Computco sells personal computers. The demand for its computers during a month follows a normal distribution, with a mean of 400 and standard deviation of 100. Each time an order is placed, costs of...

Computco sells personal computers. The demand for its computers during a month follows a normal distribution, with a mean of 400 and standard deviation of 100. Each time an order is placed, costs of $600 per order and $1500 per computer are incurred. Computers are sold for $2800, and if Computco does not have a computer in stock, the customer will buy a computer from a competitor. At the end of each month, a holding cost of $10 per computer is incurred. Orders are placed at the end of each month, and they arrive at the beginning of the next month. Four ordering policies are under consideration:


■ Policy 1: Place an order for 900 computers whenever the end-of-month inventory is 50 or less.


■ Policy 2: Place an order for 600 computers whenever the end-of-month inventory is 200 or less.


■ Policy 3: Place an order for 1000 computers whenever end-of-month inventory is 400 or less.


■ Policy 4: Place an order for 1200 computers whenever end-of-month inventory is 500 or less.



Using simulation, run 1000 iterations of an appropriate model to determine which ordering policy maximizes expected profit for a 2-year period. To get a more accurate idea of expected profit, you can credit Computco with a salvage value of $1500 for each computer left at the end of the last month. Assume that 400 computers are in inventory at the beginning of the first month.