A bakery prepares all its cakes between 4am and 6am so that theyare fresh when customers arrive. The cost of baking a cake is $2and selling price is $10. Demand for the day is estimated to benormally distributed with a mean of 20 and a standard deviation of4.
a. If cakes are worthless if they are not sold on that day, whatis the optimal number of cakes to bake?
b. If all day old cakes can be sold at a deeply discounted priceof $1, how does that change the overage cost? What is the optimalnumber to bake?
