A Pastry Store Wants to Know How Many Dozens of Muffins

question 26

Essay

A pastry store wants to know how many dozens of muffins to bake each day. Every dozen they sell fresh in the shop returns a profit of $5.00. Every dozen they bake but do not sell on the day they are baked is given to a local charity at a loss of $3.00 a dozen. The business is fairly stable in that they never sell less than 50 dozen nor more than 80 dozen muffins. Their sales history, rounded to the nearest ten dozen muffins is as shown:
$\begin{array}{ll}\text { Dozens of }&\text { Number of Days }\\\text { Muffins Sold }&\text { That Many Sold }\\50 & 12 \\60 & 37 \\70 & 45 \\80 & 18\end{array}$
They want to run a ten-day simulation for production rates of 50, 60, 70, and 80 muffins to determine the profit (loss) for each. They generated the following random numbers for days 1-10 respectively: 63, 13, 67, 50, 71, 25, 44, 00, 56, and 68.
a. What range of random numbers corresponds to 70 muffins sold?
b. What is the profit for day 3 if they make 70 dozen muffins?
c. What is the average daily profit (for all ten days) corresponding to 60 dozen muffins made?

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Definitions:

Fair Value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Goodwill

Represents the intangible asset arising when a company acquires another business for more than the fair value of its net identifiable assets.

Equity Method

An accounting technique used when an investing company holds significant influence over the investee but does not have full control over it, involving the recognition of income on the investment based on the investee’s net income.

Unrealized Profits

Profits that have been earned but not yet realized through a transaction, such as an increase in value of an asset that has not been sold.