Michael Wise operates a newsstand at a busy intersection downtown. Demand for the Sunday Times at this newsstand averages 300 copies with a standard deviation of 50 copies. (Assume a normal distribution.) Michael purchases the paper for $0.75 and sells them for $1.25. Any papers at the end of the day are recycled with no monetary return.
(a) Suppose that Michael buys 350 copies for his newsstand each Sunday morning. Use ASPE to perform 1,000 trials of a simulation on a spreadsheet. What will be Michael’s mean profit from selling the Sunday Times? What is the probability that Michael will make a profit of at least $0?
(b) Generate a parameter analysis report to consider five possible order quantities between 250 and 350? Which of these order quantities maximizes Michael’s mean profit?
(c) Generate a trend chart for the five order quantities considered in part b.
(d) Use ASPE’s Solver to search for the order quantity that maximizes Michael’s mean profit?