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Demand Distribution and Profit Analysis

The document describes a demand distribution for a product with a mean demand of 20,000 units and a standard deviation of 5,102 units. It evaluates the potential profits and losses for different order quantities under worst, most likely, and best case sales scenarios. It finds that ordering 24,000 units maximizes expected profit due to the shape of the demand distribution and potential outcomes.

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Ava Princy Thomas
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3 views11 pages

Demand Distribution and Profit Analysis

The document describes a demand distribution for a product with a mean demand of 20,000 units and a standard deviation of 5,102 units. It evaluates the potential profits and losses for different order quantities under worst, most likely, and best case sales scenarios. It finds that ordering 24,000 units maximizes expected profit due to the shape of the demand distribution and potential outcomes.

Uploaded by

Ava Princy Thomas
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

X

P(X)
0 2.67660E-008
1000 7.61527E-008
2000
#NAME?
3000
#NAME?
4000
#NAME?
5000
#NAME?
6000
#NAME?
7000
#NAME?
8000
#NAME?
9000
#NAME?
10000
#NAME?
11000
#NAME?
12000
#NAME?
13000
#NAME?
14000
#NAME?
15000
#NAME?
16000
#NAME?
17000
#NAME?
18000
#NAME?
19000
#NAME?
20000
#NAME?
21000
#NAME?
22000
#NAME?
23000
#NAME?
24000
#NAME?
25000
#NAME?
26000
#NAME?
27000
#NAME?
28000
#NAME?
29000
#NAME?
30000
#NAME?
31000
#NAME?
32000
#NAME?
33000
#NAME?
34000
#NAME?
35000
#NAME?
36000
#NAME?
37000
#NAME?
38000
#NAME?
39000
#NAME?

Expected Value = Mean = 20000


At 0.025 probability Z score is 1.645
At 0.975 probability Z score is -1.645

(x-)/ =1.645 which implies that (30000-20000)/ =1.645

Demand D
Mean = 20,000

5000

10000

15000

200

No. of Units i

t (30000-20000)/ =1.645 ie., =

Demand Distribution
Mean = 20,000
Standard Deviation =
5000

15000

20000

No. of Units in Demand


0.95

25000

30000

35000

40000

45000

45000

No. Of Units In Demand P(Demand) P(Stock Out)


15000 0.1635411243 0.8364588757
18000
#NAME? 0.6524720517
24000
#NAME? 0.216518215
28000
#NAME? 0.0584391024

Note : Mean = 20000, Standard Deviation = 5102

PROFIT OR LOSS COMPUTATION


Order Quantity
Worst Case Sales
Surplus
15000
10000
18000
10000
24000
10000
28000
10000

Profit
5000
80000
8000
80000
14000
80000
18000
80000

Order Quantity
Most Likely Sales
Stock out
15000
20000
18000
20000
24000
20000
28000
20000

5000
2000
0
0

Surplus
0
0
4000
8000

Order Quantity
Best Case Sales
Stock Out
15000
30000
18000
30000
24000
30000
28000
30000

15000
12000
6000
2000

Profit
120000
144000
192000
224000

GRAPHICAL ANALYSIS
A. Worst Sales Scenario : Sales of 10000
Order Quantity Net Profit Or Loss
15000
25000
18000
-8000
24000
-74000
28000
-118000

Profit or Loss Distribution


40000
20000
0
14000
-20000

Net Profit
or Loss

16000

18000

20000

22000

24000

-40000
-60000
-80000
-100000
-120000
-140000

Estimated Order Quantities

26000

28000

Net Profit
or Loss

-60000
-80000
-100000
-120000
-140000

Estimated Order Quantities

B. Most Likely Sales Scenario


Order Quantity Net Profit Or Loss
15000
120000
18000
144000
24000
116000
28000
72000

Profit or Loss Distribution


160000
140000
120000
100000

Projected Profit

80000
60000
40000
20000
0
14000

16000

18000

20000

22000

24000

Estimated Order Quantities

C. Best Sales Scenario


Order Quantity Profit
15000
18000
24000
28000

120000
144000
192000
224000

Profit or Loss Distribution


250000
200000
150000

Profit

100000

26000

28000

30000

Profit or Loss Distribution


250000
200000
150000

Profit

100000
50000
0
14000

16000

18000

20000

22000

24000

Estimated Order Quantities

26000

28000

30000

Loss

Net Profit Or Loss


-55000
25000
-88000
-8000
-154000
-74000
-198000
-118000

Profit

Loss
120000
144000
160000
160000

0
0
-44000
-88000

istribution

22000

24000

Order Quantities

26000

28000

30000

Net profit or Loss


120000
144000
116000
72000

Order Quantities

ibution

22000

24000

der Quantities

26000

28000

30000

26000

28000

30000

Sales Scenario Ordered Quantity


Projected Profit
10000
7000
56000
20000
14000
112000
30000
21000
168000

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