Hotel Holiday Hut

• Holiday Hut Hotel routinely experiences no-shows (people who make

reservations for a room and don’t show up) during the peak season (a certain
month) when the hotel is always full. No-shows follow the distribution shown in
the table.

• To reduce the number of vacant rooms, the hotel overbooks three rooms; that is,
the hotel accepts three more reservations than the number of rooms available.
• On a day when the hotel experiences fewer than three no-shows, there are not enough rooms for those who
have reservations. The hotel’s policy is to send these guests to a competing hotel down the street, at its own
expense of $125.

• If the number of no-shows is more than three, the hotel has vacant rooms, resulting in an opportunity cost of
$50 per room.

• Holiday Hut Hotel would like to determine the most desirable number of rooms to overbook. Of these six
choices—0, 1, 2, 3, 4, or 5 rooms—what is your recommendation?
 Harry’s Auto Shop
• The monthly demand for radial tyres at Harry’s
Auto Shop over the past 60 months are shown
in table.

• Average selling price per tyre follows discrete

uniform distribution between $60 and $80.

• Harry’s variable cost per tyre also varies each

month

• Estimated profit margin per tyre follows a

continuous uniform distribution between 20%
and 30% of the selling price
Simulation model in excel →
• Fixed cost of stocking and selling tyres is
$2,000 per month

• Find Harry’s average monthly profit.

3
18-11-2022

Transportation Problem
𝑖/𝑗 A B C D Supp
1 8 2 35 11 300 Stock-out Cost: 60
2 12 3 31 5 180
3 10 1 34 9 250 Inventory Holding Cost: 20
Dem 100 170 260 70

What if the demands are non-deterministic?

Simulation Modelling!