Exhibit 12.4.
The following questions use the information below.
The manager of a Washington, DC sightseeing tour company is concerned about overbooking for one of his bus tours. The bus has 15 seats but sometimes there are empty seats. His records show that about 20% of ticket holders do not show up for their tour. Tickets cost $10 and are non-refundable. If the manager overbooks the tour and more than 15 passengers show up, some of them will be bumped to a later tour. This bumping costs the company $25 in various expenses to keep the customer happy until the next tour. The manager wants to see what happens to profits if 18 reservations are accepted.
-Using the information in Exhibit 12.4, what formula should go in cell C13 of the worksheet to determine the Opportunity Cost of Empty Seats?
A) =C5*MAX(C4,C10)
B) =C5*MAX(C4,0)
C) =MAX(C4-C10,0)
D) =C5*MAX(C4-C10,0)

Question

Exhibit 12.4.
The following questions use the information below.
The manager of a Washington, DC sightseeing tour company is concerned about overbooking for one of his bus tours. The bus has 15 seats but sometimes there are empty seats. His records show that about 20% of ticket holders do not show up for their tour. Tickets cost $10 and are non-refundable. If the manager overbooks the tour and more than 15 passengers show up, some of them will be bumped to a later tour. This bumping costs the company $25 in various expenses to keep the customer happy until the next tour. The manager wants to see what happens to profits if 18 reservations are accepted. 
-Using the information in Exhibit 12.4, what formula should go in cell C13 of the worksheet to determine the Opportunity Cost of Empty Seats?
A) =C5*MAX(C4,C10) 
B) =C5*MAX(C4,0) 
C) =MAX(C4-C10,0) 
D) =C5*MAX(C4-C10,0)

Quizplus · Accepted Answer

The opportunity cost of empty seats is the amount of profit that could have been earned if those seats had been filled. So, the formula that takes into account the cost of bumping customers and the non-refundable ticket price is D) =C5*MAX(C4-C10,0) where C5 is the ticket price, C4 is the number of seats on the bus, and C10 is the expected number of no-shows.

Exhibit 12.4. The Following Questions Use the Information Below