Nanuq has a women’s fashion store Larmington. The manager ofthis store is trying to decide how many Jill Cladess dresses toorder for this summer season. Demand for the dresses is assumed tofollow a normal distribution with mean 400 and standard deviation100 dresses. The contract for the purchase and delivery of dressesbetween Larmington and Cladess is as follows: At the beginning ofOctober, manager of Larmington reserves ? dresses, called ascapacity ? by both parties. Larmington must take delivery for atleast 0.8 ? dresses and can, if desired, take delivery on up to itsreserved capacity of ? dresses. Each dress sells for $160 andCladess charges $70 per dress. If Larmington does not take deliveryof all ? dresses they reserved, it owes Cladess a $12 penalty foreach unit of reserved capacity that is unused (not delivered tostore). Use ? as 400 first to calculate the profit to Larmingtonstore.
Work out the average profit due to 100 simulations. Make sure toround off the demand, delivery, sale amounts, revenue, cost andpenalty using ‘ROUND’ function in Excel
Now repeat the 100 simulations for each capacity of 450, 500 and550.
Based on the above four reserved amounts, decide how manydresses Larmington should reserve (value of ?) to maximise itsprofit for the season. Justify your answer.
