Ask Question
19 January, 01:11

Due to customer no-shows, the Inn at Charlotte hotel is considering implementing overbooking. The Inn at Charlotte has 150 rooms, and the full fare is $200. The forecast of no-shows is normally distributed with a mean of 10 and a standard deviation of 3. The Inn is sensitive about the quality of service, so it estimates that cost of failing to honor a reservation is $325 in lost goodwill and explicit expenses. What is the unit underage cost if the Inn underestimates the number of no-shows

+4
Answers (1)
  1. 19 January, 01:15
    0
    The unit=9

    Explanation:

    The Cost of underage Cu = price - cost = 200-0 = 200 (as there is no variable cost of the unsold room)

    Cost of overage Co = cost - salvage value = 0 - (-325) = 325

    Service level = Cu / Cu+Co = 200 / 325+200 = 0.3809

    which corresponds to the z value of - 0.3

    the optimum overbooking = mean + z x SD

    = 10 + 3 x (-0.3) = 9
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Due to customer no-shows, the Inn at Charlotte hotel is considering implementing overbooking. The Inn at Charlotte has 150 rooms, and the ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers