Reference no: EM132904145
Salemach Corporation is a start-up company that manufactures simple machines. It is interested in analyzing the profit from a new machine. It estimates that the selling price will be $150 per unit and the setup and advertising costs will total $250,000. The company estimates that the per unit raw material cost is uniformly distributed between $50 and $80 and are equally likely. The demand is normally distributed with a mean of 12,000 units and a standard deviation of 3,000 units. The probability distribution for a range of labor cost per unit is given below.
?Labor Cost. Probability
$52 0.10
$53 0.30
$54 0.35
$55 0.20
$56 0.05
a. Obtain estimates for the mean profit, maximum profit, minimum profit, and standard deviation of profit.
b. What is your estimate of the probability of a loss? (10 points)
The following times series shows the demand for a particular product over the past 10 months.
Month Value
1 325
2 311
3 305
4 315
5 323
6 313
7 302
8 318
9 313
10 328
a. Use α = 0.2 to compute the exponential smoothing values for the time series. Compute MSE and a forecast for month 11.
b. Compare the three-month moving average forecast with the exponential smoothing forecast using α = 0.2. Which appears to provide the better forecast based on MSE?