Simulation
Autor: Saranya Roy • November 25, 2016 • Case Study • 1,598 Words (7 Pages) • 766 Views
PGPEX: Managerial Problem Solving
Monte Carlo Simulation
Prof. Preetam Basu (email: preetamb@iimcal.ac.in)
Problem 1: Shankar is a newsboy. One of the daily newspapers that Shankar sells from his newsstand is the Financial Journal. A distributor brings the day’s copy of the Financial Journal to the newsstand every morning. Any copies unsold at the end of the day are returned to the distributor next morning. However, to encourage ordering a large number of copies, the distributor does give a small refund for unsold copies. Here are Shankar’s cost figures:
Shankar pays Rs. 1.50 per copy delivered
Shankar sells it at Rs. 2.50 per copy
Shankar’s refund is Rs. 0.50 per unsold copy.
Partially because of the refund, Shankar always has taken plentiful supply. However, he has become concerned about paying so much for copies that then have to be returned unsold, particularly since this has been occurring every day. He now thinks he might be better off by ordering only a minimal number of copies and saving this extra cost. To investigate this further, he has compiled the following record of his daily sales. Shankar sells anywhere between 40 and 70 copies inclusively on any given day. The frequency of numbers between 40 and 70 are roughly equal. The decision that Shankar needs to make is the number of copies to order per day. His objective is to maximize his average daily profit.
What happens to the optimal ordering decision if the demand follows a normal distribution with mean 50 and standard deviation 15?
What happens to the optimal ordering decision if the demand follows the following discrete distribution?
Demand | Probability |
40 | 0.3 |
45 | 0.2 |
50 | 0.3 |
55 | 0.15 |
60 | 0.05 |
Problem 2: PortaCom manufactures printers. PortaCom’s product design group developed a prototype for a new high-quality printer. Preliminary marketing and financial analysis provided the following estimates:
Administrative costs=Rs.400000
Advertising cost=Rs.600000.
Labor cost=Rs.450/unit
Cost of parts=Rs.1000/unit
Demand is not known for certain and is considered probabilistic inputs. Demand is forecasted to follow normal probability distribution with mean 500 units and standard deviation of 50 units.
Selling Price=Rs.3500/unit
PortaCom would like an analysis of the profit potential for the printer. Because of tight cash flow situation management is particularly concerned about the potential for a loss.
Problem 3: Brown Telecommunication Services needs to determine how many telephone operators to employ. The management at Brown estimates that the number of phone calls received each hour of a typical 8-hour shift can be described by the following probability distribution:
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