Operations research

The management of Alaska Airlines has decided to base its overbooking policy of a stochastic single period model to maximize expected profit. This policy now needs to be implemented on a new flight from Seattle to Atlanta. The aircraft has 125 seats available for a one-way fare of $250. However, since there are commonly a few no-shows, the airline accepts more than 125 reservations. On those occasions when more than 125 people arrive to take the flight, the airline finds volunteers to be put on a later flight in return for a certificate worth $150 toward any future travel on Alaska Airlines. Based on previous experience with similar flights, it is estimated that the relative frequency of ... click for more

Operations research

A product sold by Home Depot, Inc., with an annual demand of 1000 units has Co = $25.50 and Ch = $8. The demand exhibits some variability such that the lead-time demand follows a normal probability distribution with µ = 25 and σ = 5. a. Determine the recommended order quantity. b. Determine the reorder point and safety stock if the firm desires, at most, a 2% probability of stock-out on any given order cycle. c. If a manager sets the reorder point at 30, determine the probability of a stock-out on any given order cycle. Determine the number of times the manager should expect a stock-out during the year if this reorder point were used.

Myrtle Air Express decided to offer direct service from Cleveland to Myrtle Beach. Management must decide between a full-price service using the company's new fleet of jet aircraft and a discount service using smaller capacity commuter planes. a. If nothing is known about the probabilities of the chance outcomes, determine the recommended decision using the optimistic, conservative, and minimax regret approaches.

Myrtle Air Express decided to offer direct service from Cleveland to Myrtle Beach. Management must decide between a full-price service using the company's new fleet of jet aircraft and a discount service using smaller capacity commuter planes. It is clear that the best choice depends on the market reaction to the service Myrtle Air offers. Management developed estimates of the contribution to profit for each type of service based upon two possible levels of demand for service to Myrtle Beach: strong and weak. The following table shows the estimated quarterly profits (in thousands of dollars). (see chart in attached file) a. If nothing is known about the probabilities of the chance ou... click for more

Operations Research

Seneca Hill Winery recently purchased land for the purpose of establishing a new vineyard. Management is considering two varieties of white grapes for the new vineyard: Chardonnay and Riesling. The Chardonnay grapes would be used to produce a dry Chardonnay wine, and the Riesling grapes would be used to produce a semi-dry Riesling wine. It takes approximately four years from the time of planting before new grapes can be harvested. This length of time creates a great deal of uncertainty concerning future demand and makes the decision concerning the type of grapes to plant difficult. Three possibilities are being considered: Chardonnay grapes only, Riesling grapes only, and both Chardonnay and... click for more

Operations Research

Embassy Publishing company received a six-chapter manuscript for a new college textbook. The editor of the college division is familiar with the manuscript and estimated a 0.65 probability that the textbook will be successful. If successful, a profit of $750,000 will be realized. If the company decides to publish the textbook and it is unsuccessful, a loss of $250,000 will occur. Before making the decision to accept or reject the manuscript, the editor is considering sending the manuscript out for review. A review process provided either a favorable (F) or unfavorable (U) evaluation of the manuscript. Past experience with the review process suggests probabilities P(F) = 0.7 and P(U) = 0.3 a... click for more