Monte-Calro Simulation application
Otto Fehringer, owner of a fish and chips shop, is considering setting up his shop at the Send, a month-long fair in Munster, Germany. Otto will incur fixed costs of €35,000 (for rent, waste disposal, electricity, etc.) plus some personnel cost with triangular distribution with a minimum value of €25,000, most likely value if €29,000, and a maximum of €55,000. He makes €4.50 per serving of fried fish, which cost him €1.50 to produce. He sells herring sandwiches for €3.00, which costs him €1.00 to produce.
Otto is uncertain about the sales volumes, mainly due to uncertainty about the weather. When it’s warm and sunny, sales volumes for both products are higher, when it's cold or rainy, both sales volumes are lower. Moreover, sales of herring sandwiches and fried fish are negatively related: when it's warm he sells more herring sandwiches, when it's cold, more fried fish.
Given the uncertain weather and the negative relationship between the sales volume of the two products, Otto assumes a normal distribution of sales of fried fish with a mean of 20,000 and a standard deviation of 6,000 servings.
For herring sandwiches, he assumes a normal distribution with a mean of 15,000 and a standard deviation of 4,000, using a negative correlation of -0.7 to reflect the negative relationship between the two.
Otto considers raising the price of fried fish from €4.50 to €5.50 per serving. As a result, he will lose between 4,000 and 6,000 servings, with a uniform. distribution 4,000 and 6,000.
This problem is modeled in the table below. Use SimVOI to create a simulation model for it and answer questions a-d in the table below, based on the simulation results.