Offwego Airlines has a daily flight from Chicago to Las Vegas. On average, 13 ticket holders...
Offwego Airlines has a daily flight from Chicago to Las Vegas.
On average, 13 ticket holders cancel their reservations, so the
company intentionally overbooks the flight. Cancellations can be
described by a normal distribution with a mean of 13 passengers and
a standard deviation of 5.30 passengers. Profit per passenger is
$93. If a passenger arrives but cannot board due to overbooking,
the company policy is to provide a cash payment of $193.
Use Table B.
How many tickets should be overbooked to maximize expected profit?
(Round your z value to 2 decimal places. Round
your other intermediate calculations to 4 decimal places and final
answer to the nearest whole number.)
Homework Answers
Cu = $93
Co = $193
Service level = 93 / (193 + 93) = 0.325174825
For 0.325174825 service level, Z = - 0.45
Overbook: 13 – 0.45 (5.3) = 10.615 or 11 tickets.
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