2 Next week, Super Discount Airlines has a flight from New York to Los Angeles that will...
Question:
2 Next week, Super Discount Airlines has a flight from New York to Los Angeles that will be booked to capacity. The airline knows from past history that an average of 25 customers (with a standard deviation of 15) cancel their reservation or do not show for the flight. Revenue from a ticket on the flight is $125. If the flight is overbooked, the airline has a policy of getting the cus- tomer on the next available flight and giving the person a free round-trip ticket on a future flight. The cost of this free round-trip ticket averages $250. Super Discount considers the cost of flying the plane from New York to Los Angeles a sunk cost. By how many seats should Super Discount overbook the flight?
Step by Step Answer:
Operations Management For Competitive Advantage
ISBN: 1572
11th Edition
Authors: Richard B. Chase, F. Robert Jacobs