Assume for simplicity that there are no fixed costs

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The sales at company A is normally distributed with a mean of 8000 and a standard deviation of 1000. The per unit profit is INR 200. Assume for simplicity that there are no fixed costs. a. What is the expected profit? b. A marketing firm now offers to run an advertising campaign. As a result of this campaign, the firm expects the distribution of sales of company A to change to a Gamma distribution with α=2 and β=5000. (Look up the Gamma distribution option in @Risk). However, the marketing firm will charge INR 3,50,000 to run the campaign. What will company A’s expected profit be (net of the costs) if it were to take up the marketing firms offer? Build a simulation model in @Risk to answer the question. c. Based on the results your simulation model, should company A take up the marketing firm’s offer? Justify your decision. Use only the profit criterion in your decision making.

Reference no: EM131159099

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