Cynthia Knott\'s oyster bar buys fresh Louisiana oysters for $3 per pound and se

Question

Cynthia Knott's oyster bar buys fresh Louisiana oysters for $3 per pound and sells them for $8 per pound. Any oysters not sold that day are sold to her cousin, who has a nearby grocery store, for $2 per pound. Cynthia believes that demand follows the normal distribution, with a mean of 100 pounds and a standard deviation of 10 pounds. How many pounds should she order each day? Refer to the standard normal table for z-values. Cynthia should order nothing pounds of oysters each day (round your response to one decimal place).

Explanation / Answer

Cost of actual Utilization (Co) = 8 - 3 = 5

Cost of Under utilization(Cu) = 3 - 2 = 1

Hence,

Probability of sale= Co/(Cu+Co)= 5/(5+1)= 5/6 = 0.8333

From z table,

P(z < 0.97) = 0.8333

So,

Cynthia should order = mean + z*std dev =100 + 0.97*10 = 109.7 pounds

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.