Exhibit 12.3 The Following Questions Use the Information Below

question 68

Essay

Exhibit 12.3
The following questions use the information below.
An auto parts store wants to simulate its inventory system for engine oil. The company has collected data on the shipping time for oil and the daily demand for cases of oil. A case of oil generates a $10 profit. Customers can buy oil at any auto parts store so there are no backorders (the company loses the sale and profit). The company orders 30 cases whenever the inventory position falls below the reorder point of 15 cases. Orders are placed at the beginning of the day and delivered at the beginning of the day so the oil is available on the arrival day. An average service level of 99% is desired. The following spreadsheets have been developed for this problem. The company has simulated 2 weeks of operation for their inventory system. The current level of on-hand inventory is 25 units and no orders are pending.
-Jim Johnson operates a bus service to take college students to "The Big City" on Friday night and bring them back to school on Sunday night. The bus has 45 seats but sometimes there are empty seats. His records show that about 5% of ticket holders do not show up for their ride. Tickets cost $20 and are non-refundable. If Jim overbooks the bus and more than 45 passengers show up, some of them will be bumped and have to miss the trip. This bumping costs the company $40 because Jim has a double-your-money back policy for bumped passengers. Jim wants to see what happens to profits if 48 reservations are accepted. What formulas should go in cell C10 − C15 of the worksheet?

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Definitions:

Mutual Fund Prospectus

A legal document provided by mutual funds to potential investors, detailing the fund's objectives, risks, performance, and expenses.

Front-end Loads

Charges paid by investors at the time of purchasing a mutual fund.

Back-end Loads

Fees paid by investors when selling mutual fund shares, typically decreasing over time the longer the shares are held.

Hedge Fund

A private investment fund that employs a variety of strategies to earn active return, or alpha, for their investors, often involving leverage, derivatives, and short selling.