Estimate the expected profit

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Reference no: EM13109575

Division X is growing and is in constant need of trained employees. The demand rate for trained employees is relatively constant at 5 each month. The division can run a training program that costs $5,000 per offering regardless of class size. Students graduate with a certificate and a $100/week pay raise. The raise is operative even if they attended the training before the new job is open and they continue with their old job (until they are reassigned to a higher-skilled position). What class size is optimal and how many classes should be offered every year? [Hint: You need not consider anybody%u2019s salary or career after they take their higher-skilled job.]
2. (Newsvendor model) An airline serving Denver's Stapleton Airport and Steamboat Springs, Colorado is considering overbooking its flights to avoid flying with empty seats. For example, the ticket agent is thinking of taking seven reservations for an airplane that has only six seats, During
the past month, the no-show experience has been:

No Shows 0 1 2 3 4
Frequency 30 25 20 15 10

The operating costs associated with each flight are pilot, $150; first officer, $100; fuel, $30; and landing fee, $20.
What would be your recommendation for overbooking if a one-way ticket sells for $80 and the cost of not honoring a reservation is a free lift ticket worth $50? (Assume that the airline can transfer overbooked passengers to a competing airline.) What is the expected profit per flight for your overbooking choice?

Reference no: EM13109575

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