Hervis Car Rental in Austin, TX has fifty high-performance Shelby-H Mustangs in its rental fleet. The cars will be in greater demand than usual during last weekend in July when Central Texas Mustang Club holds its annual rally in Austin. Sometimes like this, Hervis uses the revenue management system to find optimal number of reservations to have available for Shelby-H cars.
Hervis has agreed to have at least sixty percent of Shelby-H Mustangs available for rally attendees at the special rate. Though many of rally attendees will request the Saturday and Sunday two-day package, some attendees may choose the Saturday only or Sunday only reservation. Customers not attending rally may also request the Saturday and Sunday two-day package, or make Saturday only or Sunday only reservation. Therefore, 6 kinds of reservations are possible.
Cost for every kind of reservation is given here:
The expected demand is as follows:
|
Two-Day
|
Saturday
|
Sunday
|
|
Two-Day
|
Saturday
|
Sunday
|
|
Package
|
Only
|
Only
|
|
Package
|
Only
|
Only
|
|
Rally
|
$125
|
$75
|
$65
|
Rally
|
20
|
10
|
15
|
|
Regular
|
$150
|
$85
|
$75
|
Regular
|
10
|
20
|
25
|
Hervis Car Rental would like to find how many Shelby-H Mustangs to make available for every kind of reservation to maximize total revenue.a.
i) Explain decision variables.
ii) Prepare linear programming model for revenue management application.
iii) Solve the model with any computer package available to you. Determine projected total revenue and how many of every type of reservations must be made available?
iv) Which price must company work to increase to best increase total revenue?
v) What would total revenue be if only 40% of Shelby-H Mustangs are available for rally attendees?