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Young entrepreneur Fan Bingbing has launched a business venture in which she uses stories submitted by university students as the basis for comics in
Young entrepreneur Fan Bingbing has launched a business venture in which she uses stories submitted by university students as the basis for comics in a monthly anime-style magazine. Based on market research, Fan estimates that average monthly demand will be 500 copies. She has decided to model monthly demand as the maximum of 0 and a normal random variable with a mean of 500 and a standard deviation of 300. Fan must pay a publishing company $3.75 for each copy of the comic printed. She then sells the magazine for $5 each. Rather than having a storefront, Fan sells the magazines through a group of student vendors who sell the comics out of their backpacks while on campus. Fan pays a student vendor $0.35 for each magazine he/she sells. As Fan distributes a new issue each month, she only sells each issue for a month. However, the publishing company has agreed to buy back from Fan any unsold copies at the end of each month for $2.25. Create a simulation model with 1000 trials. A. What is the estimate of the average profit if Fan sets the order quantity to 1,200? What is the 95% confidence interval on this estimate of average profit? (1+1/2 point) B. What is the estimate of the average profit if Fan sets the order quantity to 1,000? What is the 95% confidence interval on this estimate of average profit? (1 point) C. Which order quantity should Fan choose based on the average profit? (1/2 points)
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