building-good-spreadsheet-models

Using the attached Excel workbook, develop the single -period payout table,and the associated EMVs using the probabilities derived from the historical data. Use the template attached below. The workbook contains 2 worksheets.

And then answer these questions:

1. What is the optimal purchase quantity based on the EMV rule?

2. What is the EMV at the optimal purchase quantity? Enter your results rounded to the nearest penny

3. What is the maximum possible revenue if the market demand is 50 and the optimal decision was made at that demand level? Enter your results rounded to the nearest penny.

4. What is the Expected outcome with “Perfect Information” once the supplier changes from a “Order to Forecast” to an “Order to Meet Demand Exactly” policy, where the customer needs to place the order in advance? (Value of WITH Perfect Information.) Enter your results rounded to the nearest penny.

5. What is the net value of this policy change that requires the customer to pre-order. In other words, what is the VALUE OF this “Perfect Information”? (Value of OF Perfect Information.) Enter your results rounded to the nearest penny.

6. What is the probability that the demand is 46 for any given season? Enter your results rounded to the nearest whole number. Do not include the “%” sign. For example, 31.6% is entered as 32.

7. What is the net financial result if management decides on a purchase quantity of 48 during one planning cycle, but the market demands 46? Enter your results rounded to the nearest penny.

 

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