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    Calculating optimal daily order

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    A bagel shop buys each bagel for $0.08 and sells each bagel for $0.35. Leftover bagels at the end of the day are purchased by a local soup kitchen for $0.03 per bagel. The shop's owner has observed for the daily demand, Q, the following probabilities, f(Q):

    Q 0 5 10 15 20 25 30 35
    f(Q) 0.05 0.10 0.10 0.20 0.25 0.15 0.10 0.05

    Answer the following questions:
    What is the optimal daily order in multiples of 5 (include the model name and formula)?

    If the daily demand is normally distributed (the mean and variance can be obtained from the table above), then what is the optimal daily order?

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    Solution Preview

    A bagel shop buys each bagel for $0.08 and sells each bagel for $0.35. Leftover bagels at the end of the day are purchased by a local soup kitchen for $0.03 per bagel. The shop's owner has observed for the daily demand, Q, the following probabilities, ...

    $2.19

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