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0Unit Title: Business Data Analysis

Unit Code: BSS002-6
Assessment 1: Individual Report (50%) It is expected that each student work independently on all
the tasks set out in this assignment, applying problem solving strategies and selecting appropriate
techniques in modelling and simulation in order to produce an individual report according to the
guidelines provided. This individual work must be your own work only with no consultation with others.
The individual report must not exceed 2,000 words.
There will be an oral viva ONLY for those individual reports which exceed the similarity index of
25% produced by Turnitin.
Assignment Title: Southwest Airlines
Issued date: Week One: Friday 16/05/2014
Submission due date:
Week Nine: Friday 11/07/2014: A single report per student should be submitted via the TURNITIN link
in the Assessments folder and a paper copy should also be submitted to the Assignment Collection
Centre.
Unit co-ordinators name: C F Shoostarian
Learning outcomes:
Core Learning Outcomes

Learning Outcomes
On completion of this unit you should be
able to:
Assessment Criteria
To achieve the learning outcome you must
demonstrate the ability to:
1
Conduct an Exploratory Data Analysis to
critically appraise the data
Construct appropriate charts and
statistical summary measures according to
the nature of the data

Assess the hidden features of the data
and its distribution

Critically appraise the discrepancy
between the empirical distributions of
model and data
2
Formulate appropriate statistical models of
random events
Select an appropriate probability
distribution model based on:
the nature of the data;
the Exploratory Data Analysis
conducted;
testing assumptions.
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3
Plan, design, formulate and construct
business models where there is
uncertainty present
Use Monte Carlo Simulation to develop
models of situations where there is
uncertainty in the problem such as:
demand and use what if analysis to
consider possible alternatives
4
Evaluate statistical evidence Assess the evidence provided by the data
in favour of some claim about the
population using:
Confidence interval
Scientific method of investigation
5
Research, synthesise and produce a
technical report
Work effectively both in group settings and
independently to communicate your
findings clearly and concisely.
Recommend solutions and provide a
better insight to the problem, justifying
your choice in a technical report which
has:
clear structure and logical
sequence;
tables, diagrams and figures are
appropriate, clearly labelled and
interpreted;
accuracy;
objectivity;
continuity;
conciseness;
A relatively formal writing style should be
used when composing technical reports.
Assessment Criteria: Learning Outcomes with the corresponding Assessment Criteria
Grading/
Criteria
A+ A A- B+ B B- C+ C C- D+ D D- E
16 15 14 13 12 11 10 9 8 7 6 5 4
LO1: Conduct an
Exploratory Data
Analysis to critically
appraise the data
For Tasks 1 3:
.Construct
appropriate charts
and statistical
summary
measures
according to the
nature of the data
.Assess the hidden
features of the data
and its distribution
.Critically appraise
the discrepancy
between the
empirical
distributions of
model and data
comprehensively
For Tasks 1 3:
.Construct
appropriate charts
and statistical
summary
measures
according to the
nature of the data
.Assess the hidden
features of the data
and its distribution
accurately

For Tasks 1 3:
.Construct
appropriate charts
and statistical
summary
measures
according to the
nature of the data
.Assess the hidden
features of the data
and its distribution
with minor errors

For Tasks 1 3:
.Construct
appropriate charts
and statistical
summary
measures
according to the
nature of the data
.Assess the hidden
features of the data
and its distribution
with major errors

For Tasks 1
3:
.Construct
appropriate
charts and
statistical
summary
measures
according to
the nature of
the data


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Grading/
Criteria
A+ A A- B+ B B- C+ C C- D+ D D- E
16 15 14 13 12 11 10 9 8 7 6 5 4
LO2: Formulate
appropriate
statistical models of
random events
Tasks 1, 2 and 3:
Select an
appropriate
probability
distribution model
based on:
the nature of the
data;
the Exploratory
Data Analysis
conducted;
testing
assumptions.
Tasks 1, 2 and 3:
Select an
appropriate
probability
distribution model
based on:
the nature of the
data;
the Exploratory
Data Analysis
conducted.
Tasks 1, 2 and 3:
Select an
appropriate
probability
distribution model
based on:
the nature of the
data;
the Exploratory
Data Analysis
conducted;
with some errors
Tasks 1, 2 and 3:
Attempting to
develop models for
the given data
Tasks 1, 2
and 3:
Exploring to
develop
models for
the given
data

Grading/
Criteria
A+ A A- B+ B B- C+ C C- D+ D D- E
16 15 14 13 12 11 10 9 8 7 6 5 4
LO3: Plan, design,
formulate and
construct business
models where there
is uncertainty
present
Use Monte Carlo
Simulation to
develop models that
will simulate the
performance of the
overbooking system
and conduct a
comprehensive
what if analysis to
consider possible
alternatives
Use Monte Carlo
Simulation to
develop models
that will simulate
the performance
of the
overbooking
system and
conduct what if
analysis to
consider possible
alternatives
Use Monte Carlo
Simulation to
develop models
that will simulate
the performance of
the overbooking
system and
conduct what if
analysis to
consider possible
alternatives with
some errors
Attempt at Using
Monte Carlo
Simulation to
develop models
that will simulate
the performance of
the overbooking
system
Explore the
use of Monte
Carlo
Simulation
to develop
models that
will simulate
the
performance
of the
overbooking
system

Grading/
Criteria
A+ A A- B+ B B- C+ C C- D+ D D- E
16 15 14 13 12 11 10 9 8 7 6 5 4
LO5:
Collaboratively
research,
synthesize and
produce a technical
report for effective
communication
using a complex
data source.
Work effectively
independently to
communicate your findings
clearly and concisely.
Recommend solutions and
provide a better insight to
the problem, justifying your
choice in a technical report
which has:
clear structure
and logical
sequence;
tables, diagrams
and figures are
appropriate,
clearly labeled
and interpreted;
accuracy;
objectivity;
continuity;
conciseness;
Work effectively
independently to
communicate
your findings
clearly and
concisely.
Recommend
solutions and
provide a better
insight to the
problem,
justifying your
choice in a
technical report
which has clear
structure with
appropriate
diagrams and
accurate
discussions
A structured
business report.
Calculations and
discussions with
some errors.
A business
report.
Calculations and
discussions with
errors.
A business
report and
tasks have
been
attempted.


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Southwest Airlines
More than 38 years ago, Rollin King and Herb Kelleher got together and decided to start a different
kind of airline. They began with one simple notion: If you get your passengers to their destinations
when they want to get there, on time, at the lowest possible fares, and make darn sure they have a
good time doing it, people will fly your airline. And you know what? They were right. Southwest
Airlines operates a commuter flight between Orlando City in the central region of the U.S. state
of Florida and Long island which is an island in the U.S. state of New York. The plane holds 30
passengers, and the airline makes 100 profit on each passenger on the flight. When South Central
takes 30 reservations for the flight, experience has shown that on average, two passengers do not
show up. As a result, with 30 reservations, Southwest is averaging 28 passengers with a profit of
28(100) = 2,800 per flight. The airline operations office has asked for an evaluation of an
overbooking strategy where they would accept 32 reservations even though the airplane holds only
30 passengers. The probability distribution for the number of passengers showing up when 32
reservations are accepted is as follows:
Passengers showing up Probability
28 0.05
29 0.25
30 0.50
31 0.15
32 0.05
The airline will receive a profit of 100 for each passenger on the flight up to the capacity of 30
passengers. The airline will incur a cost of any passenger denied seating on the flight. This cost
covers added expenses of rescheduling the passenger as well as loss of goodwill, estimated to be
150 per passenger.
Task 1
(a) Develop a worksheet model that will simulate the performance of the overbooking system.
Simulate the number of passengers showing up for each of 500. Use the results to compute the profit
for each flight.
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(b) Does your simulation recommend the overbooking strategy? What is the mean profit per flight if
overbooking is implemented?
(c) Explain how your simulation model could be used to evaluate other overbooking levels such as 31,
33, 34 and for recommending overbooking strategy.
The management at Southwest Airlines is interested in using simulation to estimate the profit per unit
for a new product they have developed called EarlyBird Check-In
SM
. The Probability distributions for
the purchase cost, the labour cost and the transportation cost for this product are given in the table
below:
Purchase
Cost ()
Probability Labour Cost
()
Probability Transportation
Cost ()
Probability
10 0.25 20 0.10 3 0.75
11 0.45 22 0.25 5 0.25
12 0.30 24 0.35
25 0.30
Assuming that these are the only costs and that the selling price for the product will be 45 per unit.
Task 2
(a) Provide the base-case, worst-case and best-case calculations for the profit per unit.
(b) Set up intervals of random numbers that can be used to randomly generate the three
cost components. Using the random numbers 0.1862, 0.7466 and 0.6171, calculate the
profit per unit.
(c) Management believes the project many not be profitable if the profit per unit is less than 5.
Explain how simulation can be used to estimate the probability the profit per unit will be less than 5.
Task 3
The management at Southwest Airlines is interested in using simulation to estimate the profit per unit
for a new product they have developed called Android App. The Airlines advertising campaign for
this new product is as follows:

Whether you're planning your next trip or checking in for your flight, the Southwest Airlines Android
App makes travelling even more convenient. From the App you can check flight status, change
reservations, add EarlyBird Check-In
SM
to an existing reservation, access your Rapid Rewards
account and more while you're on the go!
The fixed cost to begin the production of the product is 30,000. The variable cost for the product is
uniformly distributed between 16 and 24 per unit. The product will sell for 50 per unit. Demand for
the product is best described by a normal probability distribution with a mean of 1200 units and a
standard deviation of 300 units. Use 500 simulation trials to answer the following questions.
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(a) What is the mean profit for the simulation?
(b) What is the probability the project will result in a loss?
(c) What is your recommendation concerning the introduction of the product?