Reference no: EM132952208

The manager of an internet-based retailer, Moore's More, is trying to predict the revenue generated by each department in the next year. The manager has estimated the minimum and maximum growth rates possible for revenues in each department. The manager believes that any of the possible growth rates are equally likely to occur. These estimates are summarized in the table:

DEPT.-------CURRENT REVENUE-- MIN. GROWTH RATE --MAX. GROWTH RATE--
Electronics--------$6,342,213 --------------2% --------------------------10%
Office Supplies---$1,203,231---------------4% ---------------------------5%
Sporting Goods---$4,367,342 -------------2% ---------------------------6%
Toys---------------- $3,543,537 --------------1% ----------------------------8%
Hobby Supplies--- $4,723,135------------- 4% ---------------------------12%

Currently, the total logistics costs are $5,321,776. The rate of change for logistics costs is Normally distributed with a mean of %2 with a standard deviation of %1.

Create a spreadsheet to simulate the total profit that could occur in the coming year. Run 500 replications of the model and consider the following tasks:

a. Construct a 95% confidence interval for the average level of total profit the manager could expect for the next year.

b. According to your model, what are the chances that the total profit will be 5% larger than those in the next year.