1. a. The simulation indicates that 584 is the optimum stocking quantity. Daily profit at this stocking quantity is $331.4346.
b. Using the newsvendor model, Cu = 1 - 0.2 = 0.8 and Co = .2. Cu /(Cu + Co) = .8.
Using the spreadsheet, we found Q* = NORM.INV(.8,500,100) = 584.16. The simulation and newsvendor model give the same optimal stocking quantity.
2. a. According to the simulation spreadsheet, 4 hours of investment in creation maximizes daily profit at $371.33.
b. Sheen would choose an effort level where the marginal benefit gained by the effort is equal to her marginal cost of expending the effort. To calculate the effort level, h, we equalize marginal cost and marginal benefit. Here (.8 * 50) / (2√h) = 10. Solving gives h = 4,
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4. a. The optimal stocking quantity is 409 according to the spreadsheet in the simulation, which is a decrease from 516 in problem #3 because in the event that the Express stocks out, Ralph still makes a profit from 40% of customers who will buy the Private. Therefore, because he makes more profit off of the Private, his risk decreases because of cost of understocking of the Express.
b. For problems #1 and #2 there were no profitable alternatives to understocking, whereas in problem #3, Ralph has a profitable alternative for understocking since 40% of customers will buy the Private. The different critical ratios from each problem produce a different optimal stocking quantity.
c. This decreases his optimal stocking quantity because Ralph is allocating $0.03 to the cost of each newspaper, making his cost of understocking now 1-.83-40%*.4=.01. Co=.83 Critical ratio 0.01/.83= 0.012 According to the data, the optimal stocking quantity is Q*=NORMINV(.012,500,100).
5. a. A lower buy-back price means a lower stocking quantity, because it affects the cost of overstocking. Ralph wants to stock a lower quantity in order to lower his risk of overstocking. The optimal buy-back price is $0.75, which gives a stocking quantity of 659 and channel profits of $369.80.
b. The optimal transfer price is $0.99, giving a buy-back price of $0.988, and channel profits of $372.62. However, this is an unrealistic scenario because Ralph’s profits are negative at -$24 and
The second Littlefield simulation game focused on lead time and inventory management in an environment with a changing demand (“but the long-run average demand will not change over the product’s 268-day lifetime”). Therefore our strategy to win this game was controlling the Littlefield Lab’s system capacity and the inventory level with choosing a right contract as well as keeping the cash daily as much as possible. In other
3- As we can see the company would loss 0.52 cent per 1 kg if it decides to sell at 6.85 price and allocates the fixed expenses at 1.20 per 1 kg.
Compute the projected profit for the order quantities suggested by the management team under three scenarios: worst case in which sales = 10,000 units, most likely case in which sales = 20,000 units, and best case in which sales = 30,000 units.
Although the shelves are selling well, the total profit of the company is a concern. An engineer suggested that the current production of model S should be cut back because Model S shelves are sold for $1800 per unit but their costs are $1839. Therefore, company is losing money on each one. But
One of specialty’s managers felt that the profit potential was so great that the order quantity should have a 70% chance of meeting demand and only a 30% chance of any stock-outs. What quantity would be ordered under this policy, and what is the projected profit under the three sales scenarios?
Assume that next year management wants the company to earn a minimum profit of $162,000. How many units be sold to meet this target profit figure? [3 points]
C. Using a table to compare the difference between problem #1 and problem #2, respectively, we can see the obvious differences between the optimal stocking quantity and daily expected profit figures.
(d) What will Yabba’s market share have to be for it to generate a profit of $700,000?
30. The manager of the local National Video Store sells videocassette recorders at discount prices. If the store does not have a video recorder in stock when a customer wants to buy one, it will lose the sale because the customer will purchase a recorder from one of the many local competitors. The problem is that the cost of renting warehouse space to keep enough recorders in inventory to meet all demand is excessively high. The manager has determined that if 90% of customer demand for recorders can be met, then the combined cost of lost sales and inventory will be minimized. The manager has estimated that monthly demand for recorders is normally distributed, with a mean of 180 recorders and a standard deviation of 60. Determine the number of recorders the manager should order each month to meet 90% of customer demand.
The factory has been running for 50 simulated days, and management has recalled the high-powered operations team (you) to manage the capacity, scheduling, purchasing, lot sizing, and contract quotations to maximize the cash generated by the factory over its lifetime. Management is not providing any operating budget beyond the cash generated by the factory itself. You will have control of the factory from day 50 to day 386. At 1 hour per simulated day, this translates to 14 real days. At day 386, you lose control of the factory, and the simulation will quickly run another 100 days of simulation. When you lose control of the factory, management expects you to leave the factory parameters set to maximize the factory’ cash position when the factory shuts down on day 486. After the simulation s ends on day 486, you can check the status of your factory, but the factory will no longer be running. Team scores and ranking are based “cash balance,” which
Assume that an organization has an item in its inventory for which the maximum limit is set at 1,000 and the minimum limit is set at 250 units. A buffer stock of 250 units is fairly adequate. If for the duration of the last two months the rate of consumption has been 300 units on an average for each month and if the lead time is considered to be two months, subsequently the organization will soon run out of items, if either the delivery is not acknowledged just following two months or if throughout the succeeding months the rate of consumption
(d) Maximize net benefits, assuming that each unit of service has a market price of $10; Type 2 problems are the one which are visible. Problems like this always equal effectiveness and
As per the current scenario of the labour working in our company, we estimate that, each year, we have 1,00,000 minutes of mixing, 50,000 minutes of pelletizing time and 60,000 minutes of packaging time available. How many of each variant should our company make per year and what is the associated profit?
Question 8: Barbra is in charge of maintaining BX7 supplies at the hospital where the mean demand for it during lead time is 60 (normally distributed) and std dev of 7.
For products with unpredictable demand, it is recommended that the inventory manager evaluate first the nature of the product and classify whether it is perishable or not. If it is perishable, the number of inventory needs to be adjusted such that as minimum spoilage as possible will occur. If it is not perishable, the firm must set inventory levels with adequate safety stock without being compromised with the holding costs. Thus, monthly evaluation of the data is recommended so costs may be controlled.