Question: Swanson's Bakery is well known for producing the best fresh bread in the city, so the sales are very substantial. The daily demand for its fresh bread has a uniform distribution between 300 and 600 loaves. The bread is baked in the early morning, before the bakery opens for business, at a cost of $2 per loaf. It then is sold that day for $3 per loaf. Any bread not sold on the day it is baked is relabeled as day-old bread and sold subsequently at a discount price of $ 1.50 per loaf.
a. Apply the stochastic single-period model for perishable products to determine the optimal service level.