Question: Demand for milk is stochastic and uniformly distributed between 1 and 10 gallons each day (only whole gallons can be sold). The milk you sell
Demand for milk is stochastic and uniformly distributed between 1 and 10 gallons each day (only whole gallons can be sold). The milk you sell lasts for 2 days in the store and can be sold to customers on both the first and second day of its shelf life. You reorder milk from the dairy farm every other day. You sell milk to customers for $5 a gallon, purchase it from the dairy farm for $2 a gallon, and if there are any leftover after the second day, sell it to a cheese-maker for $1 a gallon. Run a simulation in excel with analytic solver with 1000 trials to identify:
A. the quantity of milk you should purchase to maximize expected profit
B. 95% confidence intervals for actual expected profit at this quantity
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