Use the Following Information to Determine the Optimal Overbooking Policy

Multiple Choice

Use the following information to determine the optimal overbooking policy for a motel at a rural town in South Carolina. The motel's capacity is 30 rooms. 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 room is $110, and the cost of lost goodwill per guest due to overbooking is approximately $60.

-Based on the total expected profits obtained in Questions 46 through 49, which policy should be selected?

A) More than 33 reservations
B) 30 reservations (that implies no overbooking)
C) 33 reservations (that implies 3 overbookings)
D) 31 reservations (that implies 1 overbooking)
E) 32 reservations (that implies 2 overbookings)