Question 1. EasyRent just started its DVD rental business. It charges $3 for overnight rental of new movies. If a customer is not able to rent a DVD, EasyRent offers three free rentals as compensation. The estimated cost of this compensation is $8. Recently, a new action movie is just about to be launched on DVD. According to historical data about action movies, the daily demand during the first month of release approximately satisfies the discrete probability distribution below:
|
Daily Demand
|
95
|
105
|
115
|
125
|
135
|
145
|
155
|
|
Probability
|
7%
|
10%
|
18%
|
30%
|
18%
|
10%
|
7%
|
EasyRent has to pay $60 per copy of DVD for right to rent out the movie. Considering the stock levels of 95, 100, 105, 110, 115, 120, 125, 130, 135, 140, 145, 150, and 155, the general manager has decided to use Monte Carlo simulation method to determine which stock level EasyRent should have in order to maximize EasyRent's expected profit during the first month (monthly profit = daily profit × 30 - total ordering cost).
Create a simulation model with Excel tools only, for example, using VLOOKUP,Data Table, but no @RISK, calculate expected profit based on simulation with 1,000 samples, and find out the best stock level.
Question 2. For the same problem as given in Question 1, build a simulation optimization model with @RISK, and use RISKOptimizer to find out the best stock level in the range of 95 to 155 subject to the condition that the standard deviation of monthly profit is no more than $1,200. Turn in the output Optimization Summary.