(Solved Homework): Brook's Café sells slices of 7 layer chocolate cake. A slice of cake sells for $7 and costs the café…

Brook’s Café sells slices of 7 layer chocolate cake. A slice of cake sells for $7 and costs the café $3 per slice. In order to eliminate waste, the café discounts slices of cake to $2 after regular hours (4:00pm) and is able to sell all remaining cake. Canyon Café estimates the demand for chocolate cake during regular hours to be Poisson distributed with a mean of 8 slices per day. What is the optimum quantity of slices Brook’s Café should purchase per day? a) 8 b) 9 c) 10 d) Cannot be determined without the standard deviation.

Expert Answer


d) Cannot be determined without the standard deviation

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Given Price P = $7

Cost C = 3

Salvage cost V = $2

Overage cost Co = Cost – Salvage Value = 3-1 = 1

Underage cost Cu = Price – Cost = 7-3 = 4

Critical ratio p = Cu/(Cu+Co) = 4/5 = 0.8

Z = normsdist(0.8) = 0.79

Order Quantity Q

Q=mu +Zsigma

Mean mu = 8

Its not possible to calculate optimum quantity Q without the standard deviation

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