Quantitative Analysis for Business Simulation Trials

Management has asked you to help estimate the average cost per unit to produce a new product so that they can project profits at different selling prices. You will conduct a Monte Carlo simulation for cost behavior using provided probabilistic data for the following cost estimates, which are provided in the attached worksheet: cost per unit for materials, labor, and utilities and their probability distributions. In your calculations, round to the nearest cent.

A. Complete the attached “QAT1 Task 1 Spreadsheet” (responses should include two decimal places) by doing the following: 1. Determine required unit costs correctly by doing the following: a. Determine the average materials cost per unit. b. Determine the average labor cost per unit. c. Determine the average utilities cost per unit. d. Determine the average total cost per unit. 2. Include the three random interval tables needed to correctly determine the costs from part A1. a. Describe how you correctly used the random interval tables from part A2 to populate the “QAT1 Task 1 Spreadsheet.” B. Determine the selling price per unit that should be established for the new product using your simulation results. 1. Describe how you arrived at the selling price from part B. Note: For your calculations in parts B and B1, assume that the company wants to realize an average markup of $20 on each unit sold.




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