A local pharmacy orders 15 copies of a monthly magazine. Depending on the cover story, demand for the magazine varies. The pharmacy purchases the magazines for $2.25 and sells them for $5.00. Any magazines left over at the end of the month are donated to hospitals and other health care facilities. Modify the newsvendor example spreadsheet to model this situation. Investigate the financial implications of this policy if the demand is expected to vary between 5 and 15 copies each month.
“For the Koehler Vision Associates model you developed in Problem 10, use data tables to study how revenue is affected by changes in the number of appointments
accepted and patient demand.”
The admissions director of an engineering college has $500,000 in scholarships each year from an endowment to offer to high-achieving applicants. The value of each scholarship offered is $25,000 (thus, 20 scholarships are offered). The benefactor who provided the money would like to see all of it used each year for new students. However, not all students accept the money; some take offers from competing schools. If they wait until the end of the admissions’s deadline to decline the scholarship, it cannot be offered to someone else because any other good students would already have committed to other programs. Consequently, the admissions director offers more money than available in anticipation that a percentage of offers will be declined. If more than 20 students accept the offers, the college is committed to honoring them, and the additional amount has to come out of the dean’s budget. Based on prior history, the percentage of applicants that accept the offer is about 70%. Develop a spreadsheet model for this situation, and apply whatever analysis tools you deem appropriate to help the admissions director make a decision on how many scholarships to offer. Explain your results.