October 2nd, 2022
See attached file for further question details.
1. Bev’s Bakery specializes in sourdough bread. Early each morning, Bev must decide how many loaves to bake for the day. Each loaf costs $0.35 to make and sells for $1.15. Bread left over at the end of the day can be sold to a day-old baked goods store for $0.25. Past data indicate that demand is distributed as follows:
Number of Loaves Probability
a. Construct a payoff table and determine the optimal quantity for Bev to bake each morning.
b. What is the optimal quantity for Bev to bake if the unsold loaves cannot be sold to the day-old store at the end of the day (so that unsold loaves are a total loss)?