Henry has a newspaper stand where he sells papers for $0.50 each. The papers cost him $0.30
Question:
Henry has a newspaper stand where he sells papers for $0.50 each. The papers cost him $0.30 each, giving him a 20-cent profit on each one he sells. From past experience, Henry knows that
10% of the time he sells 100 papers
20% of the time he sells 150 papers
40% of the time he sells 200 papers
20% of the time he sells 250 papers
10% of the time he sells 300 papers
Assuming that Henry believes the cost of a lost sale is 10 cents and any unsold papers cost him $0.30, simulate Henry's profit outlook over 25 days if he orders 175 papers each day. Use the random numbers that I generated and are shown below and are also available to you in the accompanying Excel file (Random numbers for newspaper problem.xlsx). For each trial (day), calculate the following: number of papers demanded, number of papers sold, number of papers left over, number of sales lost, and profit. Calculate the following summary statistics for the simulation: average profit, % of times profit is negative. Would you recommend that Henry increases or decreases his standing order? (Note that Henry is very intolerant of risk.) Why?
Expert Answer:
this is the demand distribution of the newspapers demand probability 100 01 150 02 200 04 250 02 300 01 With row1 containing the headers Day ordered c... View the full answer
