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Solved Problem 15-1

Higgins Plumbing maintains a stock of 8 hot water heaters. A simulation was run using random numbers to determine sales over 20 weeks. It found that with a stock of 8, Higgins would be out of stock 3 times. The average sales per week from the simulation was 6.75. Using expected values, the expected sales per week was calculated to be 6.88, close to the simulation result.

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100% found this document useful (2 votes)
2K views2 pages

Solved Problem 15-1

Higgins Plumbing maintains a stock of 8 hot water heaters. A simulation was run using random numbers to determine sales over 20 weeks. It found that with a stock of 8, Higgins would be out of stock 3 times. The average sales per week from the simulation was 6.75. Using expected values, the expected sales per week was calculated to be 6.88, close to the simulation result.

Uploaded by

Simon Li
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Solved Problem 15-1

Higgins Plumbing and Heating maintains a stock of 30-gallon hot water heaters that it sells to
home-owners and installs for them. Owner Jerry Higgins likes the idea of having a large supply
on hand to meet customer demand, but he also recognizes that it is expensive to do so. He
examines hot water heater over the past 50 weeks and notes the following:

Hot Water Heater Sales Number of Weeks This Number was Sold
4 6
5 5
6 9
7 12
8 8
9 7
10 3
Total 50

a. If Higgins maintains a constant supply of 8 hot water heaters in any given week, how many
times will he be out of stock during a 20-week simulation? We use random numbers from the
seventh column of Table 15.5, beginning with the random digits 10.
b. What is the average number of sales per week (including stockouts) over the 20-week
period?
c. Using an analytic nonsimulation technique, what is the expected number of sales per week?
How does this compare with the answer in part (b)?

Solution

Because the variable of interest is the number of sales per week, a fixed time increment model should
be used.

Heater Sales Probability Random Number Interval


4 0.12 01 to 12
5 0.10 13 to 22
6 0.18 23 to 40
7 0.24 41 to 64
8 0.16 65 to 80
9 0.14 81 to 94
10 0.06 95 to 00
1.00
Week Random Simulated Week Random Simulated
Number Sales Number sales
1 10 4 11 08 4
2 24 6 12 48 7
3 03 4 13 66 8
4 32 6 14 97 10
5 23 6 15 03 4
6 59 7 16 96 10
7 95 10 17 46 7
8 34 6 18 74 8
9 34 6 19 77 8
10 51 7 20 44 7

With a supply of 8 heaters, Higgins will be out of stock three times during the 20-week period
(in weeks 7, 14, and 16).

b. Average sales by simulation = total sales = 135 = 6.75 per week.


20 weeks 20

c. Using expected values,

E (sales) = 0.12(4 heaters) + 0.10(5) + 0.18(6) + 0.24(7)


+ 0.16(8) + 0.14(9) + 0.06(10)
= 6.88 heaters

With a longer simulation, these two approaches will lead to even closer values.

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