Problem 13-34 Demand for jelly doughnuts on Saturdays at Don's Doughnut Shoppe is shown in the...

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Problem 13-34 Demand for jelly doughnuts on Saturdays at Dons Doughnut Shoppe is shown in the following table. Relative Freq

business Operations-Management

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Answer 1

Answer #1

Cost of shortage Cs= price -cost = 4.75-3.4 = 1.35

Cost of overage Ce= cost - salvage value = 3.4-(4.75/2) =1.025

Ths means that a profit of 1.35 is earend for every unit sold and a loss of 1.025 is incurred with every unit salvaged.

Profit table

Demand/ supply	19	20	21	22	23	24	25	26	27	28	29
19	25.65	24.625	23.6	22.575	21.55	20.525	19.5	18.475	17.45	16.425	15.4	225.775	0.01	2.25775
20	25.65	27	25.975	24.95	23.925	22.9	21.875	20.85	19.825	18.8	17.775	249.525	0.05	12.47625
21	25.65	27	28.35	27.325	26.3	25.275	24.25	23.225	22.2	21.175	20.15	270.9	0.12	32.508
22	25.65	27	28.35	29.7	28.675	27.65	26.625	25.6	24.575	23.55	22.525	289.9	0.18	52.182
23	25.65	27	28.35	29.7	31.05	30.025	29	27.975	26.95	25.925	24.9	306.525	0.13	39.84825
24	25.65	27	28.35	29.7	31.05	32.4	31.375	30.35	29.325	28.3	27.275	320.775	0.14	44.9085
25	25.65	27	28.35	29.7	31.05	32.4	33.75	32.725	31.7	30.675	29.65	332.65	0.1	33.265
26	25.65	27	28.35	29.7	31.05	32.4	33.75	35.1	34.075	33.05	32.025	342.15	0.11	37.6365
27	25.65	27	28.35	29.7	31.05	32.4	33.75	35.1	36.45	35.425	34.4	349.275	0.1	34.9275
28	25.65	27	28.35	29.7	31.05	32.4	33.75	35.1	36.45	37.8	36.775	354.025	0.04	14.161
29	25.65	27	28.35	29.7	31.05	32.4	33.75	35.1	36.45	37.8	39.25	356.5	0.02	7.13

Accorrding to table, maximum profit is obtained at 24 units

corresponding cumulative probability ( service level) with 24 units =0.63

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Answer 2

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