Assignment:
Bev's Bakery specializes in sourdough bread. Early each morning, Bev must decide how many loaves to bake for the day. Each loaf costs $0.35 to make and sells for $1.15. Bread left over at the end of the day can be sold to a day-old baked goods store for $0.25. Past data indicate that demand is distributed as follows:
|
Number of Loaves
|
Probability
|
|
15
|
.05
|
|
16
|
.05
|
|
17
|
.10
|
|
18
|
.10
|
|
19
|
.20
|
|
20
|
.40
|
|
21
|
.05
|
|
22
|
.05
|
- Construct a payoff table and determine the optimal quantity for Bev to bake each morning.
- What is the optimal quantity for Bev to bake if the unsold loaves cannot be sold to the day-old store at the end of the day (so that unsold loaves are a total loss)?
Provide complete and step by step solution for the question and show calculations and use formulas.