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Chapter 12 - Simulation : S-1 ————————————————————————————————————————————

Chapter 12 Simulation
Note: The solutions you and/or your students obtain to questions in this chapter may not match the solutions given here due to the inherent variability associated with sampling in simulation. Also, you must install the Crystal Ball add-in before you can successfully load and the solution files for these problem. 1. Simulation should be used to analyze models in which one or more of the input or independent variables uncertain or subject to random variability. a. b. See file: Prb12_2.xls Sample size of 100
Histogram
25

2.

Frequency

20 15 10 5 0 9.47 13.06 16.65 Bin 20.24 23.84

c. d.

See file: Prb12_2.xls Sample size of 1,000
Histogram
100

Frequency

80 60 40 20 0 8.77 12.27 15.78 19.28 Bin 22.79 26.29 29.79

e.

A sample, by definition, does not represent the entire population. However, as the sample size increases the sample becomes more representative of the underlying population.

3.

See file: Prb12_3.xls a. Approximately 0.22 b. Approximately $3,200,000 See file: Prb12_4.xls. A reorder point of around 40 and an order quantity of 33 seems to provide the maximum monthly net profit for this item. See file: Prb12_5.xls a. About 33% of the time b. About 67% of the time

4.

5.

August=57.Simulation : S-2 ———————————————————————————————————————————— c. Expected profit  $3. 13. About 99.xls a. About 13. Expected revenue  $128.xls a.40% 14.912 $252. Mean = 900. min $4.5% 11.5% e.4% d.74. See file: Prb12_12. See file: Prb12_15. About 36% 7. Max = 18.xls a. A re-roder point of 650 and order size of 600 produces an average profit of approximately $9. About 193 seconds. 9. 8.062 million. 1.9641 b.19.00 See file: Prb12_9.9958 See file: Prb12_8. Std Dev = 7. Min = 11. 2000 Revenues 5% Increase Prob of at least a 5% increase $20.xls a.127 12. June=99. 90 b.78. $90. 17 b.0335 b. 7.267 c.000 b.9048 c.xls a.500 c.450 $20. About 0. P(<920) = 0. Order 15. P(<920) = 0. See file: Prb12_11. Mean = 900.373 54.190 c. 15.Chapter 12 .xls . October=44. See file: Prb12_13.xls a Approximately 107 reservations should be accepted.842 $20. September=39. Std Dev = 11. You should switch See file: Prb12_6. Expected Profit = $15. 10. About 55% d.000 b.585 c.788. Std Dev = 15.075 $19.390. July=80.798.526 b.xls a.xls a. max $8. See file: Prb12_10. See file: Prb12_14.842. Mean = 900. P(<920) = 0. Expected profit  $3. Approximately $8.xls a.797.374. Average Std Dev 95%-LCL 95%-UCL b. 11. 6. See file: Prb12_7.500 .749 $20. May=70.819.

Invested $170.827 b.xls Probability of making at least $12. About $9.349 95% UCL = $908. See file: Prb12_19.700 Contributed $24.950 Ask for (or buy an option on) a delay to sign the lease agreement. See file: Prb12_21.000 d. e. Average total cost  $351. The student is forced to make some decisions about what RNGs to use (just like in the real-world). c.000.886 c. Expected NPV  $2.xls a. Offer insentivite to get an earlyier decision on the large order. See file: Prb12_18. Greg should deposit about $1.xls Worst case:  -$320.xls See file: Prb12_20. I chose symmetric triangular distributions to model R&D costs. See file: Prb12_17. Probability of positive NPV  0. a.000.xls a. a. Average total cost  $399. Total $1.Chapter 12 . b.795 Invest early and often! 16. b. f. See file: Prb12_22.xls a. 17.11 About $3. See file: Prb12_16. c.Simulation : S-3 ———————————————————————————————————————————— a. d.500 per year in his flexible spending account.540  $132. d.000 b. d. c.xls Average donation per answered door  $11.87 Total expected donations  300*11. b. g. Annual Units Sold. a. f. Make a targeted sales effort to obtain additional orders for this product. About $2. b.161.000.000  0. b. Invested $32. Total $1. 53 hours.000 net profit in each of the next 5 years  0.0 million c.317 Probability of investment being worth more than $1.000 c.407. 23.612 Probabilty of making $60.000  -$144.87*.670 19. c.000 total in the next 5 years  0.158.833 95% LCL = $895. About 22% 22.000 Best case:  $354.77 18. See file: Prb12_23. The Market Life of the product should be modeled as a discrete uniform random variable.xls a. An increase in the cost of lost production time should lead to a decrease in the optimal planned replacement time. .078.753 Contributed $69. Balance about $336. Expected value  $901. See file: Prb12_20. An increase in the replacement cost should lead to an increase in the optimal planned replacement time. Balance about $563. Teaching Note: Students with weak financial backgrounds might need help with the concept of NPV. and Unit Manufacturing Costs. b. 20. Invest early.xls a.000. d.75 = $2.998 21. e.15.

The amount we should be willing to spend on advertising depends on the estimated effectiveness of the advertising in terms of: 1) increasing the customer count.000 The capacity should be  1. So there is no single "right" answer to this question. 95% Lower Confidence Limit  $9.337 0 c. d.xls Probability of selling at least 10 cars  0.000 = $1.481 29. Frequency Chart 69 O utlie rs 62 .739 $18.375. a. See file: Prb12_24.008 15. a.000  $27. See file: Prb12_28. b.181 See file: Prb12_26.118. Average weekly revenue  $2.016 31 .023 46. d.xls  $991.15 95% LCL = 0.031 25. 28. a.06 95% Upper Confidence Limit  $9.323 c.xls 8 employees should be scheduled as follows: Time Start Time Start 0:00 0 12:00 1 1:00 0 13:00 0 2:00 0 14:00 0 3:00 0 15:00 0 4:00 0 16:00 1 5:00 0 17:00 0 .50 . See file: Prb12_27. Average weekly revenue  $2.466 b. b.xls Forecast: Total Weekly Claims 2.856 Probability of total weekly claims exceeding $20.31.5 . a. b.000 Trials . c. 26.000 units.804 $35.272 $26.29*$5. b.Simulation : S-4 ———————————————————————————————————————————— 24. and 2) increasing the probability of a customer buying a car.207 $9.450. 27.Chapter 12 .29 The expected value of the bonus is  0. e.000 $1. Average weekly revenue  $2.xls a.000  0. 95% UCL = 0. Average weekly total claims  $11.56 See file: Prb12_25. b.xls The optimal number of papers to order is approximately 54 which produces an expected profit of approximately $9. a. c. See file: Prb12_29.

See file: Prb12_30. Michael should order 24.Chapter 12 . 34. b. See file: Prb12_33.Simulation : S-5 ———————————————————————————————————————————— 6:00 7:00 8:00 9:00 10:00 11:00 4 0 0 0 1 0 18:00 19:00 20:00 21:00 22:00 23:00 0 0 0 0 1 0 30. $21.000 b. c.xls About $9. d.12 About 86% 32.63 About 20% See file: Prb12_31. Yes. a. 10.000 sweatshirts .98% b. d.xls a. Expected return = 14.96% c.39 About $7.xls About $7. a.051 b. $23. Approximately $291. St dev = 4.xls a. 33.607 c. c.90 About $9. 31. See file: Prb12_34.xls a. b.52%. See file: Prb12_32.

Max = $1.4120 0. i.0490 78. c.000 $52.Chapter 12 .000 $50.000 $56. $59. Approximately 0.223  0.000 Withdrawal amount $57.000 $54.623 b. d. See file: Prb12_36. Yes.51 0.000 0% 2% 4% 6% 8% 10% 12% Prob of <$0 at death d. Pace University) See file: Case12_3. Case12-1: Live Well Die Broke See file: Case12_1.845 c. Withdrawal amount  $55.000 $53. c.059 The person runs out of money at age 83.000.57 0.xls a. Case12-2: Death And Taxes Note: The first seven questions in this case do not require the use of simulation.500. the following results were obtained (where all currency figures are in $1. h.xls The company should accrue about $39.321.Simulation : S-6 ———————————————————————————————————————————— 35. See file: Case12_2.965. Min = -$649. P(65 year old male living to >= 82) = 0. e. g.500. f.3417 0. b. See file: Prb12_35. Withdrawal amount  $52.000 Case 12-3: The Sound's Alive Company (contributed by Jack Yurkiewicz.000 $58.5 million.xls Based on a simulation run with 500 replications.xls a. Ending balance  $837. 36. 76.000 $55. j.269. Withdrawal amount  $55.451  $79.000 $51.000s): Net Profit Venture .xls a. b. Average = $318.2031  0.000. Ending balance  $1 million.

231. 95% LCL = -$558 95% UCL = -$27 0.082 2006 $1002.xls 95% LCL = $2. . Case 12-4: The Foxridge Investment Group a. c.802 Yes.49 2007 $1. there is only a small (0. b. See file: Case12_4. About 11.082) chance that this venture would generate an NPV of at least $5 million. d. Thus.32 Average: P( NPV >= $5 million): According to these results.Simulation : S-7 ———————————————————————————————————————————— 2004 $617.79 NPV $3.289 About 0.9 2005 $798.192.710 95% UCL = $3.25% f. Marissa should probably not undertake this venture.432 Probably not. e.Chapter 12 .72 0.