Question

On obving this quadratic equation, we get - 17.4 kg UIL.CO should be procured everyday. Example 15.6 A haking company sells cake by its weight in kilograms. It makes a profit of Rs 5,00 e cvery kilogram sold on the day it is baked. It disposes of all cakes not sold on the date they are baked sta loss of Rs 120 per kg. If the demand is known to be rectangular between 2,000 and 3,000 kgs, determine the optimum daily amount baked.

Answer 1

Cost of underage, Cu = Opportunity cost of earning no profit = 5.00
Cost of overage, Co = Loss of discarding = 1.20

So, the optimum in-stock probability = Cu / (Co + Cu) = 5 / (1.2+5) = 0.8065

Area = 0.8065 2,000 2,500 3,000 Q

Optimal order size, Q = 2000 + (3000 - 2000)*0.8065 = 2,806 kgs