Determine the optimal overbooking policy for Talia's Beauty Salon. The salon's capacity is 8 patrons. The...

Transcribed Image Text:

Determine the optimal overbooking policy for Talia's Beauty Salon. The salon's capacity is 8 patrons. The historic number of no-shows for a typical day along with the probability of occurrence is shown in the table. The average profitability per patron is $100 and the cost of lost goodwill per patron due to overbooking is approximately $50. To reveal the optimal overbooking policy, it is best to test and compare the results for a range of options of bookings and find the amount of their total expected profit. Since the maximum guests served at one time is 8, we will calculate for 8, 9, and 10 booked appointments. The following equation is used: Expected Net Profit [(stations filled x profit per appointment)] - (turnaways x cost per customer) x no-show probability Determine the optimal overbooking policy for Talia's Beauty Salon. The salon's capacity is 8 patrons. The historic number of no-shows for a typical day along with the probability of occurrence is shown in the table. The average profitability per patron is $100 and the cost of lost goodwill per patron due to overbooking is approximately $50. To reveal the optimal overbooking policy, it is best to test and compare the results for a range of options of bookings and find the amount of their total expected profit. Since the maximum guests served at one time is 8, we will calculate for 8, 9, and 10 booked appointments. The following equation is used: Expected Net Profit [(stations filled x profit per appointment)] - (turnaways x cost per customer) x no-show probability