A new edition of a very popular textbook will be published a year from now. The publisher currently has 1000 copies on hand and is deciding whether to do another printing before the new edition comes out. The publisher estimates that demand for the book during the next year is governed by the probability distribution in the excel template file. A production run incurs a fixed cost of $15,000 plus a variable cost of $20 per book printed. Books are sold for $190 per book. Any demand that cannot be met incurs a penalty cost of $30 per book, due to loss of goodwill. Up to 1000 of any leftover books can be sold to Barnes and Noble for $45 per book. The publisher is interested in maximizing expected profit. The following print-run sizes are under consideration: 0 (no production run) to 16,000 in increments of 2000. What decision would you recommend? Use simulation with 1000 replications.

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter10: Introduction To Simulation Modeling
Section: Chapter Questions
Problem 31P: A new edition of a very popular textbook will be published a year from now. The publisher currently...
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A new edition of a very popular textbook will be published a year from now. The
publisher currently has 1000 copies on hand and is deciding whether to do another
printing before the new edition comes out. The publisher estimates that demand for
the book during the next year is governed by the probability distribution in the
excel template file. A production run incurs a fixed cost of $15,000 plus a variable
cost of $20 per book printed. Books are sold for $190 per book. Any demand that
cannot be met incurs a penalty cost of $30 per book, due to loss of goodwill. Up to
1000 of any leftover books can be sold to Barnes and Noble for $45 per book. The
publisher is interested in maximizing expected profit. The following print-run sizes
are under consideration: 0 (no production run) to 16,000 in increments of 2000.
What decision would you recommend? Use simulation with 1000 replications.
Transcribed Image Text:A new edition of a very popular textbook will be published a year from now. The publisher currently has 1000 copies on hand and is deciding whether to do another printing before the new edition comes out. The publisher estimates that demand for the book during the next year is governed by the probability distribution in the excel template file. A production run incurs a fixed cost of $15,000 plus a variable cost of $20 per book printed. Books are sold for $190 per book. Any demand that cannot be met incurs a penalty cost of $30 per book, due to loss of goodwill. Up to 1000 of any leftover books can be sold to Barnes and Noble for $45 per book. The publisher is interested in maximizing expected profit. The following print-run sizes are under consideration: 0 (no production run) to 16,000 in increments of 2000. What decision would you recommend? Use simulation with 1000 replications.
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