Question

Jack Schoppe is evaluating two locations for starting a QuizYes toasted sub outlet. The demand is in location A is normally distributed with a mean of 150 subs a day with a standard deviation of of 50. Location B's daily demand averages at 160 with a standard deviation of 75. In both locations, Jack will be able to sell his subs for $6.00 each. The meat/veggies for the subs cost about $3.00 per sub. Since they can be refrigerated, meat and veggies can be stored without wastage if there are leftovers at the end of a business day. If he opens one of the outlets, Jack must order fresh breads (for subs) everyday from a centralized QuizYes Bakery and dispose of the remaining breads at the end of the day. The Bakery charges $1.00 per bread.

1. How many units of bread should Jack buy per day from the Bakery if he opens an outlet in location A?

2. How many units of bread would he need to order in location B?

3. Between A and B, which location is more profitable? Assume that other overhead costs are identical for the two locations.

Answer 1