The Strata-Gem Jewelry Co. has a full-time credit analyst who must verify the ac

Question

The Strata-Gem Jewelry Co. has a full-time credit analyst who must verify the account of each purchaser who makes a credit purchase. The standard procedure requires that the salesman, after making the sale, must telephone upstairs to the credit analyst, who consults his records and approves the new credit extension (only, of course, if the account is satisfactory, which we shall assume to be the case). If the credit analyst is busy upstairs when a call is made the salesman is kept waiting in line. With such a large store, there are sometimes many salesmen (and their customers) waiting for the credit analyst while he is busy answering requests. The management considers that the waiting time costs the Company $11 per hour for the salesman and $25 per hour in good will for the customer.

Credit requests are initiated by the salesmen at the rate of 12 per hour (Poisson), and the credit analyst can handle requests at the rate of 18 per hour (exponential).

a) The Company has been visited by the salesman for the Keen Komputer Kompany, which offers its new Keen Klever Koder Komputer to the Company for a rental price of $35 per hour. With this machine, the credit analyst can handle requests at an absolutely constant service time of 24 per hour. Should the computer be rented?

b) The credit analyst, who is unaccountability squeamish about computers, suggests that, if he had another credit analyst to work with him, they could work without getting in one another

Explanation / Answer

Credit requests from salesmen 12 per hour Credit requests handled by analyst 18 per hour Waiting time cost $ 11 per hour Goodwill of customer $ 25 per hour Option 1 - Renting of computer Rental of computer $ 35 per hour No. of requests that analyst can handle 24 per hour No waiting time cost and Goodwill cost Option 2 - Appointment of additional credit analyst Rate per hour for addl. Credit analyst $ 8 per hour No. of requests that analyst can handle 24 per hour (12 requests per analyst) For an addl. Cost of $ 8 per hour, the no. of requests handled by two credit analysts assuming a productivity of 12 requests per hour is equal to the benefit derived from renting the computer at $ 35 per hour. Assuming a productivity of 18 requests per hour, the benefit would increase further. Hence the company should hire addl. Credit analyst instead of renting the computer.

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