Swanson’s Bakery is well known for producing the best fresh bread in the city, so the sales are very 1 answer below »

Swanson’s Bakery is well known for producing the best

fresh bread in the city, so the sales are very substantial. The daily

demand for its fresh bread has a uniform distribution between 300

and 600 loaves. The bread is baked in the early morning, before

the bakery opens for business, at a cost of $2 per loaf. It then is

sold that day for $3 per loaf. Any bread not sold on the day it is

baked is relabeled as day-old bread and sold subsequently at a discount

price of $1.50 per loaf.The bakery owner, Ken Swanson,

now wants you to conduct a financial analysis of various inventory

policies. You are to begin with the policy obtained in the

first four parts of Prob. 19.6-4 (ignoring any cost for the loss of

customer goodwill). As given with the answers in the back of the

book, this policy is to bake 500 loaves of bread each morning,

which gives a probability of incurring a shortage of

1

3 .

(a) For any day that a shortage does occur, calculate the revenue

from selling fresh bread.

(b) For those days where shortages do not occur, use the probability

distribution of demand to determine the expected number of

loaves of fresh bread sold. Use this number to calculate the expected

daily revenue from selling fresh bread on those days.

(c) Combine your results from parts (a) and (b) to calculate the

expected daily revenue from selling fresh bread when considering

all days.

(d) Calculate the expected daily revenue from selling day-old

bread.

(e) Use the results in parts (c) and (d) to calculate the expected

total daily revenue and then the expected daily profit (excluding

overhead).

(f ) Now consider the inventory policy of baking 600 loaves each

morning, so that shortages never occur. Calculate the expected

daily profit (excluding overhead) from this policy

 

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