Add Variability

Now that we can calculate the profit per cup we need to get to our operational income, and to get that we need to add in an estimation of our monthly sales – the quantity of cups poured.

From market research, John knows that the demand for coffee in his area is a function of price. He has determined that the quantity of cups demanded per month is equal to approximately 3500 – 100 * [Price per Cup] ^ 2. However, this function does not describe his observation fully. The demand for coffee also seems to be affected by a random “noise” that John cannot explain. He decides that this noise should be modelled by a standard distribution with a mean of 0 and a standard deviation of 150.

The first thing we will do is add a Distribution node to the Driver Model. After that we will calculate the demand per month.

1. From the Palette, click and drag a Distribution node onto the workspace underneath the Price per Cup node.
2. Rename the node Demand Noise.
3. Click on the properties icon on the Distribution node.
4. Change the Mean to 0.
5. Change the StdDev to 150.
6. From the Palette, click and drag a Calculation node onto the design surface.
7. Rename the node Monthly Demand.
8. Link the Numeric node to the Calculation node.
9. Link the output of the Distribution node to the Calculation node.
10. Click on the NaN value, and enter the expression 3500 – 100 * [Price per Cup]^2 + [Demand Noise].
11. Confirm the driver model looks like the screen shot below.