Question

A bakery would like you to recommend how many loaves of its famous marble rye bread to bake at the beginning of the day. Each loaf costs the bakery ?$4.004.00 and can be sold for ?$7.007.00. Leftover loaves at the end of each day are donated to charity. Research has shown that the probabilities for demands of? 25, 50, and 75 loaves are 3030?%, 2525?%, and 4545?%, respectively. Make a recommendation for the bakery to bake? 25, 50, or 75 loaves each morning.

Answer 1

Given:
Cost per loaf = $4.00
Selling price per loaf = $7.00

25 loaves:
Cost: 25 x 4 = 100
Sales: 25 x 7 = 175 x 30% = 52.50
Profit/loss = 52.50 - 100 = -47.50
-47.50 / 25 = -1.90 loss per loaf

50 loaves
Cost: 50 x 4 = 200
Sales: 50 x 7 = 350 x 25% = 87.50
Profit/loss = 87.50 - 200 = -112.50
-112.50 / 50 = -2.25 loss per loaf

75 loaves
Cost: 75 x 4 = 300
Sales: 75 x 7 = 525 x 45% = 236.25
Profit/loss = 236.25 - 300 = -63.75
-63.75 / 75 = -0.85 loss per loaf

It is better to bake 75 loaves at the beginning of the day because it costs them less compared to baking 25 or 50 loaves.