Next week, Super Discount Airlines has a flight from New York to Los Angeles tha

Question

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 13) cancel their reservation or do not show for the flight. Revenue from a ticket on the flight is $135. If the flight is overbooked, the airline has a policy of getting the customer 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 $218. 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? (Round your answer to the nearest whole number.)

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 13) cancel their reservation or do not show for the flight. Revenue from a ticket on the flight is $135. If the flight is overbooked, the airline has a policy of getting the customer 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 $218. Super Discount considers the cost of flying the plane from New York to Los Angeles a sunk cost.

Explanation / Answer

Well, after going through the data given in the statement above, one can claculate the exact number of seats that the Airlines should overbook. So, the number of seats that are to be overbooked by the Super Discount Airline should be 15, given that the standard deviation is of 13 seats.

Hence, 15 is the most appropriate number of seats.

Regards.

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.