Sweet cider is delivered weekly to Cindy’s Cider Bar. Demand varies uniformly between 400 liters and 600 liters per week. Cindy pays 20 cents per liter for the cider and charges 80 cents per liter for it. Unsold cider has no salvage value and cannot be carried over into the next week due to spoilage. Find the optimal stocking level and its stockout risk for that quantity.
Cindy also sells a blend of cherry juice and apple cider. Demand is a normal distribution with mean 300 liters and standard deviation 10 liters per week. What’s the optimal stock level?