Use the following information to determine the optimal overbooking policy for a spa center at downtown Marquette. The center's capacity is 12 guests. The historic number of no-shows for a typical day, along with the probability of occurrence, is shown in the following table. The average profitability per guest is $80, and the cost of lost goodwill per guest due to overbooking is approximately $40.

-Calculate the total expected profit with 13 reservations (which means 1 overbooking).
A)$884
B)$922
C)$918
D)$960
E)Need additional information to calculate the total expected profit

Question

Use the following information to determine the optimal overbooking policy for a spa center at downtown Marquette. The center's capacity is 12 guests. The historic number of no-shows for a typical day, along with the probability of occurrence, is shown in the following table. The average profitability per guest is $80, and the cost of lost goodwill per guest due to overbooking is approximately $40.
 
-Calculate the total expected profit with 13 reservations (which means 1 overbooking).
A)$884 
B)$922 
C)$918 
D)$960 
E)Need additional information to calculate the total expected profit

Quizplus · Accepted Answer

The Answer of Use the following information to determine the optimal overbooking policy for a spa center at downtown Marquette. The center's capacity is 12 guests. The historic number of no-shows for a typical day, along with the probability of occurrence, is shown in the following table. The average profitability per guest is $80, and the cost of lost goodwill per guest due to overbooking is approximately $40.
 
-Calculate the total expected profit with 13 reservations (which means 1 overbooking).
A)$884 
B)$922 
C)$918 
D)$960 
E)Need additional information to calculate the total expected profit

Use the Following Information to Determine the Optimal Overbooking Policy