Question
Rohit bakes fresh cakes every morning. The daily demand for his cakes has a discrete distribution: Demand 4 15 19 25 31 37 Probability 7%
Rohit bakes fresh cakes every morning. The daily demand for his cakes has a discrete distribution:
Demand 4 15 19 25 31 37
Probability 7% 19% 26% 26% 15% 7%
Each cake costs Rohit $9.15 to make and is sold for $27. Given that everyone knows that fresh cake is so much better, unsold cakes at the end of the day are sold to Rohit's brother for 88 cents each (Rohit is tempted to ask his brother what he does with them all, but he isn't sure he wants to know).
a. If Rohit decided to bake 19 cakes each day, what would be his expected profit? Do not round intermediate calculations. Round your answer to 2 decimal places (so $15.188 is rounded to $15.19).
b. Based on the demand distribution above, how many cakes should Rohit bake each day to maximize his expected profit?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started