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 banking a cake is $6, and demand is estimated to be normally distributed, with a mean of 25 and a standard deviation of 4. What is the optimal stocking level?
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