What is the optimal production quantity for burritos

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Reference no: EM13964140

Weekday lunch demand for spicy black bean burritos at the Kiosk, a local food truck serving only lunch, has normal distribution with a mean of 100 and standard deviation of 20. The Kiosk charges $4 for a burrito, which are made before the lunch crowd arrives. Every customer who orders a burrito also orders a soda, which is sold for $1. The burrito cost the Kiosk $2 and the soda costs 5 cents. Kiosk maintains a strict "No old burrito" policy, meaning all unsold burritos are donated to a local food bank. However, any unsold soda will be kept in the refigertor and used the next day. If the Kiosk runs out of stock on burritos, customers will go somewhere else.

1. How many burritos should Kiosk make??

2. What is the overage cost (C_o) ???

3. What is the underage cost (C_u?)? ?

4. What is the optimal production quantity for burritos?

Reference no: EM13964140

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