The Management Science Association (MSA) has arranged to hold its annual conference at theRiverside Hotel in Orlando next year. Based on historical data, the MSA believes the number ofrooms it will need for its members attending the conference is normally distributed, with a mean of800 and a standard deviation of 270. The MSA can reserve rooms now (1 year prior to the conference)for $80; however, for any rooms not reserved now, the cost will be at the hotel’s regular roomrate of $120. The MSA guarantees the room rate of $80 to its members. If its members reserve fewerthan the number of rooms it reserves, MSA must pay the hotel for the difference, at the $80 roomrate. If MSA does not reserve enough rooms, it must pay the extra cost—that is, $40 per room. Can you determine a more exact value for the number of rooms to reserve to minimize cost?
The Management Science Association (MSA) has arranged to hold its annual conference at the
Riverside Hotel in Orlando next year. Based on historical data, the MSA believes the number of
rooms it will need for its members attending the conference is
800 and a standard deviation of 270. The MSA can reserve rooms now (1 year prior to the conference)
for $80; however, for any rooms not reserved now, the cost will be at the hotel’s regular room
rate of $120. The MSA guarantees the room rate of $80 to its members. If its members reserve fewer
than the number of rooms it reserves, MSA must pay the hotel for the difference, at the $80 room
rate. If MSA does not reserve enough rooms, it must pay the extra cost—that is, $40 per room. Can you determine a more exact value for the number of rooms to reserve to minimize cost?
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