Henrique Correa\'s bakery prepares all its cakes between 4 A.M. and 6 A. M.so th

Question

Henrique Correa's bakery prepares all its cakes between 4 A.M. and 6 A. M.so they will be fresh when customers arrive. Day-old cakes are virtually always sold, but at a 50% discount off the regular $10 price. The cost of baking a cake is $7, and demand is estimated to be normally distributed, with a mean of 20 and a standard deviation of 6. What is the optimal stocking level? Refer to the standard normal table for z-values. The optimal stocking level for the bakery is cakes (round your response to the nearest whole number).

Explanation / Answer

Cs=$10-$7=$3

Co=$7-$5=$2

Service level = (3)/(3+2) =0.6

For service level of 0.6, z=0.72575

So optimal stocking level =20+6*0.72575=24.35

Answer:- 24.35

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