Author:
Christine Farr

Chelsea Truman sells celebrity magazines on Sunday morning in an area surrounded by three busy shopping centers. Demand for the magazines is distributed as shown in the following table:

DEMAND

PROBABILITY

50

0.05

75

0.10

100

0.25

125

0.30

150

0.20

175

0.10

Chelsea has decided to order 100 magazines from her supplier. Chelsea pays $2 for each magazine she orders and sells each magazine for $3. Unsold magazines can be returned to the supplier for $0.75.

(a) Simulate 1 year (52 Sundays) of operation to calculate Chelsea’s total yearly profit. Replicate this calculation N times. What is the average yearly profit?

(b) Chelsea would like to investigate the profit ability of ordering 50, 100, 150, and 175 magazines at the start of each Sunday. Which order quantity would you recommend? Why?

**I don't want this problem solved (necessarily), I'm looking for help in solving it. I can't figure out how to actually simulate using Monte Carlo. The answer(s) (for a and b) would be great with instruction on how you get there.

**Note, I know someone else has posted this question and received an answer, but I'd like to actually understand the process.

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