Burger King
Burger King buys top-grade ground beef for $4 per kg. A large sign over the entrance guarantees that the meat is fresh daily. Any leftover meat is sold to the local high school cafeteria for $3 per kg. Eight hamburgers can be prepared from each kilogram of meat. Burgers sell for $2 each. Labor, overhead, cheese, buns and condiments cost $0.8 per burger. Demand is normally distributed with a mean of 360 kg per day and a standard deviation of 40 kg per day.
Questions
1. What is the optimal daily order quantity to maximize expected profits?
What is the stock-out probability?
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