Description

LOG203 Group-based Assignment Cinnabon Store

Question 2
The newly opened Cinnabon store at Raffles City needs to determine the number of rolls to make for its store. Being the first store in Singapore, Cinnabon does not have any historical data to rely on. The company hired an external agency to estimate the demand for the rolls.
After a market survey, the agency determined that the minimum and maximum demand would he 50 and 350, respectively and provided a discrete probability of different possible demands, as shown in Figure 1.
Demand Distribution
30%
100
150 200 210 300 310
Demand
Figure 1: Demand distribution for Cinnabon rolls
Each roll is sold at $4 with a profit of $2.48. A nearby restaurant purchases unsold puffs for 38 cents each at the end of the day

LOG203
Group-based Assignment
(a) The manager at Cinnabon identifies that the probability of demand-200 does not seem correct. Identify the issue. What should be the probability, assuming the probabilities for all other demands are correct?
(5 marks)
(b) Based on the information provided by the agency, analyse the inventory problem and help Cinnabon decide the number of rolls to make each day to maximise its expected profit. Determine the expected maximum profit. Show your calculations
(15 marks)
(c) Cinnabon decides to sell the unsold rolls later rather than selling them to the nearby restaurant at a discounted price. Give your views, without calculation, as to whether the same method employed in part (b) can be used to decide the optimal number of rolls if:
Cinnabon decides to sell the rolls at a discounted price the following day.
ii) Cinnabon decides to sell the rolls the next day at the same price on the subsequent days.
Provide reasons for your answer.
(10 marks)