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For each simulation run we did 1,000 iterations, and used the @RISK output function to analyze profit.
At Egress’ request we ran our first simulation for a production quantity of 7,800 and production quantity at the mean demand of 12,000. From the output (Exhibit 3 and 4) we see that expected profit at Q = 7800 is $42,249 and the standard deviation is $52,026. At Q = 12,000 the expected profit is $42,296 with a standard deviation of $143,181. While the mean demand quantity of 12,000 yields a slightly better expected profit, it is a much riskier option. First, the standard deviation of Q = 12,000 is more than three times larger than that of Q = 7,800...
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