I want a hand getting started with this question.
A bagel shop buys each bagel for $0.08 and sells each bagel for $0.35. Leftover bagels at the end of the day are purchased by a local soup kitchen for $0.03 per bagel. The shop's owner has observed for the daily demand, Q, the following probabilities, f(Q):
Q 0 5 10 15 20 25 30 35
f(Q) 0.05 0.10 0.10 0.20 0.25 0.15 0.10 0.05
Answer the following questions:
Question 1: What is the optimal daily order in multiples of 5 (include the model name and formula)?
Question 2: If the daily demand is normally distributed (the mean and variance can be obtained from the table above), then what is the optimal daily order?