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

question 5

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 value of standard deviation obtained from the simulation results?

• A) $9,175
• B) $7,884
• C) $3,860
• D) $12,870

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Definitions:

Average Variable Cost

The total variable cost of production divided by the quantity of output produced, representing the variable cost per unit of output.

Purely Competitive Market

A market structure characterized by many buyers and sellers, free entry and exit, and a homogeneous product, leading to price determination by market forces.

Cost Data

Information related to the expenses involved in producing a good or providing a service, including materials, labor, and overhead.

Market Price

The prevailing price at which a good or service is bought and sold in a competitive marketplace.