Main Module Four
Simulation

Learning Objectives

At the end of the module, the student will:

Understand what simulation is and how it aids in the analysis of a problem.

Learn why simulation is a significant problem-solving tool.

Identify the important role probability distributions, random numbers, and the computer play in simulation.

Realize the relative advantages and disadvantages of simulation models.

Understand the difference between static and dynamic simulation.

Be able to interpret output of simulation models.

Readings

Anderson, Sweeney, Williams, Camm and Martin Introduction to Management Science (13th ed.). Cincinnati, OH: South-Western College Publishing.

Chapter 1 - section 1.3 and 1.4 (Scan)

Chapter 13- Section 13.4 – Risk Analysis (Scan)

Chapter 12 - Simulation

Notes

The following topics are included in summary notes for Module Four.

Module 4.1 Notes: Simulation

Module 4.2 Notes: Risk Analysis

Assignment – Case 4

The assignment for Module 4 is:

1) Simulate the outcome of two dice rolled together 30 times. Compute the average value for all 30 trials.

2) The demand for gasoline fluctuates from region to region (demographics and geo-economic factors) and is subject to seasonal demand. As the owner of several gas stations in SW Florida, you are interested in the financial results for a specific period of the year when the demand follows a Normal distribution with mean 3500 gallons and standard deviation of 343 gallons. Due to competition and other local factors, gas prices range from $2.58 to $2.73 with a uniform distribution between those values. Fixed costs for the same period are estimated to be $5800 for all gas stations combined. For 100 trials in the simulation:

a) Compute the minimum, the maximum and the average profit for the period.

b) There is also a concern of making less than $3200 in sales during that period when operations will require additional cash flow from other sources. Management set a risk of 15% as the maximum allowable for the period without the need for preventive measures (source of cash flow for example). What is your recommendation?

Note: For this problem, you should set the workbook computation of formulas to Manual (and do not recalculate the workbook before saving). See notes for details on how to accomplish this Excel feature.

3) To be assigned.

Upload one Excel file (use one spreadsheet for each problem above) into the appropriate drop box in Angel on or before the due date. If you are late in completing this assignment, email the file to the instructor. See syllabus for penalties regarding late assignment.