A Bakery Must Decide How Many Loaves of Fresh Bread

question 30

Multiple Choice

A bakery must decide how many loaves of fresh bread to produce in a single day. Daily demand for fresh bread is normally distributed with a mean of 70 loaves and standard deviation of 18. If the marginal loss is $2 and the marginal profit is $1, how much bread should the bakery produce in a single day?

• A) 88
• B) 52
• C) 63
• D) 78
• E) 70

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Definitions:

Net Present Value

A method used in capital budgeting to assess the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows.

Discount Factor(s)

A numerical factor used to calculate the present value of future cash flows, reflecting how future values are worth less in today's terms.

Salvage Received

The amount of money or value received from selling or disposing of obsolete or excess inventory, equipment, or other assets.

Internal Rate Of Return

A metric used in capital budgeting to estimate the profitability of potential investments.