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Use a spreadsheet model to simulate 1000 possible outcomes for demand in the coming year. Based on these scenarios, what is the expected profit if Egress produces Q = 7800 ski jackets? What is the expected profit if Egress produces Q = 12,000 ski jackets? What is the standard deviation of profit in these two cases? Answer No. 2 To simulate the 1000 possible outcomes for demand, we first generate 1000 random numbers in excel using the RAND function. This generates 1000 random numbers between 0 and 1. As we have already assumed that demand is modeled on the normal distribution, we use these random numbers as probabilities in normal distribution and use them to calculate 1000 different values for demand. This is done in excel by using the NORM.INV function with the mean and standard deviation as 12,000 and 3497 respectively, as calculated in the answer to Question no. 1. Then we fix the production as 7800 and calculate the profit for each demand using the monetary values given in Exhibit-1. Please see the excel sheet for Question No. 2 in the attached file. We then change the production to 12,000 and calculate the profit against each demand using the monetary values given in Exhibit-1. Please see the excel sheet for Question No. 2 in the attached file. The random numbers stay the same for both the instances. The average profit for both instances is calculated and this average profit is the expected profit if the respective number of ski jackets are produced. Please see exhibit-2 for the details of the expected profit and the standard deviation of the profits for both the cases. Question No. 3 Based on the same 1000 scenarios, how many ski jackets should Egress produce to maximize expected profit? Call this quantity Q*. Answer No. 3
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