Simulation in health care often involves more than trivial skills. For example, modeling all outpatient clinic operations in a particular facility would probably involve the use of multiple probability distributions and many calculations. Verifying and validating the simulation requires even more technical prowess. Healthcare administration leaders and decision makers must have the knowledge, skill, and abilities to build and understand these simulations.
For this Assignment, review the resources for this week, and reflect on the advanced simulation techniques highlighted. Consider how these advanced simulation techniques might apply to specific simulation models in a health services organization, and then complete the problems assigned for the Assignment.
The Assignment: (3–5 pages)
Complete Problem 45 (Prizdol prescription drug) on page 887 of your course text.
Note: You will be using Excel and @Risk for this Assignment.
- Problem 45 on Textbook Pg 887
The annual demand for Prizodol, a prescription drug manufactured and marketed by the NuFeel Company, is normally distributed with mean 50,000 and standard deviation 12,000. Assume that demand during each of the next 10 years is an independent random number from this distribution. NuFeel needs to determine how large a Prizodol plant to build to maximize its expected profit over the next 10 years. If the company builds a plant that can produce x units of Prizodol per year, it will cost $16 for each of these x units. NuFeel will produce only the amount demanded each year, and each unit of Prizodol produced will sell for $3.70. Each unit of Prizodol produced incurs a variable production cost of $0.20. It costs $0.40 per year to operate a unit of capacity.
a. Among the capacity levels of 30,000, 35,000, 40,000, 45,000,50,000,55,000, and 60,000 units per year, which level maximizes expected profit?
Use simulation to answer this question.
b. Using the capacity from your answer to part a. NuFeel can be 95% certain that actual profit for the 10-year period will be between what two values?
Albright, S. C., & Winston, W. L. (2017). Business analytics: Data analysis and decision making (6th ed.). Stamford, CT: Cengage Learning. Chapter 16, “Simulation Models”
Torabi, E., Froehle, C. M., Lindsell, C. J., Moomaw, C. J., Kanter, D., Kleindorfer, D., & Adeoye, O. (2016). Monte Carlo simulation modeling of a regional stroke team’s use of telemedicine. Academic Emergency Medicine, 23(1), 55–62.
Note: Retrieved from the Walden Library databases.