The normal probability distribution is assumed to be a good description of the demand.

a. Create a worksheet similar to the inventory worksheet in Figure 12.7. Include columns showing demand, sales, revenue from sales, amount of surplus, revenue from sales of surplus, total cost and net profit. Use your worksheet to simulate the sales of the Nora doll using a production quantity of 60 000 units. Using 500 simulation trials, what is the estimate of the mean profit associated with the production quantity of 60 000 dolls?

b. Before making a final decision on the production quantity, management wants an analysis of a more aggressive 70 000 unit production quantity and a more conservative 50 000 unit production quantity. Run your simulation with these two production quantities. What is the mean profit associated with each? What is your recommendation on the production of the Nora doll?

c. Assuming that Baba’s management adopts your recommendation, what is the probability of a stock-out and a shortage of the Nora dolls during the holiday season?