A baker has to produce donuts in the early morning for the consumption of the whole day. The cost and selling price for one donut are c = $1.1 and p...

A baker has to produce donuts in the early morning for the consumption of the whole day. The cost and selling price for one donut are c = $1.1 and p = $2. Assume there is no goodwill loss and unsold donuts are discarded with zero value for now. It is estimated that demand in the morning is 1, 3 or 5 donuts (equally likely) and in the afternoon 1 or 2 donuts (equally likely). Demands in the morning and in the afternoon are independent. What is the optimal quantity the baker should produce now for the whole day?