Famous Albert prides himseltf on being the Cooke King of the West Small freshly
ID: 2336237 • Letter: F
Question
Famous Albert prides himseltf on being the Cooke King of the West Small freshly baked cookies are the specialty of his shop Famous Albert has asked for help to determine the number of cookies he should make each day. From an analysis of past demand, he estimates demand for cookies as DEMAND DEMAND 2.100dozen 2.300 2 500 2,700 0 03 0.09 0 30 0.30 0 15 0.03 t i2,900 3.300 Each dozen sells for $0 68 and costs sO50. which includes handling and transportation Cookies that are not sold at the end of the day are reduced to SO 32 and sold the following day as day-old merchandise a. Compute the expected profit or loss for each cooke making decision quantity (Round your answer to the nearest whole number. Enter expected losses with a negative sign.) Cookies Baked Probability of Expected ProfitLoss Dozen Demand 003 S 2.300 2 500 2 700 2,900 3.100 0,09 030 0.30 0.15 003 0.10 b. Based on your answers to part a what is the optimai number or ookies to m Optimal number of cookies dozen c. By using marginal analysis, what is the optimal number of cookies to make? Optimal number of cookies dozenExplanation / Answer
Cookies Baked (Dozen)
Probability of Demand
Expected Profit/(Loss)
2100
0.03
378
2300
0.09
414
2500
0.30
450
2700
0.30
486
2900
0.15
522
3100
0.03
558
3300
0.10
594
(b) Based on above decision optimal cookies make = 3300
(c)Using marginal analysis optimal cookie make = 2500 or 2700 having highest probability
Cookies Baked (Dozen)
Probability of Demand
Expected Profit/(Loss)
2100
0.03
378
2300
0.09
414
2500
0.30
450
2700
0.30
486
2900
0.15
522
3100
0.03
558
3300
0.10
594
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