@Risk Exercise - Jones School Lemonade Stand
You are the owner of the Jones School Lemonade Stand and would like to have
to what your income sheet the next year might look like. By using historical
collected, you know that your total revenue follows a normal distribution with
$100,000 and a standard deviation of $5,000.
Your primary cost is sugar. Sugar costs are normally a function of volume and
though you know that your stand's costs historically fall along a triangular distribution
$50,000 as the upper bound, $20,000 as the lower bound, and $40,000 as
result. (We're considering cups, ice, and lemons as having negligible cost in
Your revenue less your costs gives you your gross profit.
Your local city council is running short on funds, and is contemplating a lemonade
5%. Your inside sources at the mayor's office tell you that there is a 90% probability
tax will pass, and you'd like to take that probability into account in your
expenses, such as advertising, typically total a simple 10% of revenue. Finally,
profit is your gross profit minus taxes and other expenses.
Using the information provided above, complete the income statement @Risk
"Lemonade Stand" tab.
tand
have a clear idea as
historical data you've
distribution with a mean of
and market price,
triangular distribution with
as the most likely
cost in this scenario.)
lemonade stand tax of
probability that the
your model. Other
Finally, your net
@Risk model on the
Lemonade Stand Income Sheet Distribution Distribution Inputs
Revenue Normal Mean $ 100,000.00
Cost of Goods Sold Triangle Upper $ 50,000.00
Gross Profit $ -
Taxed?
Lemonade Tax (5%) $ - Discrete Values 1,0
Other Expenses (10%) $ -
Net Profit $ -
@Risk Statistic Function Key
Mean Net Profit @Risk Input
Std Dev. Net Profit @Risk Output
Minimum Net Profit
Maximum Net Profit
5th Percentile Net Profit
95th Percentile Net Profit
Inputs
Std Dev $ 5,000.00
Lower $ 20,000.00 Most Likely $ 40,000.00
Probability 90% , 10%
Lemonade Stand Income Sheet Distribution Distribution Inputs
Revenue $ 102,919.03 Normal Mean $ 100,000.00
Cost of Goods Sold $ (20,261.96) Triangle Upper $ 50,000.00
Gross Profit $ 82,657.07
Taxed?
Lemonade Tax (5%) $ (5,145.95) 1 Discrete Values 1,0
Other Expenses (10%) $ (10,291.90)
Net Profit $ 67,219.21
@Risk Statistic Function Key
Mean Net Profit $ 67,219.21 @Risk Input
Std Dev. Net Profit $ - @Risk Output
Minimum Net Profit $ 67,219.21
Maximum Net Profit $ 67,219.21
5th Percentile Net Profit $ 67,219.21
95th Percentile Net Profit $ 67,219.21
Inputs
Std Dev $ 5,000.00
Lower $ 20,000.00 Most Likely $ 40,000.00
Probability 90% , 10%