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Question
NARRBEGIN: SA_81_84In August 2009, a car dealer is trying to determine how many 2010 cars to order. Each car ordered in August 2009 costs $16,000. The demand for the dealer's 2010 models has the probability distribution shown in the table below. Each car sells for $21,000. If the demand for 2010 cars exceeds the number of cars ordered in August 2009, the dealer must reorder at a cost of $18,000 per car. Excess cars can be disposed of at $13,000 per car.
| Cars demanded | Probability |
| 25 | 0.25 |
| 30 | 0.20 |
| 35 | 0.15 |
| 40 | 0.20 |
| 45 | 0.20 |
Suppose that the demand for cars is normally distributed with mean of 120 and standard deviation of 20. Use @Risk simulation add-in to determine the "best" order quantity; that is, the one that has the largest expected profit. Using the statistics and/or graphs from @Risk, discuss whether this order quantity would not be considered the "best" by the car dealer.
Answer
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