The Lakeshore Restaurant plans to order pies for the 4th of July. It will cost $3.50 to buy a pie, and they will sell for $10.00. Any unsold pie can be sold to a local charity for $2.00. The following table, using data from the last few holidays, gives potential demand and probabilities for them. Demand, D 250 450

Transcribed Image Text:

The Lakeshore Restaurant plans to order pies for the 4th of July. It will cost $3.50 to buy a pie, and they will sell for $10.00. Any unsold pie can be sold to a local charity for $2.00. The following table, using data from the last few holidays, gives potential demand and probabilities for them. Demand, D 250 450 500 300 350 400 Probability, f(D) 0.25 0.10 0.10 0.20 0.20 0.15 (a) What value, if any, would you use for the cost of unsatisfied demand? (b) If the restaurant buys 350 pies, what is its expected profit? (c) How many pies would you recommend they buy? (d) Show how an ordering cost can be handled in the newsboy problem. The Lakeshore Restaurant plans to order pies for the 4th of July. It will cost $3.50 to buy a pie, and they will sell for $10.00. Any unsold pie can be sold to a local charity for $2.00. The following table, using data from the last few holidays, gives potential demand and probabilities for them. Demand, D 250 450 500 300 350 400 Probability, f(D) 0.25 0.10 0.10 0.20 0.20 0.15 (a) What value, if any, would you use for the cost of unsatisfied demand? (b) If the restaurant buys 350 pies, what is its expected profit? (c) How many pies would you recommend they buy? (d) Show how an ordering cost can be handled in the newsboy problem.

Expert Answer

Solut View the full answer