Pile cp15

15
Simulation
Question 1
A company trading in motor vehicle spares wishes to determine the level of stock it should
carry for the item in its range. Demand is not certain and replenishment of stock takes 3 days.
For one item X, the following information is obtained:
Demand (unit per day)
Probability
1
.1
2
.2
3
.3
4
.3
5
.1
Each time an order is placed, the company incurs an ordering cost of ` 20 per order. The
company also incurs carrying cost of ` 2.50 per unit per day. The inventory carrying cost is
calculated on the basis of average stock.
The manager of the company wishes to compare two options for his inventory decision.
(A) Order 12 units when the inventory at the beginning of the day plus order outstanding is
less than 12 units.
(B) Order 10 units when the inventory at the beginning of the day plus order outstanding is
less than 10 units.
Currently (on first day) the company has a stock of 17 units. The sequence of random number
to be used is 08, 91, 25, 18,40, 27, 85, 75, 32, 52 using first number for day one.
You are required to carry out a simulation run over a period of 10 days, recommended which
option the manager should chose.
(7 Marks) (Nov., 2004)
Answer
Allocation of random numbers
Demand
1
2
Probability
.
Cumulative prob.
Random numbers
.1
00-09
.2
.3
10-29
The Institute of Chartered Accountants of India
15.2
Advanced Management Accounting

3
.3
.6
30-59
.3
.9
60-89
.1
1.0
90-99
Option I
Random
numbers
Opening
Stock
Demand
Closing
Stock
Order
placed
Order
in
Average
stock
08
17
16
16.5
91
16
11
12
25
11
09
10.0
18
09
07
8.00
40
07
04
12
5.50
27
16
14
15.0
85
14
10
12
12.00
75
10
06
8.00
32
4.50
10
52
12
1.50
Day
13.5
94.5
Carrying cost (94.5 2.50)
=` 236.25
Ordering cost (2 20)
=` 40.00
` 276.25
Option 11
Random
no.
Opening
Stock
Demand
Closing
Stock
Order
placed
Order
in
Average
stock
08
17
16
16.5
91
16
11
13.5
25
11
09
10
10.0
18
09
07
8.00
40
07
04
27
04
02
10
3.00
85
12
08
10
10.00
75
08
04
6.00
Day
5.50
Simulation
15.3
32
04
01
2.50
10
52
01
10
0.50
75.5
Carrying cost (75.5 2.50) = ` 118.75

Ordering cost (2 20)
= ` 40.00
` 228.75
Option II is better.
Question 2
A Publishing house has bought out a new monthly magazine, which sells at ` 37.5 per copy.
The cost of producing it is ` 30 per copy. A Newsstand estimates the sales pattern of the
magazine as follows:
Demand Copies
Probability
0 300
0.18
300 600
0.32
600 900
0.25
900 1200
0.15
1200 1500
0.06
1500 1800
0.04
The newsstand has contracted for 750 copies of the magazine per month from the publisher.
The unsold copies are returnable to the publisher who will take them back at cost less ` 4 per
copy for handling charges.
The newsstand manager wants to simulate of the demand and profitability. The following
random number may be used for simulation:
27, 15, 56, 17, 98, 71, 51, 32, 62, 83, 96, 69.
You are required to(i)
Allocate random numbers to the demand patter forecast by the newsstand.
(ii)
Simulate twelve months sales and calculate the monthly and annual profit/loss.
(iii) Calculate the loss on lost sales.

Answer
(i)
Allocation of random numbers
(8 Marks) (Nov., 2005)
15.4

Demand
0<300
300 < 600
600 < 900
900 < 1200
1200 <1500
1500 < 1800
Probability
0.18
0.32
0.25
0.15
0.06
0.04
Cumulative probability
0.18
0.50
0.75
0.90
0.96
1.00
Allocated RN
0017
1849
5074
7589
9095
9699
(ii) Simulation: twelve months sales, monthly and annual profit/loss

Month
RN
Demand
Sold
Return
Profit
on
sales
(`)
Loss
on
return
(`)
Net (`)
Loss
on lost
units
27
450
450
300
3375
1200
2175
15
150
150
600
1125
2400
-1275
56
750
750
--
5625
--
5625
17
150
150
600
1125
2400
-1275
98
1650
750
--
5625
---
5625
71
750
750
--
5625
--
5625
51
750
750
--
5625
--
5625
32
450
450
300
3375
1200
2175
62
750
750
--
5625
--
5625
300
10
83
1050
750
--
5625
--
5625
900
11
96
1650
750
--
5625
--
5625
12
69
750
750
--
5625
54000
900
5625
7200
46800
2100
(iii) Loss on lost sale 21007.5 = ` 15750.

Question 3
(i)
What is simulation?
(ii)
What are the steps in simulation?
(1 Mark) (Nov., 2006)

(4 Marks) (Nov., 2006)
Answer
(i)
Simulation is a quantitative procedure which describes a process by developing a model

of that process and then conducting a series of organized trial and error experiments to
product the behaviour of the process over time.
Simulation
15.5
(ii) Steps in the simulation process:

(i)
Define the problem and system you intend to simulate.
(ii)
Formulate the model you intend to use.
(iii) Test the model, compare with behaviour of the actual problem environment.
(iv) Identify and collect data to test the model.
(v) Run the simulation.
(vi) Analyse the results of the simulation and, if desired, change the solution you are
evaluating.
(vii) Rerun the simulation to tests the new solution.
(viii) Validate the simulation i.e., increase the chances of valid inferences.
Question 4
How would you use the Monte Carlo Simulation method in inventory control?
(4 Marks) (May 2008)
Answer
The Monte Carlo Simulation:
It is the earliest mathematical Model of real situations in inventory control:
Steps involved in carrying out Monte Carlo simulation are:
Define the problem and select the measure of effectiveness of the problem that might be
inventory shortages per period.
Identify the variables which influence the measure of effectiveness significantly for
example, number of units in inventory.
Determine the proper cumulative probability distribution of each variable selected with
the probability on vertical axis and the values of variables on horizontal axis.
Get a set of random numbers.
Consider each random number as a decimal value of the cumulative probability

distribution with the decimal enter the cumulative distribution plot from the vertical axis.
Project this point horizontally, until it intersects cumulative probability distribution curve.
Then project the point of intersection down into the vertical axis.
Then record the value generated into the formula derived from the chosen measure of
effectiveness. Solve and record the value. This value is the measure of effectiveness for
that simulated value. Repeat above steps until sample is large enough for the
satisfaction of the decision maker.
15.6
Question 5
A single counter ticket booking centre employs one booking clerk. A passenger on arrival
immediately goes to the booking counter for being served if the counter is free. If, on the
other hand, the counter is engaged, the passenger will have to wait. The passengers are
served on first come first served basis. The time of arrival and the time of service varies from
one minute to six minutes. The distribution of arrival and service time is as under:
Arrival / Service
Arrival
Service
Time (Minutes)
(Probability)
(Probability)
0.05
0.10
0.20
0.20
0.35
0.40
0.25
0.20
0.10
0.10
0.05
Required:
(i)
Simulate the arrival and service of 10 passengers starting from 9 A.M. by using the
following random numbers in pairs respectively for arrival and service. Random numbers
60 09 16 12 08 18 36 65 38 25 07 11 08 79 59 61 53 77 03 10.
(ii)
Determine the total duration of

(1) Idle time of booking clerk and
(2) Waiting time of passengers.
(8 Marks) (Nov., 2008)
Answer
Random allocation tables are as under:
Time
Arrival
Arrivals Random
No.
(Mts) (Probability) Cumulativ
e allocate
Probability
d
Time
Service
Service
(Mts) (Probability Cumulative
) (Probability
)
Random
No.
allocated
0.05
0.05
00-04
0.10
0.10
00-09
0.20
0.25
05-24
0.20
0.30
10-29
0.35
0.60
25-59
0.40
0.70
30-69
0.25
0.85
60-84
0.20
0.90
70-89
0.10
0.95
85-94
0.10
1.00
90-99
0.05
1.00
95-99
Simulation
15.7
Simulation of ten trails:

R. No.
Arrival Mts.
Time
Start R. No.
Time Mts. Finish Time
Waiting Time
Cler Passanger
k
60
9.04
9.04
09
9.05
16
9.06
9.06
12
9.08
08
9.08
9.08
18
9.10
36
9.11
9.11
65
9.14
38
9.14
9.14
25
9.16
07
9.16
9.16
11
9.18
08
9.18
9.18
79
9.22
59
9.21
9.22
61
9.25
53
9.24
9.25
77
9.29
03
9.25
9.29
10
9.31
Total
6
6
In the above ten trial, the clerk was idle for 6 minutes and the passengers had to wait for 6
minutes.
Question 6
ABC Cooperative Bank receives and disburses different amount of cash in each month. The
bank has an opening cash Balance of ` 15 crores in the first month. Pattern of receipts and
disbursements from past data is as follows:
Monthly Cash receipts
` in Crores
Probability
Monthly Cash disbursements
` in Crores
Probability
30
0.20
33
0.15
42
0.40
60
0.20
36
0.25
39
0.40
99
0.15
57
0.25
Simulate the cash position over a period of 12 months.

Required:
(i)
Calculate probability that the ABC Cooperative Bank will fall short in payments.
(ii)
Calculate average monthly shortfall.
15.8
(iii) If ABC bank can get an overdraft facility of ` 45 crores from other Nationalized banks.
What is the probability that they will fall short in monthly payments?
Use the following sequence (rowwise) of paired random numbers.
1778 4316 7435 3123 7244 4692 5158 6808 9358 5478 9654 0977
(7 Marks)(May, 2010)
Answer
Monthly Cash receipts ( ` crores)
Monthly Cash disbursements ( ` crores)
Cash
Probability
Cumulative
R.N.
Cash
Probability
Cumulativ
e
R.N.
30
0.20
0.20
00-19
33
0.15
0.15
0014
42
0.40
0.60
20-59
60
0.20
0.35
1534
36
0.25
0.85
60-84
39
0.40
0.75
3574
99
0.15
1.00
85-99
57
0.25
1.00
7599
Opening
Receipt
Payment
Closing
Months
(` in
Crores)
Random
Number.
(` in
Crores)
Total
Random
Number.
(` in
Crores)
(` in
Crores)
15
17
30
45
78
57
-12
-12
43
42
30
16
60
-30
-30
74
36
06
35
39
-33
-33
31
42
09
23
60
-51
-51
72
36
-15
44
39
-54
-54
46
42
-12
92
57
-69
-69
51
42
-27
58
39
-66
-66
68
36
-30
08
33
-63
-63
93
99
36
58
39
-3
10
-3
54
42
39
78
57
-18
11
-18
96
99
81
54
39
42
12
42
09
30
72
77
57
15
Simulation
(i)
15.9
In 12 months, the bank falls short of cash in 10 months to meet payment.

Thus, probability of shortfall = 10/12 = 0.83
(ii)
Total short fall of ` 399 crores over 10 months

Average monthly shortfall during 10 months = ` 39.9 crores
(iii) With an overdraft facility of ` 45 crores is available, there will be a shortfall in 5 months
(4,5,6,7,8).. Therefore, probability is = 5/12 = 0.42
Question 7
What are the steps involved in carrying out Monte Carlo simulation model? (4 Marks)(Nov., 2010)
Answer
Steps involved in Monte Carlo simulation are:
(i)
To select the measure of effectiveness of the problem, that is, what element is used to
measure success in improving the system modeled. This is the element one wants to
maximize or minimize.
(ii)
Identifying the variables which influence the measure of effectiveness significantly.
(iii) Determining the proper cumulative probability distribution.

(iv) To get a set of random numbers.
(v) Consideration of each random number as a decimal value of the cumulative probability
distribution. With the decimal, enter the cumulative distribution plot from the vertical axis,
Project this point horizontally, until it intersects cumulative probability distribution curve.
(vi) Recording the value generated in step(v) into the formula derived from the chose
measures of effectiveness. Solve and record the value.
(vii) Repeating steps (V) and (VI) until sample is large enough for the satisfaction of the
decision maker.
Question 8
A car rental agency has collected the following data on the demand for five-seater vehicles
over the past 50 days.
Daily Demand
No. of Days
10
16
14
The agency has only 6 cars at present.

(i)
Use the following 5 random numbers to generate 5 days of demand for the rental agency
Random Nos 15,
(ii)
48,
71,
56,
90
What is the average number of cars rented per day for the 5 days ?
15.10
(iii) How many rentals will be lost over the 5 days?
Answer
Daily
demand
Days Probability Cumulative Random

probability
No.
Day Demand Rented Rental

lost
0.08
0.08
00.07
10
0.20
0.28
08-27
16
0.32
0.60
28-59
14
0.28
0.88
60-87
0.12
1.00
88-99
50
1.00
29
Average no. of cars rented =
29
= 5.8
5
Rental lost = 3
Question 9
What are the steps involved in the simulation process?
(4 Marks)(Nov., 2011)
Answer
Steps in Simulation Process
1.
Define the problem or system you intend to simulate.
2.
Formulate the model you intend to use.
3.
Test the model; compare its behavior with the behavior of the actual problem
environment.
4.
Identify and collect the date needed to test the model.
5.
Run the simulation.
6.
Analyse the results of the simulation and, if desired, change the solution you are
evaluating.
7.
Rerun the simulation to test the new solution.
8.
Validate the simulation, that is, increase the chances that any inferences you draw about
the real situation from running the simulation will be valid.
Question 10
A refreshment centre in a railway station has two counters - (i) self-service (opted by 60
% of the customers) and (ii) attended service (opted by 40 % of the customers). Both
Simulation
15.11
counters can serve one person at a time. The arrival rate of customers is given by the
following probability distribution:
No.of arrivals
Probability
0.10
0.30
0.05
0.20
0.35
Formulate the associated interval of 2 digit random numbers for generating

(i)
the type of service and
(ii)
the arrival rate
Answer
Type of Service
Probability
Cumulative Probability
Random No. Interval
Self- Service
0.60
0.60
00 - 59
Attended Service
0.40
1.00
60 - 99
No. of arrivals
Probability
0
1
2
3
4
0.20
0.10
0.35
0.30
0.05
Cumulative
Probability
0.20
0.30
0.65
0.95
1.00
Arrival Rate:
Random Number
Interval
00 - 19
20 - 29
30 - 64
65 - 94
95 - 99
Question 11
An international tourist company deals with numerous personal callers each day and prides
itself on its level of service. The time to deal with each caller depends on the client's
requirements which range from, say, a request for a brochure to booking a round-the-world
cruise. If a client has to wait for more than 10 minutes for attention, it is company's policy for
the manager to see him personally and to give him a holiday voucher worth `15.
The company's observations have shown that the time taken to deal with clients and the
arrival pattern of their calls follow the following distribution pattern:
Time to deal
with clients
Time between
call arrivals
Minutes
10
14
20
30
Probability
0.05
0.10
0.15
0.30
0.25
0.10
0.05
Minutes
15
25
Probability
0.2
0.4
0.3
0.1
15.12
Required:
(i)
Describe how you would simulate the operation of the travel agency based on the use of
random number tables;
(ii)
Simulate the arrival and serving of 12 clients and show the number of clients who receive
a voucher (use line 1 of the random numbers below to derive the arrival pattern and line
2 for serving times); and
(iii) Calculate the weekly cost of vouchers; assuming the proportion of clients receiving
vouchers derived from (ii) applies throughout a week of 75 operating hours.
Random Numbers
Line 1
03
47
43
73
86
36
96
47
36
61
46
98
Line 2
63
71
62
33
26
16
80
45
60
11
14
10
(7 Marks)(Nov., 2012)
Answer
Time to deal with clients
Time(Minutes)
Probability
Assigned Numbers
0.05
0.05
00-04
0.10
0.15
05-14
0.15
0.30
15-29
10
0.30
0.60
30-59
14
0.25
0.85
60-84
20
0.10
0.95
85-94
30
0.05
1.00
95-99
Time(Minutes)
Probability
Assigned Numbers
0.2
0.2
00-19
0.4
0.6
20-59
15
0.3
0.9
60-89
25
0.1
1.0
90-99
Time between arrivals
Simulation table for time between arrivals and service time

Client
Time
Between
Arrivals
Arrival Time
Time In
Serving
Time
Time
Out
Waiting
Time
Voucher
Simulation
1
2
3
4
5
6
7
8
9
10
11
12
1
8
8
15
15
8
25
8
8
15
8
25
1
9
17
32
47
55
80
88
96
111
119
144
1
15
29
43
53
59
80
94
104
118
122
144
14
14
14
10
6
6
14
10
14
4
4
4
15
29
43
53
59
65
94
104
118
122
126
148
6
12
11
6
4
6
8
7
3
-
15.13
Yes
Yes
Total Clients in a Week of 75Hours =75 Hours x 60 minutes /10.4# minutes =433
# Average
time between arrivals = 0.2x1 + 0.4x8 + 0.3x15 + 0.1x25 = 10.4minutes
2 out of the 12 clients receive ` 15 voucher. So the cost will be ` 1,082.50 or ` 1,083 [(2/12 x
433) x `15].
Taking cycle time as 148 minutes, voucher cost can be computed as follows:
` 15 per Client x [(75 Hours x 60 minutes /148 minutes) no. of cycles x 2 Clients per Cycle Time]
So, Voucher Cost will be ` 912.16
Question 12
Brief the reasons for using simulation technique to solve problems.
Answer
Reasons for using simulation technique to solve problems:
It is not possible to develop a mathematical model and solutions without some basic
assumptions.
It may be too costly to actually observe a system.
Sufficient time may not be available to allow the system to operate for a very long time.
Actual operation and observation of a real system may be too disruptive.
Question 13
A bakery sells a popular brand of bread. Cost price per bread is ` 16 and selling price per
bread is ` 20. Shelf life of the bread is 2 days and if it is not sold within two days, then it has
no sale value at the end of second day. Daily demand based on past experience is as under:
Daily Demand
20
25
35
40
45
15.14

.01
Probability
.15
.30
.40
.10
.04
Consider the following sequence of random numbers:

58, 80, 51, 09, 47, 26, 64, 43, 86, 35
Using the sequence, simulate the demand for the next 10 days and find out the total profit or
loss for 10 days assuming 35 breads are purchased every day in the morning and there is an
opening stock of 5 breads (purchased the previous day) on the 1st day morning. Assume LIFO
basis (Last In First Out basis - where the fresh bread is sold first).
(8 Marks)(Nov., 2013)
Answer
The demand patterns yield the following probability distribution. The numbers 0099 are
allocated in proportion to the probabilities associated with each event.
Random No. Coding for Demand
Demand
Prob.
Cum Prob.
Random Numbers
0.01
0.01
00 00
20
0.15
0.16
01 15
25
0.30
0.46
16 45
35
0.40
0.86
46 85
40
0.10
0.96
86 95
45
0.04
1.00
96 99
Let us simulate the supply and demand for the next ten days using the given random numbers
/ information in order to find the profit if
-
the cost of the bread is `16,
the selling price is `20 and
unsold bread after the end of the 2nd Day have no saleable value.
Simulation Sheet for Finding Profit

Day Random
No
Op.
Stock
Demand Supply
Waste
Cl.
Stock
(In No.) (In No.) (In No.) (In No.) (In No.)
1
2
58
80
5
0
35
35
35
35
5
0
0
0
Loss on
Waste
Profit on
Sale
Net
Profit
(In `)
(In `)
(In `)
80
140
60
(5b`16)
(35b`4)
140
140
(35b`4)
3
51
35
35
140
140
Simulation
15.15
(35b`4)
4
09
20
35
15
80
80
(20b`4)
5
6
47
15
26
35
35
25
15
35
240
140
(15b`16)
(35b`4)
100
10
100
100
(25b`4)
7
8
64
10
43
35
35
25
10
35
160
140
(10b`16)
(35b`4)
100
10
20
100
(25b`4)
9
10
86
10
35
40
35
25
35
80
160
(5b`16)
(40b`4)
100
10
80
100
(25b`4)
*b refers to no. of breads
Profit on Sale of one Bread `4 (`20 `16).

Total Profit for 10 Days is `680.
(`60 + `140 + `140 + `80 `100 + `100 `20 + `100 + `80 + `100)
Cost of Bread in Stock at the end of the 10th Day is `160 (10 Breads `16).
Question 14
A computer service centre services laptops. It is proposed to study the arrival and servicing
pattern of the service centre. The following in information was collected, over a period of 100
days.
No. of computers
Frequency of arrival
Frequency of service
10
15
25
20
10
20
25
11
15
16
12
18
14
13
12
10
Simulate the arrival and servicing pattern for 10 days and find out the average number of
laptops held for more than one day for service. Assume FIFO method is followed for
15.16
service/repair and there is one laptop held from previous day for repair at the beginning of the
first day.
Use the following series of random numbers:
69
52
Arrivals
Service
45
36
46
62
10
49
82
68
16
77
35
55
70
66
57
51
92
88
(6 Marks) (May, 2014)

Answer
The arrival patterns yield the following probability distribution. The numbers 0099 are
Random No. Coding for Arrival
No. of Laptops
Probability
Random Numbers
0.10
0.10
00 09
0.25
0.35
10 34
10
0.20
0.55
35 54
11
0.15
0.70
55 69
12
0.18
0.88
70 87
13
0.12
1.00
88 99
The service patterns yield the following probability distribution. The numbers 0099 are
Random No. Coding for Service
No. of Laptops
Probability
Random Numbers
0.15
0.15
00 14
0.20
0.35
15 34
10
0.25
0.60
35 59
11
0.16
0.76
60 75
12
0.14
0.90
76 89
13
0.10
1.00
90 99
Let us simulate the arrival and service of laptops for the next ten days using the given random
numbers / information.
Simulation Sheet
Day
R. No. of
Arrival
No. of Laptops
Arrived
Opening
Job
R. No. of
Service
No. of Laptops
Serviced*
Closing
Job
Simulation
15.17
69
11
52
10
45
10
36
10
46
10
62
11
10
49
10
82
12
68
11
16
77
12
35
10
55
10
70
12
66
11
57
11
51
10
10
92
13
88
12
3
Total
12
* This represents the service capacity of service centre.
Average No. of Laptops held for more than one day
Totalof ClosingJobs
No.of Days
12Laptops
10Days
1.2 Laptops per day
Question 15
A cake vendor buys pieces of cake every morning at `4.50 each by placing his order one day
in advance and sale them at `7.00each. Unsold cake can be sold next day at ` 2.00 per piece
and there after it should be treated as no value. The pattern for demand of cake is given
below:
Fresh Cake:
Daily Sale
100
101
102
103
104
105
106
107
108
109
110
Probability
.01
.03
.04
.07
.09
.11
.15
.21
.18
.09
.02
One day old cake:

Daily Sale
Probability
.70
.20
.08
.02
Use the following set of random numbers:

Fresh Cake
37
73
14
17
24
35
29
37
33
68
One day old cake
17
28
69
38
50
57
82
44
89
60
15.18
The vendor adopts the following rule.

If there is no stock of cake with him at the end of previous day, he orders for 110pieces
otherwise he orders 100 or 105 pieces whichever is nearest actual fresh cake sale on the
previous day. Starting with zero stock and a pending order of 105 pieces, simulate for 10 days
and calculate vendor's profit.
(7 Marks) (November, 2014)
Answer
Random No. Coding for Fresh Cake
No. of Cakes
Probability
Random Numbers
100
0.01
0.01
00 00
101
0.03
0.04
01 03
102
0.04
0.08
04 07
103
0.07
0.15
08 14
104
0.09
0.24
15 23
105
0.11
0.35
24 34
106
0.15
0.50
35 49
107
0.21
0.71
50 70
108
0.18
0.89
71 - 88
109
0.09
0.98
89 - 97
110
0.02
1.00
98 - 99
Random No. Coding for One Day Old Cake

No. of Cakes
Probability
Random Numbers
0.70
0.70
00 69
0.20
0.90
70 89
0.08
0.98
90 97
0.02
1.00
98 99
Let us simulate the sale of fresh and one day old cakes for the next ten days using the given
random numbers / information.
Simulation Sheet
Day
R. No.
of
Fresh
Cake
Fresh
Stock
37
105
Demand Sales
Pcs.
106
105
Cl.
Stock
Order
Initiated
110
One
R.N.
Sale
Day of Old of Old
Old
Cake Cake
Stock
Pcs.
17
--
Loss
Pcs.
--
Simulation
15.19
73
110
108
108
105
28
--
--
14
105
103
103
105
69
17
105
104
104
105
38
24
105
105
105
110
50
35
110
106
106
105
57
--
--
29
105
105
105
110
82
37
110
106
106
105
44
--
--
33
105
105
105
110
89
10
68
110
107
107
105
60
--
--
11
1,054
Calculation of Vendors Profit
Amount (`)
Sales of Fresh Cakes (1,054 Pcs. `7)

Sale of One Day Old Cake (2 Pcs. `2)
Total Sales Revenue
Less: Cost of Cakes Sold[`4.50 (1,054 + 2) Pcs.]
Less: Cost of Spoilt Cakes [`4.50 (11 + 3*) Pcs.]
Profit
* It is assumed that 3 Cakes of Closing Stock is not saleable.
7,378.00
4.00
7,382.00
4,752.00
63.00
2,567.00

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15

The Institute of Chartered Accountants of India

Advanced Management Accounting

Ordering cost (2 20)

The Institute of Chartered Accountants of India

Carrying cost (75.5 2.50) = ` 118.75

Allocate random numbers to the demand patter forecast by the newsstand.

(iii) Calculate the loss on lost sales.

Allocation of random numbers

The Institute of Chartered Accountants of India

(8 Marks) (Nov., 2005)

Advanced Management Accounting

(ii) Simulation: twelve months sales, monthly and annual profit/loss

(iii) Loss on lost sale 21007.5 = ` 15750.

What are the steps in simulation?

(1 Mark) (Nov., 2006)

Simulation is a quantitative procedure which describes a process by developing a model

The Institute of Chartered Accountants of India

(ii) Steps in the simulation process:

Define the problem and system you intend to simulate.

Formulate the model you intend to use.

Get a set of random numbers.

Consider each random number as a decimal value of the cumulative probability

The Institute of Chartered Accountants of India

Advanced Management Accounting

Determine the total duration of

(8 Marks) (Nov., 2008)

The Institute of Chartered Accountants of India

Simulation of ten trails:

Time Mts. Finish Time

Monthly Cash disbursements

Simulate the cash position over a period of 12 months.

Calculate average monthly shortfall.

The Institute of Chartered Accountants of India

Advanced Management Accounting

Monthly Cash disbursements ( ` crores)

The Institute of Chartered Accountants of India

In 12 months, the bank falls short of cash in 10 months to meet payment.

Total short fall of ` 399 crores over 10 months

Identifying the variables which influence the measure of effectiveness significantly.

(iii) Determining the proper cumulative probability distribution.

The agency has only 6 cars at present.

The Institute of Chartered Accountants of India

Advanced Management Accounting

(iii) How many rentals will be lost over the 5 days?

Days Probability Cumulative Random

Day Demand Rented Rental

Average no. of cars rented =

Define the problem or system you intend to simulate.

Formulate the model you intend to use.

Identify and collect the date needed to test the model.

Run the simulation.

Rerun the simulation to test the new solution.

The Institute of Chartered Accountants of India

Formulate the associated interval of 2 digit random numbers for generating

the type of service and

the arrival rate

Random No. Interval

The Institute of Chartered Accountants of India

Advanced Management Accounting

Time between arrivals

Simulation table for time between arrivals and service time

The Institute of Chartered Accountants of India