John Case: Newspaper The New York Times

By- Group 23
Amarpal Singh (133009)
Mohan Ram (133060)

Objective: To determine how many copies to order from the distributor, so as to maximize Johns daily average profit.
Case Facts:
1. Cost price of a newspaper is $1.5.
2. Selling price of a newspaper sold is $2.5.
3. Unsold newspapers are refunded to distributor at $0.5.
4. Sold newspapers per day are in the range of (40, 70).
Assumptions:
1. Considering 100 days.
2. Random quantity of newspapers demand within the range of set (40, 70).
3. Actual sales will depend on the demand and the ordered quantity.
So,
a) If, ordered quantity is greater than actual demand then,
An actual sale is equal to actual demand.
b) Else,
An actual sale is equal to ordered quantity.
4. To obtain the maximum average profit, Order quantity will be in the range of the sold newspaper.
Solution:
Steps:
1) Taking a random variable for the demand by using RANDBETWEEN(40,70) function such that random values are
between (40, 70).
2) Then considering any particular order quantity, in our solution we have taken the order quantity equal to 66.
3) Then, we compared the ordered quantity with the demand so as to interpret the Actual sales using the above if-
else condition.
4) Calculated the order cost by multiplying order quantity to cost price per newspaper.
5) Calculated the number of unsold copies by subtracting actual sales from the ordered quantity.
6) Calculated the revenue from the sold newspaper by multiplying actual sales to selling price per newspaper.
7) Calculated refund amount from the unsold newspaper by multiplying no. of unsold copies to refund amount.
8) Calculated the profit by adding the revenue from sold newspaper with the refund amount from unsold copies
and subtracting the order cost.
9) Calculated the average profit from all the 100 days.
10) Now using the scenario manager we have taken 30 scenarios where we varied the order quantity from 41 to 70,
so as to find out the order quantity for getting the maximum average profit.
After iteration, we found that average profit varies from 40.1 to 49.8 and the maximum average profit will be
obtained at the order quantity of 65.