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Ms Economis

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Submitted By trendyrobin
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Simulation
Homework 2
(Due Date: April 29, 2016 @ 10:00 p.m)
Sumit Kunnumkal
Indian School of Business, Hyderabad, India 500032

Important Note:
Submit the homework through the LMS website as a word document. Submit the excel sheet(s) that shows your simulation model along with your homework submission.
Include a separate excel sheet for every simulation question and name the excel sheet according to the question number.
Please be sure to follow the below instructions when building your simulation model.
1. Clearly indicate the steps in all your simulation models – what random variables form the input and what are their distributions, what is the output that you are measuring and the functional relation between the output and the input random variables.
2. In all your simulations, set the number of trials to 1000 and the seed as 1. Set the sampling type as Monte Carlo and the generator as Mersenne Twister.

You are expected to follow the ISB Honor Code for the homework and case submissions.
Question 1:
The revenues and costs at ABC company vary from month to month and can be modeled as random variables. ABC estimates (based on past data) that its sales, cost of goods sold
(COGS), marketing costs, administrative costs and miscellaneous costs for the month of
January have the following distributions:
January figures
Sales
COGS
Marketing cost
Administrative cost
Miscellaneous cost

Normal(2225,150)
Uniform(870, 910)
Triangular (90, 93, 96)
Triangular (75, 78, 81)
Triangular (23, 24, 25)

In addition, the percentage change in the sales, COGS, marketing, administrative and miscellaneous costs from one month to the next can be modeled as independent normal random variables with a mean of 1.5% and a standard deviation of 1%. For example,
SalesFeb = SalesJan(1 + XJan-Sales), COGSFeb = COGSJan(1+XJan-COGS) etc., where XJan-Sales

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