Explain how many seats should super discount overbook flight

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Reference no: EM1377245

Q. Next week, Super Discount Airlines has a flight plan from New York to Los Angeles which is expected to be booked to capacity. Airline knows from past history which an average of 25 customers (with a standard deviation of 15) cancels their reservation or do not Show up for flight. Revenue from a ticket on flight is $125. If flight is overbooked, airline has a policy of getting customer on next available flight also giving person a free round-trip ticket on a future flight. Cost of round-trip ticket averages $250. Super Discount considers cost of flying a plane from New York to Los Angeles a sunk cost.

By elucidate how many seats should Super Discount overbook flight?

Reference no: EM1377245

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