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The vendor needs to determine the optimal number of newspapers to order each day, so that there are as few leftover papers as possible.
The objective then, is to maximize average daily profits; i.e. z = max E[profits].
Setting up: The Excel Spreadsheet
First, we must extract the parameters and variables from the problem statement, and enter them in the worksheet:
The given parameters are: Vendors average daily sales (i...
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Actual Demand, taken from the Distribution Parameters: Minimum 40 and Maximum 70), vendors cost per copy (i.e. Purchase Price per Unit: $1.50), vendors revenue per copy (i.e. Sales Price per Unit: $2.50), and vendors refund per copy (i.e. Refund per Unit: $0.50).
The unknown variables are: Vendors average order quantity (i...
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