1220 words - 5 pages

JET Copies: The Decision to Purchase a Backup Copier

Businesses are continually faced with difficult and challenging decisions, especially those regarding revenue and whether or not to spend money on situations that may or may not occur, based on speculation or perception. There may be several techniques a business can employ to analyze if perceived investments will produce a desired return and subsequently, profit. Simulation is an analytical process that supports business planning objectives. By utilizing models to support this process, business leaders and managers can forecast potential expenditures and better prepare for roadblocks that can serve as organizational ...view middle of the document...

20 for day 1, .20 + .45 for day 2, .65 + .25 for day 3, and .90 + .10 for day 4. This information will then be identified in a table to be used as input to the actual simulation. Next, I identified a set of random numbers by utilizing the formula, =RAND() and copied that formula throughout each of the associated cells. Lastly, the formula =VLOOKUP(F12,$B$5:$C$8,2) will compare the random numbers with the cumulative probabilities and generate the repair time (days) values for the simulation. Now, let’s see how I modeled the number of weeks between breakdowns.

To effectively model the time between breakdowns, I turned to James’ estimation of time between 0 to 6 weeks. With this information, I then generated a second set of random numbers, again using the formula =RAND(). Since it was communicated that the probability will increase the longer the copier went without breaking down, I determined that a continuous probability function must be used. I, then, utilized the equation x = 6 times the square root of a random number, or specifically 6*SQRT(C12), for generating the time between breakdowns, given a certain random number. Lastly, I identified the cumulative time (in weeks) between breakdowns by summing the time between each specific breakdown in order to identify the year point (52 weeks), which will play an important role in identifying how much revenue will be lost for that period and help answer the question of whether or not a second copier should be purchased (Taylor III, 2011, pp. 643 - 646).

Calculating lost revenue for each day of this simulation was perhaps the most challenging aspect. JET Copies estimated that they would sell between 2000 and 8000 copies a day at $.10 each. With that, they decided that a uniform probability distribution was best to help estimate the number of copies they would sell each day (Taylor III, 2011, p. 679). To effectively compute loss revenue, I had to compute the probability of copies not sold based on the company’s expected range of 2000 – 8000 each day. This was achieved by setting up a table depicting the cumulative copies sold, using a third set of random numbers and using the formula VLOOKUP(H12,$M$5:$N$11,2). Lastly, by multiplying the number of copies not sold, depicted in each of the cells in column I, by $.10, I concluded that they would lose an estimated $7,700.00 over a 52 week period.

This simulation can be described as a probability distribution based on three sets of random numbers, time between breakdowns, cumulative time of breakdowns, the repair time for each breakdown, number of copies not sold, and lost revenue. It includes both continuous and...

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