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Develop a revenue management (maximizing) model based on the information given in the scenario. How many seats...

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Develop a revenue management (maximizing) model based on theinformation given in the scenario.
How many seats should be allocated toeach of the 16 itineraries to maximizerevenue?
What is the (maximum) expected revenue to be earned per day forall 16 flights?
Assume operating costs for each of the legs is as follows:
Leg 1 = $20,250
Leg 2 = $19,750
Leg 3 = $20,500
Leg 4 = $19,500
What is the expected operating income foreach of the legs? And intotal for Freedom Airlines, given these16 itineraries?
How do I find the optimal seat allocation?

Answer & Explanation Solved by verified expert

3.8 Ratings (404 Votes)

Sol:

Leg 1
1	Phoenix	Las Vegas	A	$180.00	50	9000
2	Phoenix	San Diego	A	$270.00	40	10800
3	Phoenix	San Francisco	A	$230.00	35	8050
4	Phoenix	Las Vegas	B	$380.00	15	5700
5	Phoenix	San Diego	B	$460.00	10	4600
6	Phoenix	San Francisco	B	$560.00	15	8400
			Max Revenue	46550
			Operating Cost =	20250
			Operating Profit	26300
Leg 2
7	Denver	Las Vegas	A	$200.00	50	10000
8	Denver	San Diego	A	$250.00	45	11250
9	Denver	San Francisco	A	$350.00	40	14000
10	Denver	Las Vegas	B	$385.00	15	5775
11	Denver	San Diego	B	$445.00	10	4450
12	Denver	San Francisco	B	$580.00	10	5800
			Max Revenue	51275
			Operating Cost =	19750
			Operating Profit	31525
Leg 3
13	San Francisco	Phoenix	A	$250.00	70	17500
14	San Francisco	Phoenix	B	$600.00	10	6000
			Max Revenue	23500
			Operating Cost =	20500
			Operating Profit	3000
Leg 4
15	San Francisco	Denver	A	$325.00	50	16250
16	San Francisco	Denver	B	$585.00	10	5850
			Max Revenue =	22100
			Operating Cost =	19500
			Operating Profit	2600

Total Operating Profit for freedom airlines = summation of operating profits of all 4 legs:

=26300 + 31525 +3000 + 2600

= $63425

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