The manager of an opera theater considers changing the overbooking policy of his upcoming concerts. Customers make
Question:
The manager of an opera theater considers changing the overbooking policy of his upcoming concerts. Customers make reservations online prior to the concert at no cost and make payment when they show up at the theater. The opera show is very popular and all reservations are sold out on the first day. (You can assume that the demand is the same as the reservation limit). The theater has 300 seats and the ticket costs $50 per seat. Historical records show that about 9% of reservation holders do not show up. If the manager overbooks and more than 300 individuals show up, those who do not have seats will be given guaranteed reservations and VIP seats to the next coming show. Moreover, to keep his customers happy, the manager gives each individual who is bumped $20 worth of gift certificates. The manager currently accepts 310 reservations.
Use Excel to calculate the average profit over the 1,000 replications. Use scenario manager to decide the number of reservations the manager should allow. Try 310, 320, 330, 340, 350, and 360, which one should the manager choose?
Fundamentals of Cost Accounting
ISBN: 978-0077398194
3rd Edition
Authors: William Lanen, Shannon Anderson, Michael Maher