A Bakery Makes Fresh Donuts Every Morning

question 47

Multiple Choice

A bakery makes fresh donuts every morning.If any are left at the end of the day they are donated to a homeless shelter.The number of donuts that can be sold each day is uncertain and the bakery must decide early each morning,how many donuts to make that day.The bakery has created the following payoff table to summarize the situation. It estimates the following probabilities for the respective levels of demand. Which alternative should the bakery choose using the expected value method and what is the expected value?

• A)Alternative 1 with expected value of 100
• B)Alternative 2 with expected value of 225
• C)Alternative 3 with expected value of 350
• D)Alternative 3 with expected value of 190

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Definitions:

Statute of Frauds

A legal principle requiring certain types of contracts to be executed in writing to be enforceable.

Sale of Goods

A commercial transaction where the ownership of physical products is transferred from the seller to the buyer for a price.

Statute of Frauds

A legal principle requiring certain types of contracts to be in written form in order to be enforceable.

Specific Performance

A legal remedy in contract law where a court orders a party to perform their obligations under a contract, rather than just paying damages for failure to do so.