Continuing Problem 5, create a two-way data table for expected profit with order quantity along…

Continuing Problem 5, create a two-way data table for expected profit with order quantity along the side and unit expediting cost along the top. Allow the order quantity to vary from 500 to 4500 in increments of 500, and allow the unit expediting cost to vary from $36 to $45 in increments of $1. Each column of this table will allow you to choose an optimal order quantity for a given unit expediting cost. How does this best order quantity change as the unit expediting cost increases? Write up your results in a concise memo to management. (Hint: You will have to modify the existing spreadsheet model so that there is a cell for expected profit that changes automatically when you change either the order quantity or the unit expediting cost. See Problem 8 for guidelines.)

Problem 5

In some ordering problems, like the one for Sam’s Bookstore, whenever demand exceeds existing inventory, the excess demand is not lost but is filled by expedited orders—at a premium cost to the company. Change Sam’s model to reflect this behavior. Assume that the unit cost of expediting is $40, well above the highest regular unit cost.

Problem 8

The current spreadsheet model essentially finds the expected profit in several steps. It first finds the profit in cell B19 for a fixed value of demand. Then it uses a data table to find the profit for each of several demands, and finally it uses SUMPRODUCT to find the expected profit. Modify the model so that expected profit is found directly, without a data table. To do this, change row 11 so that instead of a single demand, there is a list of possible demands, those currently in row 34. Then insert a new row below row 11 that lists the probabilities of these demands. Next, in the rows below the Profit Model label, calculate the units sold, revenue, cost, and profit for each demand. For example, the quantities in column C will be for the second possible demand. Finally, use SUMPRODUCT to calculate expected profit below the Profit row.