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Examples of Monte Carlo Simulation

Q. 1. An automobile company manufactures around 150 scooters. The daily production varies from 146 to 154
depending upon the availability of raw materials and other working conditions:

Production (per day) 146 147 148 149 150 151 152 153 154
Probability 0.04 0.09 0.12 0.14 0.11 0.10 0.20 0.12 0.08

The finished scooters are transported in a specially arranged lorry accommodating 150 scoters using the following
random numbers: 80,81,76,75,64,43,18,26,10,12,65,68,69,61,57. Simulate the process to find out:
i) What the average number of scooters will be waiting in the factory?
ii) What the average number of empty spaces will be in the lorry?
Ans.
Production (per
146 147 148 149 150 151 152 153 154
day)
Probability 0.04 0.09 0.12 0.14 0.11 0.10 0.20 0.12 0.08
Random
00-03 04-12 13-24 25-38 39-49 50-59 60-79 80-91 92-99
Number Range

Day Number 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Random
numbers for 80 81 76 75 64 43 18 26 10 12 65 68 69 61 57
that day
Assumed
Production in 153 153 152 152 152 150 148 149 147 147 152 152 152 152 151
that day
Lorry Capacity 150 150 150 150 150 150 150 150 150 150 150 150 150 150 150
Excess waiting Total
3 3 2 2 2 0 2 2 2 2 1
in factory = 21
Empty space in Total
2 1 3 3
Lorry =9

(i) Therefore, the average number of scooters will be waiting in the factory = [21/ 15] = 1.40
(ii) Therefore, the average number of empty spaces in the lorry =[9 /15] = 0. 60

Q. 2. The Investment Corporation wants to study the investment projects based on three factors: market demand in
units; price per unit minus cost per unit and investment required. These factors are felt to be independent of each
other. In analyzing a new consumer product, the Corporation estimates the following probability distributions: -

Price minus cost per unit i.e. profit


Annual Demand Investment Required
per unit
Units Probability Rupees Probability Rupees Probability
20,000 0.05 3.00/- 0.10 17,50,000/- 0.25
25,000 0.10 5.00/- 0.20 20,00,000/- 0.50
30,000 0.20 7.00/- 0.40 25,00,000/- 0.25
35,000 0.30 9.00/- 0.20
40,000 0.20 10.00/- 0.10
45,000 0.10
50,000 0.05

Using simulation process and repeating the trial ten times, compute the return on investment for each trial taking
these three factors into account. What is the most likely return?
Ans. The return per annum can be computed by the following expression: -
Return(R) = [(Price – Cost) per unit x Number of units/ Investment] = [Profit per unit Number of units / Investment]

Developing a cumulative probability distribution corresponding to each of the three factors, an appropriate set of
random numbers is assigned to represent each of the three factors as shown in Tables 1, 2 and 3 below.

1
Table 1 (for demand)
Annual Demand in units Probability Cumulative Probability Random Number
20,000 0.05 0.05 00-04
25,000 0.10 0.15 05-14
30,000 0.20 0.35 15-34
35,000 0.30 0.65 35-64
40,000 0.20 0.85 65-84
45,000 0.10 0.95 85-94
50,000 0.05 1.00 95-99

Table 2 (for profit)


Price minus Cost per unit i.e.
Probability Cumulative Probability Random Number
profit per unit
3.00/- 0.10 0.10 00-09
5.00/- 0.20 0.30 10-29
7.00/- 0.40 0.70 30-69
9.00/- 0.20 0.90 70-89
10.00/- 0.10 1.00 90-99

Table 3 (for investment)


Investment Required in Rs. Probability Cumulative Probability Random Number
17,50,000/- 0.25 0.25 00-24
20,00,000/- 0.50 0.75 25-74
25,00,000/- 0.25 1.00 75-99

The simulation worksheet is prepared for ten trials. The simulated return (R) is also calculated by using the formula
for R as stated above. The results of simulation are shown in table 4.

Table 4 (for simulation result)


Random Simulated Return
Random Number for (%) =
Random Simulated
Number Simulated Profit i.e. Simulated [Profit x Number
Trials Number for Investment
for Demand (Price – Profit in Rs. of units /
Investment in ( ‘000)
Demand Cost) per Investment] x
unit 100
1 28 30 19 5.00 18 1,750 8.57 %
2 57 35 07 3.00 61 2,000 5.25 %
3 60 35 90 10.00 16 1,750 20.00 %
4 17 30 02 3.00 71 2,000 4.50 %
5 64 35 57 7.00 43 2,000 12.25 %
6 20 30 28 5.00 68 2,000 7.50 %
7 27 30 29 5.00 47 1,750 7.50 %
8 58 35 83 9.00 24 1,750 18.00 %
9 61 35 58 7.00 19 1,750 14.00 %
10 30 30 41 7.00 97 2,500 8.40 %

As shown in Table 4, the highest likely return is 20.00 % which corresponds to annual demand of 35,000 units
yielding a profit of Rs. 10 per unit and investment required is Rs. 17,50,000/-.

Q. 3. A dentist schedules all his patients for 30 minute appointments. Some of the patients take more or less than 30
minutes depending on the type of dental work to be done. The following summary shows the various categories of
work, their probabilities and time actually needed to complete the work.

Category of Service Time Required in Minute Probability of Category


Filing 45 0.40
Crown 60 0.15
2
Cleaning 15 0.15
Extraction 45 0.10
Checkup 15 0.20
Total = 1.00

Simulate the dentist’s clinic for four hours and determine the average waiting time for the patient as well as the
idleness of the doctor. Assume that the patient show up at the clinic at exactly their scheduled arrival time starting at
8-00 A.M. Use the following random numbers for handling the above problem: -
40 82 11 34 25 66 17 79

Ans. The cumulative probability distribution and random number interval for service time is shown in table 1 below:
Table 1
Category of Service Time required Cumulative Random Number
Probability
Service in minutes Probability Interval
Filing 45 0.40 0.40 00-39
Crown 60 0.15 0.55 40-54
Cleaning 15 0.15 0.70 55-69
Extraction 45 0.10 0.80 70-79
Checkup 15 0.20 1.00 80-99

The various parameters of a given queuing system such as arrival pattern of customers, service time, waiting time in
the context of the given problem are shown in the following tables 2 and 3:-

Table 2 – Arrival Pattern and Nature of Service


Random Category of Service time in
Patient Number Scheduled Arrival
Number Service minutes
1 8.00 40 Crown 60
2 8.30 82 Checkup 15
3 9.00 11 Filing 45
4 9.30 34 Filing 45
5 10.00 25 Filing 45
6 10.30 66 Cleaning 15
7 11.00 17 Filling 45
8 11.30 79 Extraction 45

Table 3A – Waiting time fo the dentist and the patients


Random, Service Waiting time
Inter- Patient Dental
Number time for Service Service For the patient
Patient arrival arrival category For
for the starts at ends at Time From -
No. time in time for the the
dental category AM/PM AM/PM in to
Min, AM patient dentist
category in Min. min AM/PM
1 30 8:00 40 Crown 60 8:00 9:00 - - -
8:30 -
2 30 8:30 82 Checkup 15 9:00 9:15 - 30
9:00
9:00-
3 30 9:00 11 Filing 45 9:15 10:00 - 15
9:15
9:30 -
4 30 9:30 34 Filing 45 10:00 10:45 - 30
10:00
10:00 -
5 30 10:00 25 Filing 45 10:45 11:30 - 45
10:45
10:30 -
6 30 10:30 66 Cleaning 15 11:30 11:45 - 60
11:30
12:30 11:00 -
7 30 11:00 17 Filling 45 11:45 - 45
PM 11:45
12:30 01:15 11:30 -
8 30 11:30 79 Extraction 45 = 60
PM PM 12:30

3
Total - 285

Table 3B - Computation of Arrivals, Departures and Waiting of Patients


Event Patient Number Waiting
Time
(Patient Number) (Time to Exit) (Patient Number)
8.00 1 arrive 1 (60) -
8.30 2 arrive 1 (30) 2
9.00 1 departs; 3 arrive 2 (15) 3
9.15 2 depart 3 (45) -
9.30 4 arrive 3 (30) 4
10.00 3 depart; 5 arrive 4 (45) 5
10.30 6 arrive 4 (15) 5,6
10.45 4 depart 5 (45) 6
11.00 7 arrive 5 (30) 6,7
11.30 5 depart; 8 arrive 6 (15) 7,8
11.45 6 depart 7 (45) 8
12.00 End 7 (30) 8

The dentist was not idle during the entire simulated period.

The waiting times for the patients were as shown in the table. The average waiting time is [285 / 8] = 35 minutes.

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