Question

Bakery A sells bread for $2 per loaf that costs $0.40 per loaf to make. Bakery A gives a 90% discount for its bread at the end of the day. Demand for the bread is normally distributed with a mean of 300 and a standard deviation of 20 . What order quantity maximizes expected profit for Bakery A?

Answer 1

The order quantity that maximizes expected profit for Bakery A is zero because the profit is negative for each loaf sold.

Step-by-step explanation:

To find the order quantity that maximizes expected profit for Bakery A, we need to consider the cost and revenue associated with each quantity.

The cost per loaf to make is $0.40, and Bakery A sells each loaf for $2. Since Bakery A gives a 90% discount at the end of the day, the revenue per loaf is $2 x 0.10 = $0.20.

Therefore, the profit per loaf is $0.20 - $0.40 = -$0.20.

Since the profit is negative, Bakery A will not make any profit regardless of the order quantity.