Question

Consider the hallmark question below

A) Use simulation with 1000 replications to determine the distribution of profit for 130 unit order quantity. CHART IT.

B) Use one way data table to determine the expected profit for each of order quantities 100, 110, 120, 130, and 140. Determine the optimal order quantity.

Hallmark sells “personal expression” cards and gifts worldwide through either its own stores or other retailers. Most products are single runs. A typical problem Hallmark faces is as follows: A Barbie stationery gift set—containing 16 notes, envelopes, and foil seals—is to be produced and marketed to celebrate the 60th year of Barbie. The price will be set at $14 per unit. The cost of production to Hallmark will be $7 per unit. The product manager, based on previous sales of Barbie stationery products, estimates that demand (in 1000s) and its probability for this product will be as follows: Demand 100 110 120 130 140 Probability 0.10 0.20 0.40 0.20 0.10 Hallmark will sell any units not sold through regular channels to discount retailers at $2 less than cost (i.e., $5 per unit). There is no penalty cost for being short.

Answer 1

Demand (in 1000s)	Probability	Cumulative Probability	Random Number Interval
100	0.10	0.10	00-09
110	0.20	0.30	10-29
120	0.40	0.70	30-69
130	0.20	0.90	70-89
140	0.10	1.00	90-99
Selling price per unit	$14.00
Cost price per unit	$7.00
Profit		$7.00
Order Quantity (in 1000s)	Probability	Profit per unit	Expected profit
100	0.10	$7.00	$70.00
110	0.20	$7.00	$154.00
120	0.40	$7.00	$336.00
130	0.20	$7.00	$182.00
140	0.10	$7.00	$98.00
		Total expected profit	$840.00

Random Numbers are missing in this question. If provided, answer will be updated acordingly.