A local pharmacy orders 15 copies of a monthly magazine. Depending on the cover

Question

A local pharmacy orders 15 copies of a monthly magazine. Depending on the cover story, demand for the magazine varies. Historical records suggest that the probability distribution of demand is Poisson with a mean of 10. The pharmary purchases the magazines for $2.25 and sells them for $5.00. Any magazines leftover at the end of the month are donated to hospitals and other health care facilities. Model this newsvendor problem in Excel. Test your model to show the corresponding profit when demand for the month is 5, 10, 15 or 20 magazines.

please post excel and show formulas too please.

Explanation / Answer

Lower = 7 Copies Purchased Profit Number of copies 12 purchased Upper = 10 7 9.25 Base Case = 12 8 7.00 Purchase Cost $2.25 9 4.25 Sales Price $5.00 10 2.50 11 0.25 Demand 6 Lower = 5 12 -2.00 Upper = 15 Number Sold 5 Number Left Over 7 Total Cost $27.00 Total Revenue $25.00 Total Profit ($2.00)

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