Question

The utd cafeteria offers scones for $1.5 each from 8 am to 3 pm. the scones are ordered from their supplier at the start of each day and delivered store opens. the supplier charges 75 cents per scone. if at 3 pm, some scones are left unsold, the cafetéria people sell off the remaining scones for 50 cents assume that all leftover scones are always sold by 4 pm when the cafeteria closes. if a customer asks for a scone before 3 pm but the cafeteria has run out customer always buys a bag of chips for $1 instead (after 3 pm, the customer does not buy anything instead). assume the chips are always in stock and they purchased from the same supplier for 40 cents eachdemand for scones before 3 pm at the cafeteria is uniformly distributed between 40 and 50.(the same a previous question) b) how much is the underage cost?

Answer 1

The underage cost at the cafeteria, when a scone is not available and a bag of chips is sold instead, is calculated as the difference in profit from a scone versus that from the chips. This equates to a $0.15 loss for each scone that is understocked before 3 pm.

Step-by-step explanation:

The underage cost refers to the opportunity loss when the demand is higher than the supply on hand, which in this case is when a customer wants a scone before 3 pm but the cafeteria has run out, and they buy a bag of chips instead. Given the information that scones are sold for $1.50 each and the chips for $1, with purchase costs being $0.75 for a scone and $0.40 for a bag of chips, the underage cost per incident is the lost revenue from the higher-priced item minus the cost of the item not sold plus the revenue from the chips minus the cost to purchase them.

The calculation of this cost takes into account the difference in selling price and cost of both items. For each scone not available, the cafeteria loses ($1.50 - $0.75) but then gains ($1 - $0.40) from selling chips. Therefore, the underage cost per scone would be ($0.75 - $0.60) which equals $0.15.