EOM Enterprises owns and operates a small bakery on North Sprigg Street in Cape Girardeau, Missouri. One of their most popular items is Redhawk Rolls, which are baked every Sunday afternoon. Online sales of Redhawk Rolls have been steady. The rolls are sold in boxes containing 12 rolls each. Weekly demand for the rolls and the associated probabilities are shown in the following table:

A box of rolls sells for $10 and has a cost of $6. All rolls that are not sold by the end of the week are donated to a local food bank. Use marginal analysis to determine how many boxes of Redhawk Rolls to produce each week to maximize average profit. 

Discussion Questions 

1. EOM Enterprises is considering acquiring a new baking oven that would cut their costs per box in half. How many boxes should EOM Enterprises produce each week in that scenario? 

2. Produce a graph showing on the vertical axis how many boxes of Redhawk Rolls EOM Enterprises should produce given costs per box on the horizontal axis of $1, $2, $3, $4, $5, $6, $7, $8, and $9. Interpret the graph.  

Transcribed Image Text:

DEMAND (BOXES) 4 5 6 7 8 9 10 11 22 41 12 13 14 15 PROBABILITY 0.05 0.05 0.05 0.05 0.10 0.10 0.20 0.20 0.05 0.05 0.05 0.05