What are dorothy expected profits

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Reference no: EM132217358

Dorothy’s pastries are fresh baked daily and sold at several specialty shops throughout town. When they are a day old, they must be sold at reduced prices. Daily demand in town for the pastries is normally distributed with an average of 500 and standard deviation of 75. Dorothy’s pastry sells for $1.00 and costs $0.60 to make. Each one not sold at the end of the day can be sold the next day for $0.30 as day-old pastry.

A) How many pastries should be baked each day so that profits are maximized?

B) What are Dorothy’s expected profits?

C) What is the chance that actual demand will be so high that Dorothy can’t fulfill all orders?

D) Dorothy would like to switch transportation carriers to a local company. Their trucks have a minimum size for deliveries around town. The company requires that she have around 600 pastries (a critical fractile of 90%). How much would her cost per pastry have to decrease for this level of production to be optimal?

Reference no: EM132217358

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