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2. (15%) Simulate the following scenario and identify the Shortage/Overage costs: We are printing newspapers for the following 30 days (News Vendor Model). The

 

2. (15%) Simulate the following scenario and identify the Shortage/Overage costs: We are printing newspapers for the following 30 days (News Vendor Model). The shortage cost is $1; overage cost is $0.5. From the historical data, the mean demand = 10,000 units with standard deviation 1,000, normally distributed. To simulate in Excel, generate 1 random variable with 30 random variates and Random Seed = 789 to represent Demand of the next 30 days. Question: Based on the simulated demands, what would be the 30-day average of [Shortage Cost + Overage Cost] if we print Q = 9,500 units every day for the 30 simulated days? What if Q= 10,000? What if Q= 10,500? What if Q= 11,000? What if Q= 11,500? Plot the results with Q as the x-axis and Average Cost as the y-axis. What would be the Q that minimizes the cost?

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