taking, credit checking for new customers, and a variety of related services Aut
ID: 2332902 • Letter: T
Question
taking, credit checking for new customers, and a variety of related services Auto Superinarket AS 1S large auto deaker that provides financing for the autos and trucks that it sells. AS has approached MMI to manage the inquiries that come in regarding these loans AS is not satisfied with the performance of the call center it currently uses for handling inquiries on these loans and is considering a change to MML MMI has been asked to estimate the cost of providing the service for the coming year There are two types of loans at AS, one for autos and SUVs and another for light trucks. The loans for auto an truck buyers typically have different types of customers and loan terms, so the nature and volume of the inquiries are expected to differ. MMI would use its own call center to handle the AS engagement. The MMI cal center's annual costs are as follows: Call center costs Salaries Utilities Leasing of facilities Other expenses $4,173,5SS 2,437,446 1,935,513 814,936 $9,368, 550 MMI's call center is staffed 12 hours per day with 60 call staff always available. Each staff member has a paid 10-minute break for each hour worked, and an unpaid 1-hour break for a lunch/dinner during each 12-hour shit Thus, the call center has 12.045.000 minutes (11 hr x 50 min x 60 staff x 365 days) available for calls during th year AS and MMI work together to estimate the number of calls and time required for each call. based on AS's prio experience with its current call center Total Calls Answered Average Number of Minutes/Call Total Time (minutes) Inquiries Inquire re: rates and terms Autos Trucks 79,580 31,58e 477,90e 228, 58e Inquire re: loan application status Autos Trucks 44, 586 6, 780 222, see 73,700Explanation / Answer
1. The total annual capacy of MMI is 12,045,000 minutes with total annual cost of $9,360550.
At present MMI has 10 clients with total annual requirement of 9,940,100 minutes. Calculated on the basis of details of 10 clients given above.
The level of idle capacity at MMI, not assuming that AS becomes a customer is 2,104900 minutes ( 12045000- 99940100).
2. Total requiremnt of AS for existing proposal is 1,595,450 minutes.
The requirement for revised proposal is 468,250 minutes [(45,550*7) + (12,450*12)].
Total requirement of AS with revised proposal will be 2,063,700 minutes (1,595,450 + 468,250).
Idle capacity with revised proposal will be 41, 200 minutes.
Total capacity 12,045,000 minutes.
Total cost $ 9,360,550.
Fixed cost (other than salary) $ 5,186,995
Variable cost $ 4,173,555
Total Cost per minute $ 0.78.
Since, it is the total cost company is incurring and data of unpaid break actually taken by employees is not given, the idle cost is the total cost since all cost is having the nature of fixed cost.
Idle capacity cost is $32,135/- ( 41200*0.78).
Cost of idle capacity
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