Problem:
Henrique Correa's bakery prepares all its cakes between 4 a. m. and 6 a. m. so they will be fresh when customers arrive. Day- old cakes are virtually always sold, but at a 50% dis-count off the regular $ 10 price. The cost of baking a cake is $ 6, and demand is estimated to be normally distributed, with a mean of 25 and a standard deviation of 4.
Required:
Question: What is the optimal stocking level?
Note: Please show how to work it out.