Reference no: EM132849313
J&K Corporation sells a low-cost, high-volume product. For this product, it is equally likely that annual unit sales will be low, moderate, or high. If the sales are low (50,000 units), the company can sell the product for $11 per unit. If sales are moderate (75,000 units), we expect a competitor to enter the market, so J&K will sell the product for $10 per unit. If sales are high (100,000 units), there will be even more competition and the company will only be able to sell the product for $8.50 per unit.
Annual fixed costs for production of this product are $35,000.
Variable costs per unit produced is uncertain, but it follows a normal distribution, averaging $7.50 per unit, with a standard deviation of $0.75.
Build a model in excel to calculate J&K's annual profit for this product. Use a data table to generate 1000 iterations of the model in excel.
Evaluate the results by calculating the average, standard deviation, min, and max of the annual profit.