What are the unit underage cost and overage cost

Reference no: EM13299998

The buzz campus eatery offers a specific type of biscuits for $1.5 each from 8am to 3pm. The biscuits are ordered from a supplier at the start of each day and delivered before the store opens. The supplier charges 75 cents per biscuit. If, at 3pm, some biscuits are left, the buzz people mark down the price and sell off all the remaining biscuits for 50 cents each. In contrast, if, before 3pm, a customer comes to buy a biscuit but buzz has run out of biscuits, the buzz gives a free coupon worth 10 cents to the customer as compensation. Demand for biscuits before 3pm at buzz is variable but can only be 40 to 45, with probabilities given in the following table.

Number of customers Probability
40 0.1
41 0.15
42 0.25
43 0.25
44 0.15
45 0.1

(d) What are the unit underage cost (Cu) and overage cost (Co) of the biscuit business?

Reference no: EM13299998

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