BeeRUS has opened a sports pub. For the opening day, the manager needs to determ

Question

BeeRUS has opened a sports pub. For the opening day, the manager needs to determine the amount of inventory items to have ready. One such item are chicken wings. The local supplier offers to send wings in batches of 50 at a cost of $0.15 each. The sales price is $5.50 for a plate of 10. If there are no interesting games to watch while being at the pub, the manager thinks that fewer people will come. In this case, demand is expected to be normally distributed, with a mean of 140 (wings, i.e. 14 plates) and a standard deviation of 20. However, if there are interesting games, more people will come, with normally distributed demand (mean 190 and standard deviation 15. Based on the profile of the teams playing during the next couple of weeks, the manager thinks that there is a 65% chance that the upcoming games will attract a crowd. How many wings should the manager order? (total of 23 points)

Note: The problem does not consider unsold wings.

Instructions:

Important:

*Carry 2 decimals for all calculations, except for values for beer bottles, which need to reported with zero decimals (i.e. integers).

*Any simulation you may choose to perform needs to be performed with 5000 runs.

*Please remember to always include a concluding sentence for each model you submit, you will lose points if you do not

[Needed Excel File] https://drive.google.com/folderview?id=0B95SY57Hrg0OU01tTWJZR2NBcVU&usp=sharing

Explanation / Answer

The manager should order the quantity for 65% confidence level, which means probability of demand being higher than 190 is 65%.

In mathematical form, for expected demand X, P(X>190) = 65% , Refer standard normal table to obtain Z-value corresponding to [P(z) = 65%] = 0.38532

Expected Demand = µ+z = 190 + 0.38532*15 = 196

So the manager should order 196 chicken wings. But because he sells in plates, so he should order 200 chicken wings for 20 plates.

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