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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