398 45 $97 9,971 $70,315
399 45 $99 24,218 $1,542,193
400 47 $99 23,421 $1,419,411
401 46 $85 15,077 $783,046
402 46 $95 7,956 ($137,975)
403 45 $88 14,453 $672,154
404 46 $95 10,137 $92,890
405 46 $83 9,982 $196,574
406 47 $82 14,038 $684,429
407 45 $98 3,484 ($631,980)
408 45 $90 11,778 $348,172
409 46 $91 20,262 $1,260,988
410 46 $89 17,113 $948,580
411 45 $92 11,894 $337,326
412 47 $89 17,894 $1,018,206
413 47 $83 13,760 $631,497
414 44 $98 15,904 $707,318
415 45 $81 8,110 $404
416 46 $96 9,643 $34,677
417 45 $83 12,638 $523,469
418 44 $100 9,109 ($40,880)
419 44 $89 16,616 $926,485
420 45 $99 11,099 $162,849
421 44 $98 22,102 $1,362,559
422 45 $98 14,962 $591,931
423 44 $81 17,411 $1,167,214
424 44 $87 16,485 $953,108
425 45 $90 13,870 $574,583
426 46 $91 7,312 ($183,910)
427 44 $85 9,611 $154,751
428 46 $89 10,784 $232,419
429 45 $91 15,778 $781,298
430 44 $88 3,470 ($592,496)
431 45 $98 26,329 $1,794,632
432 46 $84 14,320 $706,834
433 44 $80 24,061 $1,999,599
434 47 $86 14,349 $668,315
435 45 $84 16,166 $942,217
436 45 $86 12,361 $461,810
437 44 $90 7,288 ($164,404)
438 44 $98 17,042 $825,874
439 45 $86 15,654 $847,059
440 46 $93 12,503 $376,286
441 45 $87 9,390 $102,505
442 45 $85 19,984 $1,372,588
443 44 $84 20,007 $1,412,517
444 45 $98 16,073 $702,961
445 45 $85 22,403 $1,666,278
446 45 $95 15,187 $661,622
447 46 $98 15,523 $622,604
448 45 $94 25,681 $1,822,262
449 47 $83 22,049 $1,620,975
450 47 $80 19,693 $1,393,160
451 44 $89 13,501 $560,590
452 46 $87 14,961 $742,899
453 46 $84 14,153 $688,554
454 47 $86 14,915 $736,668
455 47 $90 20,506 $1,305,915
456 43 $80 11,501 $444,987
457 45 $98 15,036 $588,331
458 47 $84 10,456 $238,638
459 43 $96 16,250 $787,547
460 45 $84 14,508 $735,530
461 44 $87 22,297 $1,624,445
462 44 $93 21,619 $1,415,379
463 46 $84 17,469 $1,076,476
464 46 $90 16,223 $828,886
465 46 $100 14,959 $544,681
466 46 $93 12,436 $369,075
467 44 $100 9,866 $39,253
468 44 $98 13,934 $495,945
469 46 $87 18,459 $1,138,800
470 45 $81 10,986 $349,784
471 47 $82 17,255 $1,067,186
472 46 $83 19,668 $1,358,469
473 45 $95 13,192 $443,218
474 45 $86 4,837 ($426,918)
475 45 $91 22,154 $1,511,864
476 45 $98 18,690 $977,654
477 44 $94 17,525 $944,843
478 45 $96 19,322 $1,081,418
479 44 $84 4,050 ($509,214)
480 46 $83 8,860 $60,889
481 47 $98 16,689 $741,517
482 44 $85 16,042 $917,302
483 45 $99 15,865 $660,220
484 45 $82 9,113 $107,252
485 45 $100 20,897 $1,182,942
486 45 $95 22,319 $1,440,111
487 45 $95 12,487 $356,824
488 45 $96 14,737 $593,931
489 43 $84 15,188 $851,928
490 45 $95 9,517 $37,129
491 43 $96 12,969 $420,136
492 44 $93 9,390 $49,705
493 45 $92 11,541 $295,938
494 45 $83 16,904 $1,047,623
495 44 $90 13,638 $574,763
496 44 $94 15,323 $704,223
497 45 $100 7,673 ($201,938)
 498 45 $95 22,922 $1,488,321
499 46 $98 17,819 $878,006
500 45 $95 16,731 $821,628
Average $45.04 $90.31 14920.829431849 $694,689.95

Summary Statistics
Mean Profit $694,689.95
Standard Deviation $ 523,256.14
Minimum Profit ($665,645.30)
Maximum Profit $1,999,599.48
Number of losses 46
Probability of Loss 0.092
Probability of Profit 0.908
rmal Distribution)
15,000
4,500
RMINV(RAND(),mean,std dev)

Direct Labor Cost/unit

Cost ($)/Unit
$43
$44
$45
$46
$47

First Year
RN Demand Net Profit $
0.9592 7,837 ($165,698.16)
0.2221 (3,442) ($1,399,081.28)
0.6388 1,598 ($821,623.77)
 Parameters
Selling Price per unit $249
Administartive cost $400,000
Advertising cost $600,000

Probabilistic Inputs
Direct Labor Cost/Unit Probability Parts Cost (Uniform Distribution) Demand (Normal Distribution)
$43 0.1 Smallest Value $80 Mean
$44 0.2 Largest Value $100 Std Deviation
$45 0.4 Parts Cost=SV+RAND()*(LV-SV) Demand=NORMINV(RAND(),mean,std dev
$46 0.2
$47 0.1
Total 1.00

Sample Computaion with Excel

Parts Cost (Uniform Distribution)
RN Parts Cost/unit Direct Labor cost/ unit (Discrete
0.9512 $99.02 Distribution)
RN Labor Cost
Demand (Normal Distribution) 0.8762 46
RN Demand
0.9021 20,821
Probability Table for Direct Labor Cost/unit
Cummulative
Direct Labor Cost/Unit Probability Probability From To
$43 0.1 0.1 0 0.1
$44 0.2 0.3 0.1 0.3
$45 0.4 0.7 0.3 0.7
$46 0.2 0.9 0.7 0.9
$47 0.1 1 0.9 1
Total 1.00 3.00

3 Trials Simulation
Direct Labor
Trial RN Cost/Unit RN Parts Cost/Unit
1 0.3170 45 0.3004 $86
2 0.9833 47 0.3004 $86
3 0.0122 43 0.1419 $83

500 Trials Simulation

Direct Labor First Year
Trial Cost/Unit Parts Cost/Unit Demand Net Profit $
1 46 $81 14,740 $798,280
2 46 $81 14,740 $798,280
 3 45 $87 14,147 $655,055
4 47 $95 13,216 $407,881
5 44 $95 5,313 ($413,498)
6 46 $99 15,897 $650,090
7 46 $82 11,150 $345,598
8 47 $87 13,503 $556,134
9 45 $85 16,885 $1,007,729
10 46 $92 21,253 $1,354,711
11 45 $87 17,779 $1,086,026
12 44 $83 17,313 $1,111,303
13 45 $93 18,918 $1,106,874
14 47 $88 18,230 $1,072,584
15 46 $86 18,125 $1,118,095
16 45 $84 9,634 $153,947
17 43 $94 21,631 $1,432,474
18 47 $81 25,869 $2,130,392
19 46 $86 14,806 $738,793
20 45 $99 18,389 $939,489
21 44 $91 8,672 ($15,003)
22 45 $88 8,902 $32,076
23 44 $92 21,428 $1,421,906
24 43 $89 19,169 $1,243,163
25 45 $95 13,617 $480,688
26 46 $82 3,750 ($545,297)
27 45 $91 16,568 $864,977
28 46 $83 17,368 $1,081,419
29 45 $91 15,681 $773,116
30 47 $94 12,408 $336,358
31 43 $89 13,268 $549,179
32 45 $86 14,615 $731,531
33 45 $93 16,911 $880,129
34 46 $82 6,316 ($233,432)
35 44 $87 12,838 $518,783
36 45 $96 16,628 $795,206
37 45 $87 5,646 ($338,504)
38 46 $96 14,441 $546,076
39 45 $95 3,398 ($628,951)
40 45 $94 11,037 $208,871
41 43 $93 8,703 ($20,156)
42 44 $100 11,034 $160,524
43 45 $85 20,206 $1,397,826
44 44 $90 7,908 ($91,180)
45 45 $83 20,835 $1,521,086
46 45 $80 20,865 $1,580,409
47 44 $86 19,938 $1,377,554
48 44 $100 18,839 $981,163
49 45 $83 25,868 $2,127,818
50 46 $87 25,969 $2,023,153
51 45 $95 16,411 $796,331
52 44 $82 17,027 $1,086,903
53 45 $92 14,466 $624,285
54 47 $89 20,450 $1,300,972
55 45 $86 20,293 $1,400,239
56 47 $96 (57) ($1,006,047)
57 45 $82 12,055 $471,771
58 43 $95 12,426 $382,185
59 45 $86 18,205 $1,141,401
60 46 $99 11,734 $217,687
61 45 $85 15,386 $835,333
62 46 $99 26,404 $1,758,121
63 45 $92 17,661 $976,531
64 45 $93 11,746 $309,320
65 45 $87 13,630 $594,736
66 46 $85 9,600 $132,191
67 46 $87 8,889 $32,359
68 43 $83 15,040 $843,896
69 44 $92 9,376 $64,075
70 45 $84 22,922 $1,748,346
71 45 $90 14,583 $668,477
72 47 $99 3,370 ($651,359)
73 44 $85 15,727 $893,506
74 45 $86 23,226 $1,729,554
75 44 $84 12,533 $521,218
76 45 $98 14,058 $492,958
77 45 $90 17,674 $1,006,046
78 45 $82 19,623 $1,398,579
79 45 $85 16,019 $903,990
80 45 $95 10,524 $143,476
81 46 $81 19,596 $1,393,708
82 45 $96 10,265 $111,915
83 46 $99 10,406 $81,870
84 45 $98 18,940 $1,012,573
85 44 $93 7,716 ($136,458)
86 46 $93 19,212 $1,120,334
87 45 $97 15,458 $658,333
88 44 $97 14,400 $554,950
89 45 $97 12,698 $353,260
90 45 $81 16,839 $1,076,439
91 45 $99 5,946 ($376,497)
92 47 $85 17,566 $1,058,063
 93 46 $93 18,261 $1,017,305
94 46 $96 13,869 $478,308
95 45 $94 12,669 $392,939
96 45 $88 8,074 ($65,609)
97 46 $87 12,352 $428,694
98 46 $95 17,245 $861,162
99 45 $82 18,120 $1,216,773
100 46 $92 16,641 $853,008
101 47 $86 18,520 $1,150,607
102 45 $95 8,821 ($39,504)
103 45 $88 13,781 $600,200
104 44 $93 13,729 $541,602
105 45 $84 20,120 $1,419,681
106 46 $97 23,619 $1,496,904
107 46 $91 16,617 $864,666
108 46 $83 12,885 $541,907
109 43 $81 15,780 $969,082
110 43 $87 11,645 $387,570
111 45 $100 18,669 $945,221
112 46 $96 14,904 $594,547
113 46 $88 21,538 $1,477,705
114 46 $86 25,742 $2,012,536
115 45 $91 11,095 $250,994
116 46 $95 12,501 $355,685
117 46 $80 16,355 $1,006,436
118 46 $84 24,855 $1,950,234
119 46 $91 13,815 $551,257
120 45 $86 15,224 $791,165
121 45 $99 20,346 $1,133,829
122 45 $88 13,473 $566,069
123 46 $88 11,821 $355,012
124 45 $88 15,582 $802,122
125 46 $93 15,292 $681,717
126 43 $100 13,143 $393,475
127 45 $95 15,607 $704,083
128 45 $86 11,616 $367,694
129 43 $98 19,520 $1,099,076
130 44 $87 8,135 ($44,090)
131 45 $86 28,845 $2,396,546
132 45 $91 9,223 $43,477
133 45 $81 12,232 $499,546
134 45 $85 24,695 $1,931,826
135 45 $90 22,254 $1,544,350
136 45 $88 16,350 $901,015
137 44 $80 19,703 $1,457,694
138 44 $86 16,761 $991,565
139 46 $92 14,904 $647,720
140 45 $84 13,923 $667,372
141 44 $98 17,690 $896,092
142 44 $92 19,178 $1,168,353
143 44 $87 18,281 $1,161,349
144 44 $87 17,661 $1,084,986
145 44 $81 15,295 $892,720
146 46 $92 13,563 $511,729
147 43 $98 19,526 $1,113,479
148 45 $87 9,571 $118,382
149 45 $86 8,156 ($38,618)
150 44 $96 17,484 $905,757
151 47 $96 8,268 ($122,134)
152 45 $81 18,643 $1,297,967
153 44 $82 13,464 $655,183
154 44 $83 12,314 $497,878
155 46 $82 13,899 $676,694
156 46 $92 17,086 $899,688
157 45 $82 14,166 $722,944
158 47 $94 26,458 $1,862,249
159 47 $94 13,550 $464,603
160 46 $98 9,607 $7,212
161 43 $91 14,924 $711,898
162 47 $93 15,998 $739,345
163 45 $87 18,143 $1,122,695
164 46 $81 13,414 $637,578
165 43 $93 12,846 $452,455
166 46 $99 16,216 $683,112
167 45 $95 10,156 $106,936
168 46 $86 12,797 $494,848
169 46 $87 10,913 $266,911
170 46 $95 20,454 $1,214,157
171 47 $90 11,146 $247,419
172 45 $98 18,686 $987,161
173 43 $92 18,403 $1,094,273
174 46 $95 15,291 $654,414
175 45 $83 14,977 $817,937
176 45 $87 17,449 $1,042,520
177 46 $86 12,540 $463,734
178 44 $97 6,362 ($314,149)
179 44 $87 6,169 ($271,670)
180 45 $93 13,252 $471,710
181 45 $91 15,488 $755,546
182 45 $89 11,349 $307,491
183 45 $98 15,541 $641,892
184 46 $80 8,159 $1,198
185 45 $91 22,100 $1,500,108
186 44 $100 20,082 $1,112,963
187 47 $97 14,848 $563,062
188 43 $81 14,142 $773,203
189 44 $88 20,889 $1,435,501
190 45 $94 10,681 $177,722
191 46 $90 12,814 $447,166
192 44 $99 12,204 $298,002
193 46 $86 15,287 $785,421
194 46 $85 9,930 $173,142
195 45 $91 14,838 $680,314
196 46 $85 15,985 $885,611
197 46 $97 19,485 $1,066,697
198 45 $98 16,927 $788,567
199 44 $89 20,330 $1,364,804
200 45 $84 10,200 $221,485
201 43 $82 13,090 $620,515
202 45 $85 11,354 $351,735
203 46 $92 8,764 ($29,990)
204 47 $99 12,667 $306,486
205 44 $81 10,259 $273,922
206 43 $86 7,791 ($67,854)
207 45 $100 17,589 $830,689
208 46 $91 11,343 $267,017
209 44 $84 8,604 $41,139
210 45 $85 11,277 $341,658
211 45 $81 11,953 $473,937
212 45 $96 17,542 $899,418
213 44 $94 23,356 $1,581,760
214 45 $95 17,618 $929,106
215 45 $97 12,806 $364,387
216 46 $86 5,256 ($385,954)
217 45 $83 15,728 $903,757
218 46 $88 10,878 $248,188
219 44 $93 14,814 $662,422
220 45 $100 15,477 $617,160
221 46 $90 15,477 $756,637
222 45 $98 16,421 $736,997
223 45 $80 20,957 $1,590,130
224 45 $96 16,046 $740,990
225 46 $93 13,673 $501,665
226 47 $96 14,748 $562,449
227 45 $98 15,635 $653,525
228 47 $87 14,414 $663,842
229 47 $99 16,498 $698,505
230 45 $100 17,324 $803,513
231 46 $100 14,787 $525,433
232 46 $98 18,217 $916,580
233 44 $88 15,509 $817,476
234 47 $94 11,731 $262,849
235 45 $93 26,571 $1,943,302
236 46 $92 14,945 $661,335
237 43 $91 16,161 $860,899
238 45 $93 24,474 $1,718,504
239 45 $88 14,133 $635,251
240 44 $97 16,475 $779,883
241 43 $81 17,960 $1,242,578
242 44 $96 16,925 $853,117
243 45 $93 21,499 $1,386,629
244 44 $95 9,123 ($195)
245 47 $94 19,141 $1,075,459
246 46 $94 9,613 $47,556
247 43 $97 20,159 $1,205,634
248 45 $81 7,299 ($102,522)
249 45 $81 18,536 $1,273,073
250 46 $87 9,614 $113,026
251 44 $89 11,227 $307,492
252 43 $89 22,649 $1,660,515
253 45 $85 17,841 $1,128,098
254 45 $84 10,813 $297,288
255 47 $89 12,883 $453,192
256 47 $90 13,645 $521,846
257 44 $84 16,453 $986,018
258 45 $90 16,101 $836,492
259 46 $87 12,603 $467,021
260 43 $89 14,068 $648,536
261 45 $93 20,089 $1,238,666
262 44 $100 19,142 $1,016,683
263 45 $88 11,810 $372,970
264 46 $98 11,485 $207,845
265 44 $89 21,227 $1,466,753
266 43 $95 15,988 $771,544
267 43 $88 10,523 $240,854
268 47 $99 7,163 ($265,662)
269 45 $87 23,590 $1,771,490
270 46 $90 19,781 $1,239,763
271 47 $84 14,665 $723,361
272 46 $82 16,899 $1,040,364
273 43 $87 17,841 $1,130,259
274 47 $82 17,697 $1,124,011
275 45 $88 16,410 $907,205
276 44 $99 26,142 $1,773,180
277 47 $82 12,230 $471,378
278 45 $88 16,149 $873,258
279 47 $96 8,014 ($149,285)
280 46 $86 11,626 $359,935
281 47 $93 19,078 $1,079,775
282 44 $96 21,730 $1,367,028
283 44 $80 21,244 $1,652,957
284 45 $87 9,355 $97,616
285 43 $89 21,148 $1,482,512
286 47 $88 11,815 $350,722
287 45 $90 11,888 $360,604
288 47 $98 14,937 $548,187
289 44 $99 18,846 $1,003,718
290 45 $92 19,928 $1,240,640
291 45 $89 10,861 $253,267
292 46 $99 16,660 $738,072
293 45 $89 12,532 $440,832
294 46 $98 15,248 $600,143
295 45 $82 17,679 $1,159,689
296 44 $96 11,374 $237,152
297 45 $91 8,874 $2,749
298 45 $92 12,139 $359,148
299 45 $80 23,935 $1,967,660
300 46 $100 18,143 $877,507
301 45 $84 12,132 $450,639
302 44 $93 18,142 $1,029,656
303 45 $81 10,507 $292,807
304 45 $81 16,110 $987,799
305 45 $89 12,216 $406,652
306 45 $87 22,188 $1,589,124
307 45 $86 16,023 $892,729
308 47 $91 12,099 $344,388
309 47 $86 13,944 $615,421
310 43 $82 16,254 $1,022,450
311 44 $82 12,362 $520,434
312 44 $83 12,100 $480,751
313 44 $85 19,755 $1,374,700
314 47 $87 13,028 $496,952
315 45 $94 18,348 $1,020,604
316 44 $100 16,425 $726,736
317 46 $92 25,259 $1,815,287
318 46 $94 14,558 $582,737
319 46 $99 14,165 $473,146
320 46 $89 20,295 $1,306,660
321 46 $95 15,397 $656,174
322 45 $83 14,409 $748,974
323 45 $83 8,870 $70,206
324 43 $94 21,193 $1,375,530
325 43 $93 11,560 $302,535
326 45 $98 22,230 $1,362,672
327 45 $100 12,496 $304,139
328 44 $98 9,167 ($15,510)
329 46 $96 15,073 $616,060
330 44 $94 18,815 $1,095,584
331 45 $98 13,762 $453,645
332 45 $100 11,216 $169,874
333 47 $90 15,101 $684,357
334 44 $92 13,081 $481,725
335 43 $93 17,540 $973,282
336 44 $81 10,782 $335,523
337 46 $84 14,930 $781,318
338 46 $84 16,128 $919,146
339 45 $84 6,292 ($243,152)
340 45 $99 17,589 $849,783
341 45 $83 17,157 $1,082,538
342 45 $90 18,186 $1,064,565
343 46 $96 12,362 $317,744
344 45 $99 18,874 $988,568
345 43 $92 9,333 $59,570
346 44 $85 15,402 $842,098
347 46 $89 13,808 $568,519
348 46 $92 8,800 ($18,816)
349 45 $91 15,939 $802,779
350 45 $89 8,781 $5,662
351 43 $93 13,082 $483,068
352 45 $80 13,278 $640,136
353 45 $99 10,234 $73,113
354 43 $84 9,357 $138,984
355 45 $98 10,956 $166,219
356 44 $93 14,559 $634,762
357 46 $92 16,203 $794,792
358 46 $85 16,600 $959,570
359 45 $91 19,702 $1,218,191
360 44 $98 18,792 $1,018,475
361 44 $86 13,369 $595,147
362 44 $80 12,265 $530,443
363 45 $100 4,652 ($515,737)
364 44 $98 17,530 $876,258
365 46 $86 6,341 ($257,364)
366 46 $83 16,300 $961,752
367 46 $93 8,037 ($114,435)
368 45 $98 16,982 $796,760
369 45 $83 12,725 $541,180
370 45 $97 28,405 $2,035,501
371 43 $87 23,752 $1,834,958
372 44 $87 15,150 $792,396
373 45 $88 18,043 $1,086,255
374 45 $97 10,094 $77,003
375 45 $86 15,730 $855,156
376 45 $95 10,470 $136,310
377 45 $87 18,006 $1,105,990
378 43 $98 15,189 $639,404
379 45 $98 11,202 $185,298
380 45 $99 5,911 ($377,908)
381 44 $100 21,786 $1,292,703
382 45 $94 10,493 $152,270
383 45 $88 12,185 $411,211
384 44 $95 17,705 $940,295
385 44 $99 14,026 $486,830
386 46 $98 12,630 $331,514
387 43 $98 11,833 $274,008
388 47 $83 11,992 $423,032
389 44 $83 18,288 $1,229,586
390 45 $90 13,461 $535,707
391 45 $99 22,843 $1,388,282
392 44 $81 13,188 $629,831
393 45 $86 12,797 $508,109
394 44 $97 21,549 $1,332,423
395 44 $84 16,327 $978,369
396 43 $81 13,417 $678,588
397 43 $94 13,115 $470,911
398 45 $85 11,642 $390,144
399 44 $92 17,007 $920,026
400 46 $84 20,717 $1,473,476
401 43 $88 15,079 $781,551
402 45 $86 18,603 $1,191,435
403 45 $86 7,759 ($86,433)
404 46 $81 15,767 $928,130
405 45 $98 11,881 $253,680
406 44 $98 18,138 $944,317
407 47 $94 12,654 $364,374
408 46 $85 7,923 ($65,495)
409 45 $84 16,517 $981,413
410 43 $81 15,409 $923,550
411 44 $85 10,953 $311,293
412 45 $89 13,403 $542,136
413 47 $91 15,564 $724,156
414 45 $91 17,406 $963,357
415 45 $84 18,403 $1,201,288
416 46 $97 12,029 $279,989
417 45 $81 12,271 $515,370
418 47 $95 15,937 $698,629
419 47 $80 13,114 $599,483
420 45 $85 17,424 $1,080,811
421 47 $89 12,914 $457,188
422 44 $82 13,560 $662,522
423 43 $91 11,472 $317,337
424 44 $89 13,660 $585,651
425 45 $89 7,054 ($189,379)
426 46 $86 20,529 $1,403,389
427 44 $97 9,244 ($2,210)
428 45 $98 13,135 $394,320
429 45 $93 14,998 $670,178
430 43 $98 12,055 $298,760
431 43 $80 16,452 $1,070,191
432 47 $87 15,642 $796,045
433 45 $94 18,374 $1,014,192
434 44 $84 11,320 $366,896
435 45 $93 7,810 ($136,706)
436 45 $84 9,420 $134,084
437 47 $90 16,668 $860,119
438 45 $98 16,868 $789,703
439 43 $91 11,328 $305,131
440 45 $99 18,757 $966,053
441 45 $87 6,985 ($181,332)
442 45 $96 20,311 $1,185,902
443 47 $85 17,582 $1,056,726
444 43 $93 9,997 $130,660
445 44 $80 13,288 $660,279
446 43 $97 22,308 $1,428,716
447 44 $98 20,075 $1,152,325
448 45 $96 23,525 $1,544,195
449 45 $86 15,790 $864,599
450 45 $91 20,076 $1,271,398
451 45 $97 16,334 $741,615
452 44 $83 10,312 $259,049
453 45 $99 18,833 $982,868
454 45 $95 10,769 $170,287
455 47 $86 18,969 $1,206,471
456 43 $87 3,673 ($562,058)
457 44 $93 16,853 $884,807
458 45 $94 19,144 $1,113,067
459 44 $98 19,892 $1,119,676
460 45 $94 13,171 $444,513
461 44 $92 12,780 $441,963
462 46 $88 18,642 $1,137,967
463 47 $87 19,447 $1,236,080
464 45 $83 7,250 ($122,903)
465 44 $82 11,281 $384,712
466 44 $84 15,725 $904,693
467 45 $91 18,858 $1,137,016
468 47 $83 13,420 $596,032
469 46 $100 14,513 $495,008
470 46 $82 18,505 $1,236,609
471 45 $87 8,497 ($9,703)
472 45 $89 14,808 $697,760
473 46 $92 20,708 $1,289,847
474 46 $91 13,232 $475,804
475 45 $86 7,319 ($138,605)
476 45 $99 20,197 $1,130,349
477 44 $98 9,926 $58,225
478 45 $95 18,997 $1,069,319
479 45 $91 14,405 $630,542
480 46 $96 21,596 $1,300,385
481 46 $97 18,887 $1,004,175
482 46 $85 29,158 $2,438,372
483 44 $84 10,134 $230,559
484 47 $99 18,367 $886,120
485 46 $98 9,723 $24,522
486 45 $92 20,417 $1,287,364
487 46 $90 10,154 $150,281
488 46 $93 9,331 $26,317
489 44 $84 12,480 $508,761
490 46 $98 15,349 $617,599
491 45 $84 14,038 $686,792
492 43 $93 20,949 $1,367,508
493 45 $81 15,785 $933,993
494 46 $98 15,999 $673,392
495 47 $93 26,247 $1,861,456
496 44 $96 15,226 $664,776
497 44 $92 17,392 $971,057
 498 46 $83 11,780 $413,423
499 44 $93 12,867 $438,037
500 45 $93 13,236 $468,959
Average $45.04 $90.24 15020.121105623 $707,000.80

Summary Statistics
Mean Profit $707,000.80
Standard Deviation $ 527,338.53
Minimum Profit ($1,006,046.82)
Maximum Profit $2,438,372.02
Number of losses 43
Probability of Loss 0.086
Probability of Profit 0.914
rmal Distribution)
15,000
4,500
RMINV(RAND(),mean,std dev)

Direct Labor Cost/unit

Cost ($)/Unit
$43
$44
$45
$46
$47

First Year
RN Demand Net Profit $
0.6982 2,337 ($724,302.34)
0.3272 (2,014) ($1,233,641.27)
0.0249 (8,829) ($2,087,385.45)
 Parameters
Selling Price per unit $50
Fixed Cost $30,000

Probabilistic Inputs
Direct Labor Cost/Unit Probability Parts Cost (Uniform Distribution) Demand (Normal Distribution)
$16 Smallest Value $16 Mean
$17 0.71 Largest Value $24 Std Deviation
$18 0.75 Parts Cost=SV+RAND()*(LV-SV) Demand=NORMINV(RAND(),mean,std dev
$19 0.79
$20 0.83
$21 0.88
$22 0.92
$23 0.96
$24 1.00
Total 6.83

Sample Computaion with Excel

Parts Cost (Uniform Distribution)
RN Parts Cost/unit Direct Labor cost/ unit (Discrete
0.9106 $23.28 Distribution)
RN Labor Cost
Demand (Normal Distribution) 0.3167 45
RN Demand
0.6832 1,343
Probability Table for Direct Labor Cost/unit
Cummulative
Direct Labor Cost/Unit Probability Probability From To
 $43 0.1 0.1 0 0.1
$44 0.2 0.3 0.1 0.3
$45 0.4 0.7 0.3 0.7
$46 0.2 0.9 0.7 0.9
$47 0.1 1 0.9 1
Total 1.00 3.00

3 Trials Simulation
Direct Labor
Trial RN Cost/Unit RN Parts Cost/Unit
1 0.1543 44 0.8977 $23
2 0.9176 47 0.2368 $18
3 0.0872 43 0.4675 $20

500 Trials Simulation

Direct Labor First Year
Trial Cost/Unit Parts Cost/Unit Demand Net Profit $
1 46 $21 683 ($875,970)
2 47 $24 1,356 ($758,341)
3 45 $16 1,430 ($731,807)
4 43 $19 1,286 ($759,565)
5 46 $18 907 ($832,021)
6 44 $22 843 ($845,554)
7 45 $22 946 ($827,949)
8 44 $21 1,129 ($792,303)
9 46 $21 1,162 ($788,141)
10 45 $17 1,296 ($757,663)
11 45 $21 1,030 ($811,359)
12 43 $22 1,068 ($803,171)
13 44 $22 1,403 ($742,969)
14 44 $21 1,310 ($758,527)
15 46 $23 840 ($848,498)
16 46 $23 1,711 ($691,858)
17 44 $19 1,063 ($802,284)
18 47 $22 1,301 ($766,124)
19 46 $18 1,246 ($769,287)
20 45 $22 1,464 ($734,047)
21 45 $21 1,099 ($798,638)
22 46 $21 1,336 ($757,335)
23 45 $18 1,594 ($703,143)
24 44 $19 810 ($849,288)
25 46 $18 534 ($901,146)
26 46 $20 1,167 ($785,880)
27 47 $17 1,522 ($718,078)
28 45 $23 960 ($826,106)
29 45 $23 1,489 ($730,608)
30 45 $18 1,193 ($778,446)
31 45 $19 1,342 ($752,374)
32 46 $18 1,266 ($765,703)
33 46 $16 1,177 ($780,253)
34 45 $17 1,326 ($752,356)
35 45 $20 1,207 ($778,276)
36 45 $20 1,491 ($725,747)
37 45 $17 834 ($844,022)
38 45 $18 1,796 ($666,177)
39 45 $21 830 ($848,149)
40 47 $23 1,150 ($794,245)
41 44 $17 1,791 ($662,843)
42 45 $17 806 ($849,618)
43 43 $17 1,089 ($794,091)
44 44 $22 808 ($852,545)
45 43 $18 1,087 ($795,368)
46 44 $21 1,142 ($790,497)
47 45 $21 941 ($827,667)
48 47 $16 1,076 ($800,103)
49 47 $23 1,616 ($710,473)
50 46 $20 1,287 ($764,766)
51 47 $17 1,120 ($793,010)
52 45 $23 1,317 ($761,639)
53 46 $21 803 ($853,487)
54 45 $24 988 ($821,763)
55 45 $18 1,538 ($713,966)
56 45 $24 1,049 ($810,949)
57 45 $24 1,416 ($745,023)
58 45 $23 1,459 ($736,448)
59 44 $19 824 ($846,305)
60 43 $22 1,563 ($712,061)
61 44 $17 1,098 ($793,010)
62 45 $21 1,294 ($763,603)
63 44 $22 1,342 ($754,053)
64 44 $16 1,334 ($748,090)
65 46 $22 874 ($841,823)
66 45 $17 1,184 ($778,727)
67 47 $17 1,347 ($750,296)
68 46 $22 1,898 ($657,293)
69 46 $19 1,219 ($776,064)
70 45 $24 2,220 ($599,354)
71 46 $20 1,173 ($785,251)
72 45 $17 1,171 ($781,320)
 73 45 $22 1,542 ($718,899)
74 45 $21 854 ($844,108)
75 43 $22 1,151 ($788,026)
76 46 $20 1,048 ($807,734)
77 44 $17 1,492 ($718,900)
78 43 $22 1,121 ($794,187)
79 44 $23 1,204 ($781,027)
80 46 $21 1,475 ($731,733)
81 46 $18 1,433 ($735,578)
82 46 $22 1,695 ($693,815)
83 44 $19 1,381 ($742,454)
84 46 $21 1,446 ($736,842)
85 45 $21 1,561 ($714,931)
86 46 $24 1,189 ($787,160)
87 45 $22 1,302 ($762,744)
88 44 $20 927 ($828,169)
89 45 $23 247 ($955,347)
90 45 $22 1,370 ($750,921)
91 45 $24 1,402 ($747,058)
92 45 $19 982 ($818,534)
93 45 $20 899 ($834,452)
94 44 $17 755 ($858,195)
95 46 $20 1,260 ($769,159)
96 45 $23 1,201 ($782,521)
97 44 $17 1,549 ($708,305)
98 46 $21 1,923 ($649,269)
99 47 $17 1,026 ($810,546)
100 47 $21 842 ($847,394)
101 45 $17 1,067 ($800,858)
102 43 $23 1,639 ($699,575)
103 44 $21 987 ($818,858)
104 45 $18 1,640 ($694,579)
105 47 $16 1,457 ($729,486)
106 43 $18 1,391 ($738,278)
107 47 $23 1,111 ($801,277)
108 45 $24 837 ($849,037)
109 46 $22 929 ($831,402)
110 44 $17 1,152 ($783,543)
111 45 $24 1,531 ($723,698)
112 45 $22 713 ($870,362)
113 45 $17 1,264 ($763,762)
114 47 $17 1,466 ($728,281)
115 45 $19 1,895 ($648,443)
116 46 $22 1,139 ($794,300)
117 44 $19 936 ($825,878)
118 46 $20 1,169 ($785,929)
119 45 $20 912 ($832,030)
120 45 $21 1,196 ($781,226)
121 47 $20 667 ($878,682)
122 45 $19 1,020 ($811,717)
123 45 $22 1,816 ($669,844)
124 44 $21 1,173 ($784,128)
125 45 $23 1,160 ($790,446)
126 44 $23 1,671 ($695,922)
127 46 $21 1,175 ($785,935)
128 45 $17 1,584 ($704,276)
129 44 $24 1,274 ($769,302)
130 45 $18 1,021 ($810,660)
131 46 $22 1,114 ($798,656)
132 46 $23 1,091 ($804,216)
133 46 $21 1,983 ($639,533)
134 45 $22 1,180 ($784,865)
135 45 $20 1,182 ($782,733)
136 44 $16 1,296 ($755,518)
137 46 $23 1,883 ($660,285)
138 45 $20 1,801 ($668,944)
139 43 $21 1,073 ($801,323)
140 45 $23 1,447 ($738,289)
141 43 $16 433 ($917,953)
142 45 $23 951 ($828,033)
143 45 $17 1,313 ($754,563)
144 45 $16 1,330 ($750,678)
145 44 $18 921 ($827,630)
146 46 $18 895 ($834,153)
147 47 $24 1,109 ($802,616)
148 45 $22 1,594 ($709,183)
149 45 $23 1,318 ($761,616)
150 45 $18 1,283 ($761,221)
151 46 $22 917 ($834,386)
152 44 $19 1,459 ($728,118)
153 45 $20 1,157 ($786,612)
154 45 $16 1,096 ($794,421)
155 45 $24 1,539 ($722,569)
156 45 $23 1,187 ($785,212)
157 44 $21 937 ($827,497)
158 45 $24 1,287 ($767,844)
159 46 $24 1,265 ($773,142)
160 46 $17 1,445 ($730,502)
161 46 $23 706 ($872,968)
162 45 $24 1,234 ($777,849)
163 45 $22 1,576 ($712,301)
164 45 $18 1,655 ($692,193)
165 43 $17 1,153 ($782,184)
166 44 $21 1,285 ($764,024)
167 44 $23 1,367 ($750,595)
168 46 $17 1,160 ($784,385)
169 43 $20 1,164 ($783,201)
170 45 $18 884 ($835,781)
171 44 $21 1,045 ($807,680)
172 44 $21 1,300 ($761,159)
173 44 $21 833 ($846,833)
174 45 $21 1,410 ($741,959)
175 45 $18 993 ($815,425)
176 45 $18 1,721 ($680,582)
177 44 $23 909 ($834,757)
178 46 $18 500 ($907,384)
179 45 $23 1,014 ($816,561)
180 46 $18 1,982 ($634,263)
181 46 $22 1,551 ($719,221)
182 45 $16 1,255 ($764,628)
183 46 $21 551 ($899,852)
184 45 $23 1,482 ($731,797)
185 45 $23 872 ($841,838)
186 44 $22 1,743 ($680,989)
187 45 $23 1,257 ($772,402)
188 44 $23 1,659 ($698,669)
189 46 $18 718 ($866,796)
190 43 $19 1,135 ($787,836)
191 44 $17 581 ($890,964)
192 46 $18 1,341 ($751,664)
193 45 $19 1,431 ($734,646)
194 44 $24 1,400 ($746,040)
195 46 $22 884 ($839,658)
196 45 $23 720 ($869,343)
197 44 $17 1,356 ($745,353)
198 45 $21 971 ($822,210)
199 46 $23 1,450 ($739,804)
200 43 $17 1,008 ($809,778)
201 46 $21 1,123 ($795,659)
202 45 $17 1,277 ($761,261)
203 46 $16 1,702 ($681,874)
204 43 $21 979 ($818,982)
205 45 $23 1,104 ($800,422)
206 45 $24 954 ($827,959)
207 45 $22 1,734 ($684,329)
208 45 $19 1,395 ($742,308)
209 45 $24 1,120 ($798,240)
210 45 $19 736 ($863,647)
211 45 $18 960 ($821,517)
212 45 $21 985 ($819,346)
213 45 $18 1,213 ($774,540)
214 45 $18 659 ($877,654)
215 45 $19 1,333 ($753,256)
216 46 $18 1,337 ($753,070)
217 47 $20 1,240 ($773,851)
218 47 $17 1,429 ($736,052)
219 45 $21 1,311 ($760,170)
220 45 $24 1,152 ($792,542)
221 44 $23 1,680 ($694,304)
222 44 $19 992 ($815,644)
223 46 $19 940 ($827,049)
224 47 $17 1,103 ($795,522)
225 43 $22 1,546 ($716,192)
226 45 $20 2,199 ($594,906)
227 45 $16 1,425 ($732,657)
228 44 $17 1,319 ($751,712)
229 45 $20 1,950 ($640,314)
230 45 $18 1,118 ($791,826)
231 47 $23 708 ($873,200)
232 47 $18 1,615 ($702,387)
233 43 $22 1,037 ($809,560)
234 47 $18 1,599 ($705,161)
235 45 $18 784 ($854,164)
236 45 $17 520 ($902,484)
237 45 $23 1,452 ($736,619)
238 47 $22 1,672 ($698,844)
239 44 $20 846 ($843,660)
240 45 $20 915 ($831,283)
241 46 $17 1,359 ($747,227)
242 44 $21 1,725 ($681,998)
243 45 $16 1,385 ($739,625)
244 43 $19 1,530 ($714,263)
245 45 $16 1,223 ($770,553)
246 45 $23 1,033 ($812,802)
247 45 $21 950 ($826,204)
248 45 $19 522 ($903,345)
249 46 $22 1,093 ($802,528)
250 46 $19 1,426 ($738,266)
251 45 $16 1,027 ($807,207)
252 45 $17 1,121 ($790,148)
253 45 $23 1,374 ($751,343)
254 45 $20 984 ($818,773)
255 45 $22 421 ($923,475)
256 46 $21 1,615 ($706,020)
257 45 $19 1,272 ($764,656)
258 45 $21 1,407 ($742,962)
259 44 $19 708 ($868,638)
260 45 $16 1,601 ($699,260)
261 46 $17 687 ($872,315)
262 46 $21 917 ($832,867)
263 44 $18 1,216 ($772,291)
264 45 $23 1,043 ($811,355)
265 45 $22 1,122 ($795,898)
266 44 $22 1,045 ($808,614)
267 45 $21 1,789 ($672,041)
268 46 $24 1,500 ($731,334)
269 47 $18 1,091 ($798,881)
270 44 $19 846 ($842,877)
271 44 $21 1,511 ($722,621)
272 46 $16 1,001 ($813,104)
273 43 $21 1,231 ($771,783)
274 45 $19 923 ($829,077)
275 44 $17 2,044 ($615,016)
276 43 $22 1,262 ($768,194)
277 44 $18 632 ($882,009)
278 45 $22 1,533 ($720,386)
279 43 $23 1,285 ($764,995)
280 44 $17 1,599 ($699,142)
281 44 $18 953 ($821,342)
282 45 $23 525 ($905,236)
283 46 $17 1,430 ($734,349)
284 43 $19 716 ($866,418)
285 45 $20 1,212 ($777,084)
286 46 $19 724 ($866,827)
287 46 $20 1,436 ($737,373)
288 43 $18 1,467 ($724,203)
289 44 $23 1,018 ($815,130)
290 46 $20 1,290 ($763,677)
291 47 $18 995 ($816,585)
292 45 $20 1,119 ($794,473)
293 44 $22 678 ($876,016)
294 44 $23 1,529 ($721,996)
295 45 $21 1,302 ($761,658)
296 44 $21 1,636 ($699,567)
297 44 $23 927 ($831,383)
298 45 $19 1,123 ($791,968)
299 43 $22 605 ($888,707)
300 45 $21 1,167 ($785,778)
301 45 $21 791 ($855,252)
302 46 $19 1,368 ($747,661)
303 45 $17 1,213 ($773,375)
304 45 $23 1,661 ($700,181)
305 44 $24 494 ($910,626)
306 45 $19 1,140 ($789,378)
307 44 $18 1,385 ($741,638)
308 45 $20 1,089 ($799,230)
309 43 $19 758 ($857,968)
310 45 $18 1,287 ($760,010)
311 45 $20 1,504 ($722,665)
312 45 $17 1,555 ($708,863)
313 45 $19 1,842 ($659,045)
314 45 $19 835 ($845,706)
315 45 $18 1,224 ($772,775)
316 47 $23 1,033 ($814,947)
317 45 $17 610 ($885,893)
318 45 $20 754 ($861,587)
319 44 $21 1,027 ($810,580)
320 45 $17 1,190 ($777,943)
321 44 $16 1,260 ($762,095)
322 45 $22 1,476 ($731,606)
323 46 $17 1,162 ($784,430)
324 45 $19 1,119 ($793,253)
325 44 $20 1,300 ($759,509)
326 46 $20 1,274 ($766,576)
327 47 $21 1,541 ($720,855)
328 44 $18 810 ($848,498)
329 43 $22 1,006 ($815,221)
330 43 $21 1,372 ($745,779)
331 45 $17 1,392 ($739,900)
332 44 $22 1,472 ($730,755)
333 45 $21 1,614 ($704,392)
334 46 $19 1,282 ($763,448)
335 46 $21 1,373 ($749,647)
336 45 $19 1,551 ($712,603)
337 45 $17 1,259 ($764,159)
338 46 $22 1,088 ($803,076)
339 43 $19 1,560 ($708,310)
340 45 $23 1,130 ($795,274)
341 47 $21 1,369 ($751,899)
342 44 $21 1,168 ($785,608)
343 44 $16 1,326 ($749,806)
344 43 $19 1,450 ($729,370)
345 45 $20 1,463 ($731,164)
346 45 $16 1,069 ($799,316)
347 43 $18 1,278 ($759,917)
348 46 $24 1,046 ($812,249)
349 43 $22 1,107 ($796,227)
350 45 $18 1,150 ($785,941)
351 45 $24 1,392 ($749,357)
352 44 $24 1,742 ($684,640)
353 44 $22 838 ($846,546)
354 45 $19 954 ($823,292)
355 45 $21 820 ($850,207)
356 46 $19 1,302 ($760,319)
357 46 $16 1,375 ($743,119)
358 47 $17 1,754 ($676,366)
359 45 $19 1,013 ($812,792)
360 44 $17 1,136 ($786,120)
361 45 $18 788 ($853,484)
362 47 $22 1,512 ($728,312)
363 45 $22 1,533 ($720,513)
364 43 $21 1,325 ($754,996)
365 45 $23 1,274 ($769,054)
366 43 $21 1,306 ($759,107)
367 46 $19 1,662 ($694,186)
368 47 $20 765 ($860,369)
369 45 $19 549 ($898,315)
370 45 $19 1,046 ($806,283)
371 44 $18 1,269 ($762,879)
372 47 $23 970 ($825,869)
373 44 $23 1,081 ($803,303)
374 47 $18 984 ($818,797)
375 45 $17 2,052 ($617,371)
376 46 $16 1,080 ($798,408)
377 43 $18 529 ($900,563)
378 45 $16 1,199 ($775,008)
379 47 $18 1,078 ($802,103)
380 45 $17 1,420 ($734,937)
381 45 $18 1,056 ($803,513)
382 45 $17 1,190 ($777,249)
383 45 $20 1,239 ($771,886)
384 45 $23 1,071 ($806,582)
385 46 $23 1,064 ($808,436)
386 45 $23 1,278 ($768,385)
387 47 $23 1,380 ($752,428)
388 44 $18 1,540 ($712,544)
389 47 $20 1,569 ($714,811)
390 47 $21 1,442 ($739,763)
391 46 $24 923 ($834,359)
392 44 $21 1,206 ($778,385)
393 46 $18 1,763 ($673,168)
394 44 $20 1,006 ($813,695)
395 45 $22 1,504 ($725,975)
396 44 $24 1,221 ($778,772)
397 45 $19 890 ($835,151)
398 45 $21 1,591 ($708,553)
399 43 $17 1,410 ($733,318)
400 45 $19 1,332 ($754,112)
401 44 $23 914 ($833,267)
402 43 $18 1,399 ($737,695)
403 46 $24 1,125 ($798,088)
404 45 $21 1,023 ($812,527)
405 43 $23 1,184 ($783,398)
406 44 $17 1,263 ($761,989)
407 47 $21 1,402 ($746,652)
408 46 $23 1,602 ($711,178)
409 44 $18 1,189 ($778,082)
410 44 $23 1,150 ($790,770)
411 43 $18 1,395 ($737,700)
412 43 $22 1,451 ($733,673)
413 44 $21 1,276 ($765,691)
414 45 $24 1,544 ($721,663)
415 46 $20 1,480 ($729,649)
416 44 $17 1,375 ($741,387)
417 47 $24 847 ($849,011)
418 46 $24 1,134 ($796,828)
419 47 $20 729 ($867,589)
420 46 $23 1,222 ($780,515)
421 44 $18 1,160 ($783,137)
422 46 $24 1,073 ($807,609)
423 46 $17 1,552 ($710,936)
424 45 $19 1,209 ($775,750)
425 46 $22 890 ($839,052)
426 43 $23 2,149 ($606,711)
427 45 $19 1,025 ($810,535)
428 47 $22 826 ($851,296)
429 45 $23 1,371 ($751,690)
430 44 $21 774 ($857,507)
431 47 $19 1,239 ($773,439)
432 45 $24 898 ($837,913)
433 46 $18 908 ($831,587)
434 44 $19 1,654 ($691,554)
435 44 $23 1,217 ($778,701)
436 44 $17 1,694 ($681,631)
437 44 $19 1,224 ($772,237)
438 45 $23 1,560 ($716,939)
439 45 $18 1,391 ($741,929)
440 45 $20 1,244 ($771,433)
441 45 $17 1,404 ($737,838)
442 45 $20 1,806 ($668,228)
443 43 $17 978 ($815,439)
444 46 $22 921 ($833,143)
445 45 $21 488 ($910,754)
446 44 $21 1,487 ($726,977)
447 44 $19 1,402 ($738,903)
448 43 $19 1,184 ($778,838)
449 45 $17 922 ($828,115)
450 44 $17 1,377 ($741,093)
451 46 $24 1,180 ($788,663)
452 45 $24 1,342 ($757,757)
453 45 $18 955 ($822,077)
454 45 $18 1,576 ($706,432)
455 44 $21 1,031 ($810,603)
456 45 $16 1,115 ($790,564)
457 46 $19 741 ($863,543)
458 45 $20 1,588 ($707,592)
459 47 $22 1,070 ($806,975)
460 45 $19 1,266 ($765,729)
461 44 $21 1,163 ($786,541)
462 45 $16 1,028 ($807,002)
463 43 $18 1,673 ($685,789)
464 44 $18 1,734 ($675,471)
465 47 $17 1,175 ($782,203)
466 45 $20 925 ($830,268)
467 44 $21 863 ($840,961)
468 44 $18 888 ($834,040)
469 45 $21 1,003 ($816,131)
470 45 $21 1,038 ($809,783)
471 46 $19 1,315 ($757,429)
472 45 $17 1,418 ($734,342)
473 46 $17 871 ($837,508)
474 44 $23 1,306 ($762,843)
475 47 $19 1,414 ($741,193)
476 46 $21 1,087 ($802,154)
477 45 $21 902 ($835,115)
 478 44 $22 1,334 ($755,843)
479 44 $22 1,083 ($801,416)
480 45 $17 1,441 ($729,881)
481 45 $19 786 ($854,873)
482 45 $23 1,504 ($727,409)
483 45 $24 1,126 ($796,860)
484 45 $24 1,393 ($748,748)
485 47 $22 996 ($820,524)
486 44 $17 995 ($813,247)
487 43 $22 1,182 ($782,975)
488 44 $21 1,374 ($747,365)
489 45 $20 1,429 ($737,064)
490 45 $23 1,059 ($808,054)
491 44 $21 1,288 ($762,718)
492 46 $22 692 ($874,903)
493 46 $17 1,033 ($808,196)
494 46 $22 1,059 ($808,717)
495 45 $24 1,310 ($764,001)
496 46 $19 1,039 ($809,052)
497 43 $20 1,549 ($711,195)
498 44 $20 760 ($859,165)
499 46 $23 1,077 ($806,555)
500 44 $24 1,227 ($777,720)
Average $44.98 $20.12 1210.6654329792 -$777,355.84

Summary Statistics
Mean Profit ($777,355.84)
Standard Deviation $ 57,936.23
Minimum Profit ($955,346.63)
Maximum Profit ($594,905.92)
Number of losses 500
Probability of Loss 1
Probability of Profit 0
 4.6

rmal Distribution)
1,200
300
RMINV(RAND(),mean,std dev)

Direct Labor Cost/unit

Cost ($)/Unit
 $43
$44
$45
$46
$47

First Year
RN Demand Net Profit $
0.0367 (537) ($1,097,662.85)
0.3801 (92) ($1,016,863.50)
0.6109 84 ($984,262.26)
 For the payoff table below, the decision maker will use the following probabilities for the state of nature:
P(s1) = 0.15, P(s2) = 0.5, and P(s3) = 0.35.

State of Nature
Decision Alternatives
s1 s2 s3
d1 (5,000) 1,000 10,000
d2 (15,000) (2,000) 40,000

The decision maker expressed the following indifference probabilities.

Payoff Probability
40,000 does not apply
10,000 0.85
1,000 0.6
(2,000) 0.53
(5,000) 0.5
(15,000) does not apply

Make a decision using the Expected Utility Approach.

State of Nature
Decision Alternatives
s1 s2 s3 Expected Value
d1 (5,000) 1,000 10,000 3,250.00
d2 (15,000) (2,000) 40,000 10,750.00
Probability 0.15 0.5 0.35

Best payoff values U(best payoff) = U(40,000) = 10

Worst payoff values U(worst payoff) = U(-15,000) = 0

The decision maker obtains a payoff of 40,000 with probability of p and a payoff of -15,000 with
probability of (1-p).
The decision maker obtains a payoff of 40,000 with probability of p and a payoff of -15,000 with
probability of (1-p).

Utility of M:
U(M) = pU(best payoff) + (1-p)U(worst payoff)

U(10,000) = (0.85)U(40,000) + (1-0.85)U(-15,000)

(0.85)(10) + (0.15)(0)
U(10,000) = 8.5

U(1,000) = (0.6)U(40,000) + (1-0.6)U(-15,000)

(0.6)(10) + (0.4)(0)
U(1,000) = 6

U(-2,000) = (0.53)U(40,000) + (1-0.53)U(-15,000)

(0.53)(10) + (0.47)(0)
U(-2,000) = 5.3

U(-5,000) = (0.5)U(40,000) + (1-0.5)U(-15,000)

(0.5)(10) + (0.5)(0)
U(-5,000) = 5

Payoff Probability Utility Value U(M)

40,000 does not apply 10
10,000 0.85 8.5
1,000 0.6 6
(2,000) 0.53 5.3
(5,000) 0.5 5
(15,000) does not apply 0

Payoff Table
State of Nature
Decision Alternatives
s1 s2 s3
d1 (5,000) 1,000 10,000
d2 (15,000) (2,000) 40,000

Utility Table
State of Nature
Decision Alternatives
s1 s2 s3 Expected Value
d1 5 6 8.50 6.725
d2 - 5.30 10 6.150
Probability 0.15 0.5 0.35

The best decision is d1 using the Expected Utility approach.

r the state of nature:

5,000 with