The Rose Warehouse Buys Roses Each Week from Panama The Owner of the Rose Warehouse Wants to Compare Two

question 3

Essay

The Rose Warehouse buys roses each week from Panama. A toll?free long distance call is made on Saturday night, and early Monday morning roses arrive at the airport in a box refrigerated with dry ice. The roses cost $8 a dozen and are sold on a cash-and-carry basis for $28 a dozen. Roses left over at the end of the week are put in a trash collector in an alley behind the store. Past sales rounded to the nearest ten dozen) are as follows:
$\begin{array}{cc}\text { Dozens of Roses } & \text { Relative } \\\underline{\text { Demanded }} &\underline{ \text { Frequency }}\\110 & 5 \\120 & 20 \\130 & 25 \\140 & 30 \\150 & 20\end{array}$

The owner of the Rose Warehouse wants to compare two ordering rules for ordering roses: 1) order last week's demand plus 10 dozen extra as (safety stock), (2) order 130 dozen every week. He wants to run an eight-week simulation to compare the average weekly profit for the two rules. Last week's demand was for 110 dozen. He generated the following random numbers for weeks 1?8, respectively: 63, 13, 67, 50, 71, 25, 44, and 00.
a. What is the random number range corresponding to 130 dozen roses demanded?
b. Using ordering rule 1, what is the profit for week 3?
c. Using ordering rule 2, what is the profit for week 6?
d. What is the average profit over all eight weeks for ordering rule 1?

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Definitions:

Responsibility Accounting

A system of accounting that segments financial information by areas of responsibility, allowing managers to be held accountable for their areas' financial performance.

Managers

Managers are individuals in an organization responsible for directing and overseeing the work of a group of people towards the achievement of goals.

Residual Income

The income that exceeds the minimum rate of return, often used as a measure of the performance of investment centers within organizations.

Net Operating Income

Profit generated from a company's normal business operations, excluding deductions of interest and taxes.