What is proportion of months in which demand is satisfied

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Reference no: EM132237829

Galaxy Co. distributes wireless routers to Internet service providers. Galaxy procures each router for $75 from its supplier and sells each router for $125. Monthly demand for the router is a normal random variable with a mean of 100 units and a standard deviation of 20 units. At the beginning of each month, Galaxy orders enough routers from its supplier to bring the inventory level up to 100 routers. If the monthly demand is less than 100, Galaxy pays $15 per router that remains in inventory at the end of the month. If the monthly demand exceeds 100, Galaxy sells only the 100 routers in stock. Galaxy assigns a shortage cost of $30 for each unit of demand that is unsatisfied to represent a loss-of-goodwill among its customers. Management would like to use a simulation model to analyze this situation.

a. What is the average monthly profit resulting from its policy of stocking 100 routers at the beginning of each month?

b. What is the proportion of months in which demand is completely satisfied?

c. Use the simulation model to compare the profitability of monthly replenishment levels of 100, 120, and 140 routers. Use the corresponding 95% confidence intervals on the average profit to make your comparison.

Reference no: EM132237829

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