Use the Information Below to Answer the Following Question(s) We Assume That the Production (Demand) Volume Is Normally Distributed

question 30

Multiple Choice

Use the information below to answer the following question(s) . Consider the following spreadsheet for an outsourcing decision model. $\begin{array}{|l|c|c|}\hline & \text { A } & \text { B } \\\hline 1 & \text { OutsourcingDecision Model } & \\\hline 2 & & \\\hline 3 & \text { Data } & \\\hline 4 & & \\\hline 5 & \text { Manufactured in-house } & \\\hline 6 & \text { Fixed cost } & \$ 60,000 \\\hline 7 & \text { Unit variable cost } & \$ 130 \\\hline 8 & & \\\hline 9 & \text { Purchased from supplier } & \\\hline 10 & \text { Unit cost } & \$ 165 \\\hline 11 & & \\\hline 12 & \text { Demand volume } & 1,000 \\\hline 13 & \\\hline 14 & \text { Model } \\\hline 15 & \\\hline 16 & \text { Total manufacturing cost } \\\hline 17 & \text { Total purchased cost } \\\hline 18 & \\\hline 19 & \text { Difference } \\\hline 20 & \text { Decision } \\\hline\end{array}$ We assume that the production (demand) volume is normally distributed with a mean of 1,000 and a standard deviation of 100. For the unit cost, select the triangular distribution. It has a minimum value of $150, most likely value of $165, and a maximum value of $190. The number of trials per simulation is equal to 5,000 at a Sim. Random Seed of 1. Run the simulation and answer the following question(s) using the Risk Solver Platform.
-What is the cost difference lower cutoff in thousands of dollars if the likelihood is 60%?

• A) approximately 13.56
• B) approximately 22.45
• C) approximately 29.67
• D) approximately 38.97

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Definitions:

Drive Reduction

A motivation theory that suggests behavior is motivated by the desire to reduce internal drives of tension or arousal that arise from unmet needs.

Pleasure Principle

A psychoanalytic concept suggesting that individuals seek pleasure and avoid pain to satisfy their biological and psychological needs.

Optimal Arousal

A theory suggesting there is a level of arousal that is ideal for facilitating optimal performance on a task or activity.

Incentives

Rewards or stimuli that motivate individuals to perform actions or behaviors, often used to encourage desired outcomes.