Question

A bagel company bakes a specialty bagel that it sells by the dozen every day. These specialty bagels can only be baked early in the morning before the store opens for business. The company estimates that the daily demand (in dozens) for its specialty bagel is distributed as follows: Specialty bagels arc sold by the dozen only at a cost of $9.00 per dozen. The cost to make one bagel is $0.50. Leftover specialty bagels arc sold by the dozen the next day for a 50% discount. The optimal number of specialty bagels that should be baked tomorrow (in dozens) is:________ a) 5 dozen. b) 4 dozen. c) 3 dozen. d) 2 dozen.

Answer 1

b) 4 dozen

Step-by-step explanation:

The computation of the optimal number of specially bagels i.e expected value is shown below:

As we know that

Expected value = Demand × probability

= 1 dozens × 0.10 + 2 dozens × 0.15 + 3 dozens × 0.20 + 4 dozens × 0.25 + 5 dozens × 0.30

= 0.1 + 0.3 + 0.6 + 1 + 1.5

= 3.5 dozen or 4 dozen

Hence, the correct option is b.