Use the Following Information to Determine the Optimal Overbooking Policy

Multiple Choice

Use the following information to determine the optimal overbooking policy for a spa center at downtown Marquette. The center's capacity is 12 guests. The historic number of no-shows for a typical day, along with the probability of occurrence, is shown in the following table. The average profitability per guest is $80, and the cost of lost goodwill per guest due to overbooking is approximately $40.

-Calculate the total expected profit with 14 reservations (which means 2 overbookings) .

A) $884
B) $922
C) $918
D) $960
E) Need additional information to calculate the total expected profit