Consider a bakery that bakes and sells baked fresh brownies to a variety of retailers every day.

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Question:

Consider a bakery that bakes and sells "baked fresh" brownies to a variety of retailers every day. Demand can vary from 4,500 to 8,500 any given day and is more or less following a uniform distribution. Brownies weigh 5 oz each, retail for $2.75 and cost

$1.15 to make. At the end of each day all remaining inventory is blended and mixed with milk (1 oz for each muffin) at a cost of .5 per brownie. The resulting substance is used as an ingredient in cakes and is sold to another bakery for .25/oz.

a)What is the expected daily cost of being over-stocked?

b) How many brownies should be made every day?

a)What is the average revenue from selling the cake ingredient per day?

b) What is the expected daily units of stock-out?

c)Suppose management after a while feels confident that daily demand actually may go as high as 9,000. How does that affect you answer to d). Provide a comprehensive discussion that accounts for the intuition of how this change affected your answer.