OptiJet Airlines provide daily service for commuters travelingfrom South to MidWest. One of the fare classes for this flight hasbeen set at $250. The airline has set aside a capacity of 25passengers in this fare class. Historical passenger demand forthese seats in this fare class has been fit to a normaldistribution with mean 27.18 and standard deviation 3.14. Ifdemanded, the airline will typically accept more reservations thanthe seat capacity since only 90% of all customers who have areservation show up for the flight. This policy is calledoverbooking. If the flight is overbooked, anyone who shows up butdoes not receive a seat on the plane receives $350 in compensationin addition to a full refund of the ticket price. The variable costof transporting a passenger and his/her luggage on this flight is$100. The fixed cost of operating the flight is $2,500. To maximizeexpected profit from operating this flight, how many reservationsfor the flight should this airline accept? Develop a simulationmodel in the spreadsheet file. What would be the best strategy forthe airline?
