Igam's shoppe buys products each week from nearby city. Orders are placed online on Saturday night, and early Monday morning products arrive at the airport in a box refrigerated with dry ice. The products cost $8 a dozen and are sold on a cash-and-carry basis for $28 a dozen. Products left over at the end of the week are put in a trash collector in an alley behind the store. Past sales (rounded to the neares ten dozen) are as follows:
Dozens of Products Relative
Demanded Frequency
---------------- ---------------
110 5
120 20
130 25
140 30
150 20
Igam wants to compare two ordering rules for ordering products:
1. order last week's demand plus 10 dozen extra (as safety stock), 2. order 130 dozen every week. He wants to run an eight week simulation to compare the average weekly profit for the two rules. Last week's demand was for 110 dozen. He generated the following random numbers for weeks 1-8, respectively: 63,13,67,50,71,25,44 and 00.
a. What is the random number range corresponding to each of the five demand quantities?
b. Simulate eight weeks of operation using each of the ordering rules and compute the average weekly profit resulting from each rule.
Create a spreadsheet model in Excel for the above problem. Rerun the model for 100 weeks of operation and 500 weeks of operation (trials) using random numbers you generate, rather than the random numbers supplied above. Compare the average weekly profit for the 8 week simulation, 100-week simulation and 500-we