Ski jackets | Operations Management homework help

Monte Carlo Simulation

Ski Jacket Production
Egress, Inc. is a small company that designs, produces, and sells ski jackets and other coats. The creative design team has labored for weeks over its new design for the coming winter season. It is now time to decide how many ski jackets to produce in this production run. Because of the lead times involved, no other production runs will be possible during the season.
Predicting ski jacket sales months in advance of the selling season can be quite tricky. Egress has been in operation for only three years, and its ski jacket designs were quite successful in two of those years. Based on realized sales from the last three years, current economic conditions, and professional judgment, twelve Egress employees have independently estimated demand for their new design for the upcoming season. Their estimates are shown in Table 1.

Table 1: Estimated Demands
14,000 16,000
13,000 8,000
14,000 5,000
14,000 11,000
15,500 8,000
10,500 15,000

To assist in the decision on the number of units for the production run, management has gathered the data in Table 2. Note that S is the price Egress charges retailers. Any ski jackets that do not sell during the season can be sold by Egress to discounters for V per jacket. The fixed cost of plant and equipment is F. This cost is incurred irrespective of the size of the production run.

Table 2: Monetary Values
Variable production cost per unit (C): $80
Selling price per unit (S): $100
Salvage value per unit (V): $30
Fixed production cost (F): $100,000

1. Egress management believes that a normal distribution is a reasonable model for the unknown demand in the coming year. What mean and standard deviation should Egress use for the demand distribution?
2. Use a spreadsheet model to simulate 1000 possible outcomes for demand in the coming year. Based on these scenarios, what is the expected profit if Egress produces Q = 7,800 ski jackets? What is the expected profit if Egress produces Q = 12,000 ski jackets? What is the standard deviation of profit in these two cases?
3. Based on the same 1000 scenarios, how many ski jackets should Egress produce to maximize expected profit? Call this quantity Q*
4. Should Q* equal estimated mean demand or not? Explain.
5. Create a histogram of profit at the production level Q*. Create a histogram of profit when the production level Q equals mean demand. What is the probability of a loss greater than $100,000 in each case? 

Calculate Your Essay Price
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more

Order your essay today and save 10% with the coupon code: best10