ABC Press produces academic planning calendars each July to be sold in anticipation of the new school year. The demand for the calendars varies dependent on price and season. The cost to produce the calendars is $2.80 per unit. (No additional units can be produced after the initial production run.)
At the start of the academic year, the calendars are priced at $5.00 per unit. Demand at this price is normally distributed, with a mean of 3000 and a standard deviation of 500. There are 3 discount periods that follow, and demand at each price is a factor of the original (full price) demand. (Note: Demand cannot be negative.)
In mid-August, the price drops to $4.50. Demand at this price is 40% of the original demand.
In mid-September, the price drops to $4.00 and demand is 60% of the original demand.
In December, the price drops to $2.50 and demand is 200% of the original demand.
If any calendars are remaining after the last discount period, they will be recycled at a cost of $1.50 per unit.
Questions: Please show all formulas and calculations
1 - Build a simulation model with appropriate random variables (decision, Uncertainty and Output). Use the model to test production quantities ranging from 4000 to 6000 calendars, in increments of 500. Run 1000 iterations of the model and analyze the results. Show your model and results below.
2 - Which of the following is the decision variable in this model?
Calendars to Produce
There is no decision variable in this model
Demand for Calendars
Selling Price of a Calendar
3 - Which of the following is an uncertainty (random) variable in this problem?
Selling Price of a Calendar
Cost of Recycling
Calendars to Produce
Demand for Calendars
4 - which production quantity would you recommend and why?
5 – Show a second model with changes to the points below:
Demand (for original priced calendars) set to 3000
Production Quantity set to 5000
How many units are sold at the first discount level ($4.50 price)?
What is the Total Production Cost?
What is the Total Revenue?
What is the Total Profit?