Microsoft Office Tutorials and References
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the percentage of revenue used to calculate the cost of goods sold, COGS, is deter-
mined by a Normal distribution with mean 30 and standard deviation 5. See the
COGS Expense in Table 8.1 for detail. It would be extremely rare that a value of 10
or 50 would be returned by the function, since this represents values that are 4 stan-
dard deviations below and above the mean. This is noteworthy since it is sometimes
possible to return negative values for the Normal if the standard deviation is large
relative to the mean; for example, a mean of 30 and standard deviation of 15 could
easily return a negative randomly sampled value, since values 2 standard deviations
below the mean are not difficult to obtain. If a Normal distribution is used with these
types of parameter values, the modeler must introduce a function to truncate nega-
tive values if they are nonsensical. For example, a negative weight or height would
be such a circumstance.
Now, let us examine the results of our simulation. I have placed the Brain on the
same worksheet as the Calculations , and Exhibit 8.12 shows the general structure
of the combined Brain and Calculation worksheets. The Brain contains the impor-
tant values for sampling and also the constant values used in the calculations. In
the lower part of Exhibit 8.12 you can see that the structure of the Profit or Loss
statement is translated horizontally, with each row representing an experimental
observation of the statement. Of the 13 observations visible for the model, only
Exhibit 8.12 Brain and calculation for financial example
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