CMA Final · Strategic Cost Management · Simulation
In a Monte Carlo simulation of a project's annual profit, the profit in ₹ lakh for 5 independent trials was 12, 18, 9, 15 and 16. What does the simulation estimate as the expected profit?
The estimated expected profit is ₹14 lakh. A Monte Carlo simulation estimates the expected value by averaging trial outcomes, so the total of 70 lakh across five trials is divided by five.
- A₹15 lakh
- B₹13 lakh
- C₹14 lakhCorrect
- D₹18 lakh
Explanation
Expected value is estimated as the average of the trial outcomes: (12+18+9+15+16)/5 = 70/5 = ₹14 lakh. ₹15 lakh is the median, not the mean.
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