Jay is planning to open a food stand selling homemade hotdogs at the upcoming 4^th of July celebration at Lake Erie. Each hotdog costs $4 and is sold for $7. The demand for hotdogs, as well as the corresponding probabilities, can be described as follows:

Jay cannot replenish his raw materials/ingredients during the day, so any excess demand will be lost. If there are any leftover hotdogs, Jay can sell them to his neighborhood convenience store at an undisclosed price.

Suppose the optimal stocking quantity for Jay is 34 units, what can be said about the pre-negotiated price per hotdog Jay has agreed with the convenience store? Provide a complete analysis to support your answer.
 

Transcribed Image Text:

Demand 30 31 32 33 34 35 36 Probability 0.10 0.13 0.20 0.14 0.11 0.18 0.14 Demand 30 31 32 33 34 35 36 Probability 0.10 0.13 0.20 0.14 0.11 0.18 0.14

Answer rating: 100% (QA)

Answer 1 There are two possible scenarios that could play out Scenario 1 Jay sells all of his hotdog... View the full answer