Determine how many cupcakes should be produced


Suppose the manager has obtained more information on stockout costs. For customers for whom demand is not met, he estimates that 25% will be upset enough to seriously affect business and that 70% of these customers will not return for some period of time. This translates into a loss of $50 per customer. The other 30% will never return and the manager estimates that this will cost the firm $150 per lost customer. Determine how many cupcakes should be produced.

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Operation Management: Determine how many cupcakes should be produced
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