What is the primary trade-off in revenue management?
Explanation
Revenue management is a powerful tool for maximizing income from a fixed asset, but it carries the risk of damaging customer trust if the pricing is perceived as unfair or illogical. The central trade-off is balancing the financial gains from variable pricing against the potential for negative customer reactions.
Other questions
Which of the following describes the objective of aggregate planning?
What is the process of breaking an aggregate plan down into greater detail, resulting in a master production schedule?
Which of the following is considered a 'capacity option' in aggregate planning?
An aggregate planning strategy that sets production equal to forecast demand for each period is known as a:
A roofing supply manufacturer has a 6-month aggregate plan with a total expected demand of 6,200 units over 124 production days. What is the average daily requirement to meet this demand?
For the roofing supplier example, Plan 1 uses a constant workforce to produce 50 units per day. The total units of inventory carried over from one month to the next is 1,850 units, at a carrying cost of $5 per unit. Regular-time labor cost is $99,200. What is the total cost of this plan?
For the roofing supplier example, Plan 2 involves maintaining a constant workforce to produce 38 units per day in-house and subcontracting the rest. Total required units are 6,200, and in-house production is 4,712 units. Subcontracting cost is $20 per unit. Regular-time labor cost is $75,392. What is the total cost of this plan?
For the roofing supplier example, Plan 3 is a chase strategy involving hiring and layoffs. The basic production cost is $99,200. The extra cost for increasing production (hiring) is $9,000, and the extra cost for decreasing production (layoffs) is $9,600. What is the total cost of this plan?
Which of the following is NOT a characteristic of organizations where revenue management is of interest?
A hotel with 100 rooms historically charges $150 per night and sells an average of 50 rooms. The variable cost per room is $15. What is the total contribution per night with this single price point?
Using revenue management, a 100-room hotel with a $15 variable cost per room decides to use two price levels. It estimates it can sell 30 rooms at $100 and another 30 rooms at $200. What is the new total contribution per night?
What is the primary planning horizon for intermediate plans, such as aggregate plans?
A key output of the Sales and Operations Planning (S&OP) process is the:
Which of the following aggregate planning strategies is a 'demand option'?
A planning strategy that maintains a constant output rate, production rate, or workforce level over the planning horizon is called:
In the graphical method for aggregate planning, what is the first step?
What is a major advantage of a level strategy in aggregate planning?
Farnsworth Tire Company has a demand of 800 tires in March. Beginning inventory is 100 tires. Regular time capacity is 700 tires. How can the company meet the March demand according to the initial feasible solution in the transportation table?
In the transportation method of linear programming for aggregate planning, why might a 'dummy' column for 'unused capacity' be added?
What is the primary aggregate planning vehicle (i.e., the most adjusted variable) in most service industries?
A law firm estimates its likely labor-hour requirement for the next quarter is 17,000 hours. Assuming one lawyer can provide 500 billable hours in the quarter, how many lawyers are needed to cover the likely forecast?
A manager of a roofing supply company needs to create an aggregate plan. In January, the expected demand is 900 units and there are 22 production days. What is the demand per day for January?
A planning strategy that uses two or more controllable variables to set a feasible production plan is known as a:
What is the primary reason that aggregate planning is more challenging in services compared to manufacturing?
Which of the following is NOT one of the four features needed for an effective S&OP process to generate a useful aggregate plan?
In the roofing supplier example, what is the inventory carrying cost per unit per month?
What is a primary disadvantage of a chase strategy in aggregate planning?
The transportation method of linear programming for aggregate planning is a way of:
In the Farnsworth Tire Company transportation model, producing a tire in March on regular time ($40) and selling it in April incurs an additional carrying cost of $2 per tire per month. What is the total cost shown in the table for a tire produced in March and sold in April?
What does S&OP stand for in the context of intermediate planning?
Which of the following would be an example of a counterseasonal product mixing strategy?
In the law firm example, corporate law has a 'likely' forecast of 7,000 hours. With 500 hours per lawyer per quarter, what is the maximum demand for personnel for corporate law?
Which aggregate planning strategy would be most suitable for service organizations where inventory cannot be used as a buffer?
In the comparison of the three aggregate plans for the roofing supplier, which plan had the lowest total cost?
What is the primary role of a master production schedule (MPS)?
A roofing supplier's cost to increase daily production rate (hiring and training) is $300 per unit, and the cost to decrease it (layoffs) is $600 per unit. In April, daily production increases from 38 to 57 units. What is the extra hiring cost for April?
What is a significant limitation of graphical aggregate planning methods?
The long-range planning process is primarily the responsibility of which group within an organization?
Which of the following issues would be addressed in a long-range plan rather than an aggregate plan?
A roofing supplier with a daily production capacity of 38 units needs to produce 800 units in March, which has 21 production days. How many units does it need to subcontract in March?
What is the term for a planning strategy where a company accepts orders for goods but is unable to fill them at the moment?
The aggregate plan for Snapper, a lawn mower company, specifies production for a 'family' of mowers. This means the plan determines:
A key advantage of Sales and Operations Planning (S&OP) is that it:
In aggregate planning for restaurants, the relevant units of time for peak and slack periods might be measured in:
When is it appropriate for a firm to use a level-scheduling strategy?
What is the primary objective of revenue (or yield) management?
A roofing supplier needs to produce 1,100 units in June, which has 20 production days. A chase strategy requires producing the exact amount. If each unit requires 1.6 labor-hours and the pay rate is $10 per hour, what is the basic production cost for June?
In the cumulative graph for Plan 1 of the roofing supplier, what does the area between the 'Cumulative forecast requirements' line and the 'Cumulative level of production' line represent when the production line is higher?
What is the relationship between the aggregate plan and short-term scheduling?