Problem 13-43 Offwego Airlines has a daily flight from Chicago to Las Vegas. On

Question

Problem 13-43 Offwego Airlines has a daily flight from Chicago to Las Vegas. On average, 14 ticket holders cancel their reservations, so the company intentionally overbooks the flight. Cancellations can be described by a normal distribution with a mean of 14 passengers and a standard deviation of 4.40 passengers. Profit per passenger is $84. If a passenger arrives but cannot board due to overbooking, the company policy is to provide a cash payment of $184 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.) Overbookedtickets

Explanation / Answer

Underage cost Cu = 84

Overage cost Co= 184

Service level = Cu/(Cu+Co) = 84/(184+84) = 0.3134

Z = -0.49

No of sandwiches = Mean + z*Standard deviation = 14 + (-0.49*4.40) = 11.84 or 12

Overbooked tickets = 12

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