A local barbecue joint makes one massive batch of potato salad each day. If they run out of this savory side before the end of the day, their last few customers are less than satisfied, but if they make too much, they sell it to the local hog farmer for feed. Every serving costs an equivalent of $0.23 to make, but can be sold for $2.50 to customers and for $0.12 to the hog farmer. The average daily demand is for 400 servings with a standard deviation of 40 servings. How many servings should be made each day?
A)467
B)453
C)462
D)455

Question

Quizplus · Accepted Answer

The optimal quantity to make is the value of the mean plus the value of the z-score times the standard deviation. The z-score for a 95% confidence level is 1.96. So, the optimal quantity to make is 400 + 1.96 * 40 = 467.

A Local Barbecue Joint Makes One Massive Batch of Potato