Question
CPG Bagels starts the day with a large production run of bagels. Throughout the morning, additional bagels are produced as needed. The last bake is
CPG Bagels starts the day with a large production run of bagels. Throughout the morning, additional bagels are produced as needed. The last bake is completed at 3 p.m.and the store closes at 8 p.m.It costs approximately $0.20 in materials and labor to make a bagel. The price of a fresh bagel is $0.60. Bagels not sold by the end of the day are sold the next day as "day old" bagels in bags of six, for $0.99 a bag. About two-thirds of the day-old bagels are sold; the remainder are just thrown away. There are many bagel flavors, but for simplicity, concentrate just on the plain bagels. The store manager predicts that demand for plain bagels from 3 p.m.until closing is normally distributed with a mean of 50 and a standard deviation of 17.
b. Suppose that the store manager is concerned that stockouts might cause a loss of future business. To explore this idea, the store manager feels that it is appropriate to assign a stockout cost of $5 per bagel that is demanded but not filled. (Customers frequently purchase more than one bagel at a time. This cost is per bagel demanded that is not satisfied rather than per customer that does not receive a complete order.) Given the additional stockout cost, how many bagels should the store have at 3 p.m.to maximize the store's expected profit? (Round your answer to the nearest whole number.)
c. Suppose the store manager has 105 bagels at 3 p.m. How many bagels should the store manager expect to have at the end of the day? (Round your answer to the nearest whole number.)
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