Concept explainers
Six months before its annual convention, the American Medical Association must determine how many rooms to reserve. At this time, the AMA can reserve rooms at a cost of $150 per room. The AMA believes the number of doctors attending the convention will be
- a. Use simulation with @RISK to determine the number of rooms that should be reserved to minimize the expected cost to the AMA. Try possible values from 4100 to 4900 in increments of 100.
- b. Redo part a for the case where the number attending has a triangular distribution with minimum value 2000, maximum value 7000, and most likely value 5000. Does this change the substantive results from part a?
a)
To determine: The number of rooms that should be reserved to minimize the expected cost.
Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.
Explanation of Solution
Formulae to determine the above table:
Output results:
Run simulation by placing the cursor on B15.
In the @RISK click start simulation to develop the following output results:
The average cost minimized between 4500 and 4900.
b)
To determine: The number of rooms that should be reserved to minimize the expected cost.
Introduction: Simulation model is the digital prototype of the physical model that helps to forecast the performance of the system or model in the real world.
Explanation of Solution
Formulae to determine the above table:
Output results:
Run simulation by placing the cursor on B16.
In the @RISK click start simulation to develop the following output results:
Here, the best number of rooms reserved is somewhat smaller than the numbers in part (a). The average cost is not lower than part (a).
Want to see more full solutions like this?
Chapter 10 Solutions
Practical Management Science