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A car dealer must decide how many cars of the next year's model to order. He has estimated that demand will follow the given discrete
A car dealer must decide how many cars of the next year's model to order. He has estimated that demand will follow the given discrete distribution:
Demand | Probability |
20 | 0.30 |
25 | 0.15 |
30 | 0.15 |
35 | 0.20 |
40 | 0.20 |
Each car sells for $25,000 and the dealer is committed to meeting all demand. Each car ordered now costs $20,000. Each car that has to be reordered (because demand exceeds the dealer's initial order) costs $22,000. Any unsold cars can be returned to the manufacturer for a refund of $17,000 per car.
The dealer wants to evaluate the consequences of ordering 30 cars now.
- Form a profit model that uses an order quantity of 30 and a randomly sampled demand value. That is, calculate all relevant costs, revenues, refunds, and the resulting profit. (4 pts)
- Run this experiment 1000 times. (2 pts)
- Report the min, max, and average profit for the decision to order 30 cars now. (2 pts)
Submit Excel sheet.
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