Single Period Problem

The local team is having a major game this Sunday evening. You are in charge of the stadium cafeteria and you will need to decide about the number of sandwiches you will prepare for sales.

The cost of a sandwich is $3.5. The selling price during the sandwich is $6. After the game is over, you will throw all the unsold sandwiches, as they have no value. We expect number of sandwich sold is normally distributed with an expected demand (mean) of 1,000 units and a standard deviation of 150 units.

Provide an answer for the following questions. You need to show your Work and provide neat and clear submission.

1. What the cost per unit of demand overestimated (Co)
2. What the cost per unit of demand underestimated (Cu)
3. What is the critical ratio that will balance the cost of understocking and overstocking?
4. How many sandwiches should you prepare for the game?