Stochastic Cost-Volume-Profit Analysis: Satisficing with Short Product Lives
Bridgegate Foods is a wholesale provision merchant specialising in supplying hotels and restaurants in the Torbay area. It is considering whether or not to lease some deep freeze equipment with the complex ventilation and temperature control facilities required for the storage of oysters. Market research in local hotels and restaurants has suggested that they would demand on average a total of 200 dozen oysters per week, but that the standard deviation of their demand would be 80 dozen. Bridgegate’s experience in the wholesaling of other shellfish suggests to them that they can interpret their market research as saying that they would face a normal distribution for dozens of oysters demanded, with a mean of 200 and a standard deviation of 80, at the price of £9 per dozen that they would propose to charge.
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