Question: Problem 2 0 - 5 ( Algo ) Next week, Super Discount Airlines has a flight from New York to Los Angeles that will be
Problem Algo
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 customers with a standard
deviation of cancel their reservation or do not show for the flight. Revenue from a ticket on
the flight is $ 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 roundtrip ticket on a future flight. The cost of
this free roundtrip ticket averages $ 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? Use Excel's NORMSINV
function to find the correct critical value for the given level. Do not round intermediate
calculations. Round your answer to the nearest whole number.
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