This is skill-building exercise. You should provide formulas, steps, or reasons

Question

This is skill-building exercise. You should provide formulas, steps, or reasons to support your solutions. You Must show how did you reach every number. Submissions with only the final solutions will not be La Poire sells artisan European style cake. Demand varies uniformly between 300 cakes and 500 cakes per day. It costs La Poire $10 to make a cake. La Poire sells each cake for S25. La Poire gives a 75% discount for its cake at the end of the day Find the optimal stocking level that maximizes expected profit for La Poire and its stockout risk for that quantity Path:

Explanation / Answer

So 460 is the correct order size

notation Formulae a Low 300 b High 500 m mean 400 (a+b)/2 s Std Dev 57.73503 (b-a)/sqrt(12) C Cost 10 $ p Selling price 25 $ V salvage 6.25 Cu Cost of under order 15 (p-c) Co Cost of over order 3.75 (c-v) CR Critical ratio 0.8 (Cu/(Cu+Co) So actual order 460 a+0.8*(b-a)

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