Question

Part 1 of 1 - Just Baked Just Baked cupcakes sold at retail stores for prices ranging from about $2.30 each for simpler cupcakes by the dozen up to about $3.50 for the fanciest cupcakes sold individually. Most of the cupcakes were sold in 2-packs priced at $5.50. An approximate overall average selling price was $2.75 per cupcake. Total variable costs per cupcake from the bakery were about $0.50, representing $0.25 in direct material and $0.25 in variable labor. Cupcakes not sold by the end of the day were discarded. On a daily basis, demand is normally distributed with mean 1,200 and standard deviation 200. Question 1 of 4 5 Points

Answer 1

The correct answer is option C.$ 2.25

Underage=Cost of understocking=Cu=Selling price-Cost price=2.75-0.5=$ 2.25

The correct answer is option D.$ 0.50

Overage=Cost of overstocking=Co=Cost price-Salvage value=0.5-0=$ 0.50

The correct answer is option B.0.81

Critical ratio=Cu/(Cu+Co)=2.25/(2.25+0.5)=0.8181=0.81

The correct answer is option B.1382

We have,

Optimal CSL(cycle service level)=critical ratio=0.8181

We have in normal distribution,

z=x-mean/std dev

Using excel function,we calculate z as

z=NORMSINV(CSL)=NORMSINV(0.8181)

  z=0.9081

solving for x ,we get,

0.9081=x-1200/200

x=1381.6=1382 cupcakes