Problem A-1

A news vendor sells magazines at a busy subway stations. Weekly demand for one popular magazine is
distributed as shown in the following table:
Demand 50 75 100 125 150 175
Probability 0.05 0.10 0.25 0.30 0.20 0.10
The vendor normally orders 100 magazines from her supplier. She pays $2 for each magazine she orders
and sells each magazine for $3. Unsold magazines can be returned to the supplier for $0.75.

i) Enter this input data into an Excel worksheet.

See Excel workbook ‘Practice Problems Solutions – Section A’ in Avenue.

ii) Prepare a flowchart of the activities during one week of business. Simulate one week of business in
Excel. What is the profit for this one week?

Order a quantity of magazines (say 100) for one week

Customer demand for one week (uncertain event 1)

Calculate total revenue, total cost, total profit, all for one week

Probability distribution for uncertain event:

uncertain event 1 – discrete general distribution … use Excel function LOOKUP()

The profit for this one week is $100.

Practice Problems Solutions –A.Simulation … page 1

iii) Copy the simulation in (b) 52 times to simulate 52 weeks of business. Calculate the average profit per
week on this magazine.

The average profit per week is $85.94 (over the 52 weeks).

iv) Use Data Table to simulate 200 weeks of business. What is the average profit per week?

The average profit per week is $87.06 (over the 52 weeks).

Practice Problems Solutions –A.Simulation … page 2

v) Use Scenario Manager (with the simulation in (d)) to investigate the profitability of ordering 50, 100,
150, and 175 magazines. Which order quantity gives the best average profit per week over 200 weeks?

Practice Problems Solutions –A.Simulation … page 3

The best order quantity is 100 magazines. This gives the highest average profit per week (over 200
weeks).

Practice Problems Solutions –A.Simulation … page 4

Problem A-2

See Excel workbook ‘Practice Problems Solutions – A.Simulation’ in Avenue.

The office opens at 9:30am and closes at 12:15pm for lunch. This is 2 hours and 45 minutes or 165
minutes.

(a) One replication gives a finish time of 177 minutes. This is 12 minutes past the 12:15 closing time for
lunch.

(b) Based on 200 replications in the Data Table, the average time to finish the appointments is 175.31
minutes. This is 10.31 minutes past the 12:15 closing time for lunch. The probability that medical office
will finish the appointments in 165 minutes is 0.135. The formula in this cell is:

=COUNTIF(N8:N207,"<=165")/200

There is only a 13.5% chance that the office will finish on time.

If this is a typical schedule of appointments, then the medical office should consider changing its lunch
start time to 12:30pm or later or the office open time to 9:15am or earlier so that it has at least 175
minutes to finish the appointments.

Practice Problems Solutions –A.Simulation … page 5

Problem A-3
An airline company flies a six-passenger fight once a day from Sudbury to Toronto. When passengers
make a reservation they pay $129 for a non-refundable one-way ticket. Probability distributions for the
daily demand for the flight and the number of no-shows (i.e. passengers with a fully paid reservation who
do not arrive at the gate and, therefore, forfeit their payment of $129) are:

Demand Probability No-shows Probability

5 0.05 0 0.15
6 0.11 1 0.25
7 0.20 2 0.26
8 0.18 3 0.23
9 0.16 4 0.11
10 0.12
11 0.10
12 0.08

The company currently overbooks three passengers per flight. If there are not enough seats for a
passenger at the gate, the company refunds his or her payment and also provides a S150 voucher good on
any other trip. The fixed cost for each flight is $450, regardless of the number of passengers.

i) Enter this input data into an Excel worksheet.

Practice Problems Solutions –A.Simulation … page 6

ii) Prepare a flowchart of the activities during one flight. Simulate one flight in Excel. What is the profit
for this one flight?

Customers request a reservation for a flight (uncertain event 1)

Customer reservation accepted

Customers with reservations show up (uncertain event 2)

Overbooked customers

Calculate total revenue, total cost, total profit for the flight

Probability distribution for uncertain events:

uncertain event 1 – discrete general distribution … use Excel function LOOKUP()
uncertain event 2 – discrete general distribution … use Excel function LOOKUP()

The profit for this one flight is $432.

Practice Problems Solutions –A.Simulation … page 7

iii) Use Data Table to simulate 200 flights. What is the average profit per flight?

The average profit for a flight is $390 over 200 flights.

iv) Use Scenario Manager (with the simulation in (c)) to investigate the profitability of overbooking 0, 1,
2, 3, 4, 5 passengers. What amount of overbooking gives the best average profit per week over 200
flights?

Practice Problems Solutions –A.Simulation … page 8

The best policy is to overbook 1 or 2 passengers. This gives the maximum average profit per flight, $393
or $394.

SimQuick Practice Problem: Exercise 1b on p. 23 of the SimQuick Manual

(see p. 19 of the Lecture Notes or page 28 of Lecture Notes – revised September 21)

SimQuick Practice Problem: Exercises 7a and 7b on p. 33 of the SimQuick Manual

(see p. 21 of the Lecture Notes or page 31 of Lecture Notes – revised September 21)

<see attached pdf file>

Practice Problems Solutions –A.Simulation … page 9

Simulation Solutions

Simulation Exercise 1b on page 23 of the SimQuick Manual

This Excel worksheet is on course web-site. Download the worksheet and at the Excel formulas

Summary of Results:

The following five simulations (a to e) are each 30 runs of 120 minutes. The detailed simulation
outputs are on the following pages.

Average time (a) (b) (c) (d) (e)

between 2.0 minutes 1.8 minutes 1.6 minutes 1.4 minutes 1.2 minutes
customer
arrivals
Utilizations:
Teller 1 66% 72% 78% 86% 94%
Teller 2 51% 60% 67% 79% 92%
Waiting time 0.64 minutes 0.93 minutes 1.18 minutes 2.53 minutes 4.38 minutes
in Line
Total time in 3.04 minutes 3.33 minutes 3.58 minutes 4.93 minutes 6.78 minutes
process

* Total time in process = Average waiting time in Line + Average service time (i.e. 2.4 minutes)

An average arrival time of 1.4 minutes seems to be the maximum capacity for this process. This
is case (d). The utilizations are 86% at Teller 1 and 79% at Teller 2 for this arrival time. When
there are more customers (i.e. case (e)) the utilizations are too high. As we will see later in the
course a capacity safety factor of 10 percent is usually desirable.

1
a) Average time between arrivals (at ‘Door’) = 2.0 minutes

2
b) Average time between arrivals (at ‘Door’) = 1.8 minutes

3
c) Average time between arrivals (at ‘Door’) = 1.6 minutes

4
d) Average time between arrivals (at ‘Door’) = 1.4 minutes

5
e) Average time between arrivals (at ‘Door’) = 1.2 minutes

6
Simulation Exercise 7a on page 33 of the SimQuick Manual

This SimQuick worksheet is on Avenue > Contents > Week 6.

Workst.
Add. Insp. 3

Two Work Stations for second inspection Three Work Stations for second inspection
(Fig. B.7, p. 237)

Summary of Results:
Simulation outputs are on the following pages. Each simulation is 30 runs of 120 minutes.)

Two Work Stations for the second inspection

Decision Point: (a) (b) (c)
Probability that a passenger 10 % 15% 20%
is sent to security line 2
Number of passengers
Arriving (at Entrance ‘Arrivals’) 241.43 people 237.40 239.50
Leaving (at Buffer ‘Done’) 226.23 people 221.90 220.93
Mean time (note 1)
In Security Line 1 3.92 minutes 3.40 3.46
At Inspection 1 or 2 1 minute 1 1
In Security Line 2 0.47 minutes 2.01 7.11
At Additional Inspection 1 or 2 5 minutes 5 5
Total time 5.47 minutes 5.45 6.88
Mean number of passengers
In Security Line 1 7.60 people 6.50 6.70
In Security Line 2 0.09 people 0.60 2.60
Total passengers in security lines 7.69 people 7.10 8.30
Utilizations
Inspector 1, 2 0.96, 0.94 0.95, 0.93 0.96, 0.94
Additional Inspector 1, 2 0.53, 0.34 0.73, 0.63 0.87,0.83

1. Mean time in Security Line 1 and mean time in Security Line 2 is from the simulation output.
Mean time at Inspection 1 or 2 is 1 minute because the distribution is given and is Nor(1,0.1).
Mean time at Additional Inspection 1 or 2 is 5 minutes because the distribution is is Nor(5, 1).
Total mean time is (3.92+1) + (0.10*)x(0.47+5) *or 0.15 or 0.20

7
 Three Work Stations for the second inspection
Decision Point: (d) (e)
Probability that a passenger 15% 20%
is sent to security line 2
Number of passengers
Arriving (at Entrance ‘Arrivals’) 240.17 people 239.03
Leaving (at Buffer ‘Done’) 225.00 people 223.97
Mean time
In Security Line 1 4.15 minutes 4.00
At Inspection 1 or 2 1 minute 1
In Security Line 2 0.25 minutes 0.55
At Additional Inspection 1 or 2 5 minutes 5
Total time 5.94 minutes 6.11
Mean number of passengers
In Security Line 1 7.99 people 7.71
In Security Line 2 0.08 people 0.21
Total passengers in security lines 8.07 people 7.92
Utilizations
Inspector 1, 2 0.96, 0.94 0.95, 0.93
Additional Inspector 1, 2, 3 0.64, 0.48, 0.32 0.72, 0.62, 0.47

Conclusions:
1. We should send 15% of passengers to the second security line. The utilizations for the two
inspectors is too low (0.53 and 0.34) when only 10% of passengers are sent.
2. If 15% of passengers are sent to the second security line then two additional inspectors is
satisfactory. The utilizations for the additional inspectors are 0.73 and 0.63. 85% of passengers
only wait an average of 3.40+1 = 4.40 minutes in line; the other 15% wait an average of
(3.40+1)+(2.01+5) = 11.41 minutes in line. The overall average is 0.85x4.40 + 0.15x11.41 =
5.45 minutes. Unfortunately SimQuick does not report the maximum times.
3. If 20% of passengers are sent to the second security line then three additional inspectors may
be used. If two inspectors are used the utilizations for the additional inspectors are high: 0.87
and 0.83. These high utilizations produce long wait times in security line 2: 7.11 minutes. This
wait time drops to 0.55 minutes when three inspectors are used.

8
(a) Two Work Stations for the second inspection
Decision Point: Probability that a passenger is sent to security line 2 = 10%

9
(b) Two Work Stations for the second inspection
Decision Point: Probability that a passenger is sent to security line 2 = 15%

10
(c) Two Work Stations for the second inspection
Decision Point: Probability that a passenger is sent to security line 2 = 20%

11
(d) Three Work Stations for the second inspection
Decision Point: Probability that a passenger is sent to security line 2 = 15%

12
(e) Three Work Stations for the second inspection
Decision Point: Probability that a passenger is sent to security line 2 = 20%

13