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A.) What is the overage cost of overbooking one too many rooms? $55 $120 $25 $175 B.) What is the underage cost of overbooking one too few rooms? I $120 $25 $175 $55 What is the critical ratio for service level for the overbooking decision?

A.) What is the overage cost of overbooking one too many rooms? $55 $120 $25 $175 B.) What is the underage cost of overbooking one too few rooms? I $120 $25 $175 $55 What is the critical ratio for service level for the overbooking decision?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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The Holiday Inn Riverside is a popular destination for fans traveling to watch the local university football games, and sometimes for visiting teams as well. History has shown that when the hotel is fully booked, the number of last-minute cancellations (at no cost to the customer) has a mean of 15 and standard deviation of 4. The average room rate is $120 at the Holiday Inn. When the hotel is overbooked, the policy is to find a room in a nearby comparable hotel without overcharging the customer, and to pay the prevailing rate (typically $175) on behalf of the overbooked customer. A.) What is the overage cost of overbooking one too many rooms? $55 $120 $25 $175 B.) What is the underage cost of overbooking one too few rooms? I $120 $25 $175 $55 c.) What is the critical ratio (or service level) for the overbooking decision? 100% 68% 32% 50%
Transcribed Image Text:The Holiday Inn Riverside is a popular destination for fans traveling to watch the local university football games, and sometimes for visiting teams as well. History has shown that when the hotel is fully booked, the number of last-minute cancellations (at no cost to the customer) has a mean of 15 and standard deviation of 4. The average room rate is $120 at the Holiday Inn. When the hotel is overbooked, the policy is to find a room in a nearby comparable hotel without overcharging the customer, and to pay the prevailing rate (typically $175) on behalf of the overbooked customer. A.) What is the overage cost of overbooking one too many rooms? $55 $120 $25 $175 B.) What is the underage cost of overbooking one too few rooms? I $120 $25 $175 $55 c.) What is the critical ratio (or service level) for the overbooking decision? 100% 68% 32% 50%
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