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Humber is now considering opening a Lakeshore bakery location. The bakery will be set up to produce in multiples of 500 loafs only. Minimum
Humber is now considering opening a Lakeshore bakery location. The bakery will be set up to produce in multiples of 500 loafs only. Minimum daily production will be 1500 loafs and maximum will be 4500 loafs. Assume demand will be in multiples of 1000 with minimum at 1000 and maximum at 5000. It will cost the bakery $0.90 to make a loaf and $2.34 to sell. Unsold loaves (if any) at the end of each day will be delivered to Saga Food Drive, a charity organization. Saga will pay the bakery $1.00 each for only the first 500 loafs they receive -the rest (if any) will be free. That is, Saga will not pay more than $500 for any amount of loaves they receive from the bakery daily. The bakery also estimates the opportunity cost for unmet demand (underage or lost sales) at $0.73 per loaf. Use the given information to complete the payoff table below, where payoff is daily gross profit, in dollars. Suppose you set up the payoff table in Excel or Google Sheets with demand in the columns and supply in rows as follows:
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