problem 2

Problem 2 Potter James is the owner of Potter Patisserie, a pastry shop located just off the historic town square. Business has not been good lately as would be customers frequently leave the store disgruntled when their preferred pastries are not in stock. At the same time, costs have soared as Potter has had to dispose of left-over pastries. Potter remembered that you are logistics whiz and decides to ask you for your help. Potter buys kouign-amann's for $2.25 a piece and resells them for a $4.20. Potter likes to sell fresh pastries, so he throws away any leftovers at the end of the day. 1. Looking at Potter's sales records from the last month, you estimate that average daily demand is 62 kouign-amanns with a standard deviation of 14 kouign-amanns. Drawing on what you learned in college, how many kouign-amann's should Potter order? 2. You further decide that it would make more business/environmental sense to sell the leftover pastries at a markdown price the following day. You suggest that Potter should make the markdown price at $1.50 a piece. With this, how many pastries should Potter order now? (I did not cover this in class, and wanted you guys to think a little bit on how you might solve this. Hint: how does markdown costs affect the overstock/understock costs?) Problem 2 Potter James is the owner of Potter Patisserie, a pastry shop located just off the historic town square. Business has not been good lately as would be customers frequently leave the store disgruntled when their preferred pastries are not in stock. At the same time, costs have soared as Potter has had to dispose of left-over pastries. Potter remembered that you are logistics whiz and decides to ask you for your help. Potter buys kouign-amann's for $2.25 a piece and resells them for a $4.20. Potter likes to sell fresh pastries, so he throws away any leftovers at the end of the day. 1. Looking at Potter's sales records from the last month, you estimate that average daily demand is 62 kouign-amanns with a standard deviation of 14 kouign-amanns. Drawing on what you learned in college, how many kouign-amann's should Potter order? 2. You further decide that it would make more business/environmental sense to sell the leftover pastries at a markdown price the following day. You suggest that Potter should make the markdown price at $1.50 a piece. With this, how many pastries should Potter order now? (I did not cover this in class, and wanted you guys to think a little bit on how you might solve this. Hint: how does markdown costs affect the overstock/understock costs?)