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Question: Dans Vending has the contract to supply sandwic...

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Dans Vending has the contract to supply sandwiches at all home football games for a university. It is a constant challenge at each game to determine how many sandwiches to have available at the games. Ted Lowry, operations manager for Dans Vending, has determined that his fixed cost of providing sandwiches, whether he sells 1 sandwich or 4,000 sandwiches, is $1,000. This cost includes hiring employees to work at the concession booths, hiring extra employees to make the sandwiches the day of the game, delivering them to the game, and advertising during the game. He believes that this cost should be equally allocated between two types of sandwiches. Ted has determined that he will supply only two types of sandwiches: turkey and tuna. His cost to make a turkey sandwich is $2.75 each, and his cost to make a tuna sandwich $3.00 each. Both sandwiches will sell for $6.00 at the game. Unsold sandwiches have no value and are donated to a local shelter for the homeless. Past experience has shown the following demand distributions for the two types of sandwiches at home games: Turkey Demand & Probability 200 0.10 300 0.15 400 0.15 500 0.20 600 0.20 700 0.10 800 0.05 900 0.05

Tuna Demand & Probability

300 0.10 400 0.20 500 0.25 600 0.25 700 0.15 800 0.05

1. For each type of sandwich, determine the profit (or loss) associated with producing at each possible demand level. For instance, determine the profit if 200 turkey sandwiches are produced and 200 are demanded. What is the profit if 200 turkey sandwiches are produced but 300 were demanded, and so on?

2. Compute the expected profit associated with each possible production level (assuming Ted will only produce at one of the possible demand levels) for each type of sandwich.

3. Prepare a short report that provides Ted with the information regarding how many of each type of sandwich he should produce if he wants to achieve the highest expected profit from sandwich sales at the game. Should not be more than a page.