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In preparing for the upcoming holiday season, Fresh Toy Company (FTC) designed a new doll called The Dougie that teaches children how to dance. The fixed cost to produce the doll is $100,000. The variable cost, which includes material, labor, and shipping costs, is $34 per doll. During the holiday selling season, FTC will sell the dolls for $42 each. If FTC overproduces the dolls, the excess dolls will be sold in January through a distributor who has agreed to pay FTC $10 per doll. Demand for new toys during the holiday selling season is extremely uncertain. Forecasts are for expected sales of 60,000 dolls with a standard deviation of 15,000. The normal probability distribution is assumed to be a good description of the demand. FTC has tentatively decided to produce 60,000 units (the same as average demand), but it wants to conduct an analysis regarding this production quantity before finalizing the decision. (a) Create a what-if spreadsheet model using a formula that relates the values of production quantity, demand, sales, revenue from sales, amount of surplus, revenue from sales of surplus, total cost, and net profit. What is the profit corresponding to average demand (60,000 units)? $ (b) Modeling demand as a normal random variable with mean of 60,000 and a standard deviation of 15,000, simulate the sales of the Dougie doll using a production quantity of 60,000 units. What is the estimate of the average profit associated with the production quantity of 60,000 dolls? (Use at least 1,000 trials. Round your answer to the nearest integer.) (c) Before making a final decision on the production quantity, management wants an analysis of a more aggressive 70,000-unit production quantity and a more conservative 50,000-unit production quantity. Run your simulation with these two production quantities. (Round your answers to the nearest integer.) What is the mean profit associated with 50,000 units? What is the mean profit associated with 70,000 units? (d) In addition to mean profit, what other factors should FTC consider in determining a production quantity? (Select all that apply.)

In preparing for the upcoming holiday season, Fresh Toy Company (FTC) designed a new doll called The Dougie that teaches children how to dance. The fixed cost to produce the doll is $100,000. The variable cost, which includes material, labor, and shipping costs, is $34 per doll. During the holiday selling season, FTC will sell the dolls for $42 each. If FTC overproduces the dolls, the excess dolls will be sold in January through a distributor who has agreed to pay FTC $10 per doll. Demand for new toys during the holiday selling season is extremely uncertain. Forecasts are for expected sales of 60,000 dolls with a standard deviation of 15,000. The normal probability distribution is assumed to be a good description of the demand. FTC has tentatively decided to produce 60,000 units (the same as average demand), but it wants to conduct an analysis regarding this production quantity before finalizing the decision. (a) Create a what-if spreadsheet model using a formula that relates the values of production quantity, demand, sales, revenue from sales, amount of surplus, revenue from sales of surplus, total cost, and net profit. What is the profit corresponding to average demand (60,000 units)? $ (b) Modeling demand as a normal random variable with mean of 60,000 and a standard deviation of 15,000, simulate the sales of the Dougie doll using a production quantity of 60,000 units. What is the estimate of the average profit associated with the production quantity of 60,000 dolls? (Use at least 1,000 trials. Round your answer to the nearest integer.) (c) Before making a final decision on the production quantity, management wants an analysis of a more aggressive 70,000-unit production quantity and a more conservative 50,000-unit production quantity. Run your simulation with these two production quantities. (Round your answers to the nearest integer.) What is the mean profit associated with 50,000 units? What is the mean profit associated with 70,000 units? (d) In addition to mean profit, what other factors should FTC consider in determining a production quantity? (Select all that apply.)

Algebra: Structure And Method, Book 1
Algebra: Structure And Method, Book 1
(REV)00th Edition
ISBN:9780395977224
Author:Richard G. Brown, Mary P. Dolciani, Robert H. Sorgenfrey, William L. Cole
Publisher:Richard G. Brown, Mary P. Dolciani, Robert H. Sorgenfrey, William L. Cole
Chapter2: Working With Real Numbers
Section2.3: Rules For Addition
Problem 8P
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5 In preparing for the upcoming holiday season, Fresh Toy Company (FTC) designed new doll called The Dougie that teaches children how to dance. The fixed cost to produce the doll is $100,000. The variable cost, which includes material, labor, and shipping costs, is $34 per doll. During the holiday selling season, FTC will sell the dolls for $42 each. If FTC overproduces the dolls, the excess dolls will be sold in January through a distributor who has agreed to pay FTC $10 per doll. Demand for new toys during the holiday selling season is extremely uncertain. Forecasts are for expected sales of 60,000 dolls with a standard deviation of 15,000. The normal probability distribution is assumed to be a good description of the demand. FTC has tentatively decided to produce 60,000 units (the same as average demand), but it wants to conduct an analysis regarding this production quantity before finalizing the decision. (a) Create a what-if spreadsheet model using a formula that relates the values of production quantity, demand, sales, revenue from sales, amount of surplus, revenue from sales of surplus, total cost, and net profit. What is the profit corresponding to average demand (60,000 units)? $ (b) Modeling demand as a normal random variable with a mean of 60,000 and a standard deviation of 15,000, simulate the sales of the Dougie doll using production quantity of 60,000 units. What is the estimate of the average profit associated with the production quantity of 60,000 dolls? (Use at least 1,000 trials. Round your answer to the nearest integer.) (c) Before making a final decision on the production quantity, management wants an analysis of a more aggressive 70,000-unit production quantity and 50,000-unit production quantity. Run your simulation with these two production quantities. (Round your answers to the nearest integer.) What is the mean profit associated with 50,000 units? What is the mean profit associated with 70,000 units? (d) In addition to mean profit, what other factors should FTC consider in determining a production quantity? (Select all that apply.) O probability of a loss O gut feeling stock market O probability of a shortage Oprofit standard deviation SHOW WORK FOR (a), (b), and (c) ON EXCEL SPREADSHEET. more conservative
Transcribed Image Text:5 In preparing for the upcoming holiday season, Fresh Toy Company (FTC) designed new doll called The Dougie that teaches children how to dance. The fixed cost to produce the doll is $100,000. The variable cost, which includes material, labor, and shipping costs, is $34 per doll. During the holiday selling season, FTC will sell the dolls for $42 each. If FTC overproduces the dolls, the excess dolls will be sold in January through a distributor who has agreed to pay FTC $10 per doll. Demand for new toys during the holiday selling season is extremely uncertain. Forecasts are for expected sales of 60,000 dolls with a standard deviation of 15,000. The normal probability distribution is assumed to be a good description of the demand. FTC has tentatively decided to produce 60,000 units (the same as average demand), but it wants to conduct an analysis regarding this production quantity before finalizing the decision. (a) Create a what-if spreadsheet model using a formula that relates the values of production quantity, demand, sales, revenue from sales, amount of surplus, revenue from sales of surplus, total cost, and net profit. What is the profit corresponding to average demand (60,000 units)? $ (b) Modeling demand as a normal random variable with a mean of 60,000 and a standard deviation of 15,000, simulate the sales of the Dougie doll using production quantity of 60,000 units. What is the estimate of the average profit associated with the production quantity of 60,000 dolls? (Use at least 1,000 trials. Round your answer to the nearest integer.) (c) Before making a final decision on the production quantity, management wants an analysis of a more aggressive 70,000-unit production quantity and 50,000-unit production quantity. Run your simulation with these two production quantities. (Round your answers to the nearest integer.) What is the mean profit associated with 50,000 units? What is the mean profit associated with 70,000 units? (d) In addition to mean profit, what other factors should FTC consider in determining a production quantity? (Select all that apply.) O probability of a loss O gut feeling stock market O probability of a shortage Oprofit standard deviation SHOW WORK FOR (a), (b), and (c) ON EXCEL SPREADSHEET. more conservative
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