This question is incomplete, the complete question is;
United Airline flights from Newark to Seattle are typically booked to capacity. However, due to United’s current lenient rebooking policies, on average 17 customers (with a standard deviation of 10) cancel or are no shows for these flights. The average revenue collected on this flight is is $145/seat. However, if the flight is overbooked and the airline needs to rebook a ticketed passenger, United typically gives the customer a free round-trip ticket for a future flight. The cost of this free round-trip ticket averages $330. By how many seats should United overbook for this route?
Answer:
the number of seats that should be overbooked is approximately 12
Explanation:
Given the data in the question;
average = 17 customers
standard deviation = 10
Cost of under booking the flight ( underage ); Cu = $145
Cost of overbooking the flight ( Overage ); Co = $330
we calculate the service level
service level = Cu / ( Cu + Co )
we substitute
Service level = 145 / ( 330 + 145 )
= 145 / 475
Service level = 0.3053
In excel, we use NORMSIV function to determine the z-value
z-value = NORMSIV ( 0.3053 )
z -value = -0.509
Now, the number of seats (Q) that should be overbooked will be;
Q = Average cancellations + Z-value × S.D
we substitute
Q = 17 + ( -0.509 × 10 )
Q = 17 + ( -5.09 )
Q = 17 - 5.09
Q = 11.91 ≈ 12
Therefore, the number of seats that should be overbooked is approximately 12