A real estate agent is considering changing her cell phone plan. There are three

Question

A real estate agent is considering changing her cell phone plan. There are three plans to choose from, all of which involve a monthly service charge of $20. Plan A has a cost of $.44 a minute for daytime calls and $.19 a minute for evening calls. Plan B has a charge of $.54 a minute for daytime calls and $.15 a minute for evening calls. Plan C has a flat rate of $80 with 225 minutes of calls allowed per month and a charge of $.40 per minute beyond that, day or evening.

a. Determine the total charge under each plan for this case: 130 minutes of day calls and 50 minutes of evening calls in a month. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Cost for Plan A $ Cost for Plan B $ Cost for Plan C $

c. If the agent will use the service for daytime calls, over what range of call minutes will each plan be optimal? (Round each answer to the nearest whole number.Include the indifference point itself in each answer.)

Plan A is optimal from zero to. (answer).... minutes. Plan C is optimal from... (answer)... minutes onward.

d. Suppose that the agent expects both daytime and evening calls. At what point (i.e., percentage of total call minutes used for daytime calls) would she be indifferent between plans A and B? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places. Omit the "%" sign in your response.)

Point... (answer)....percent daytime minutes

Explanation / Answer

a. 130 min daytime call and 50 minutes evening calls.

Therefore, Cost for Plan A $86.70, Cost for Plan B $97.70 and Cost for Plan C $100 as per below.

c. Let us consider the plan C as a base because it has a fixed monthly charges of $100(20+80). Therefore, if we devide $100 by .44( daytime rate), we get 227 daytime minutes. For Plan B, it would be 185 minutes and for C it would be 225(Given, Day or Night)

d. As daytime rate of plan A is 0.44 and of Plan B as 0.55, Therefore, we set the equation as per below, we get,

20+.44D+.19E

20+.54D+.15E,

We get 33.33 percent of daytime minute indifferent.

Plan A Plan B Plan C Call Rate Minutes Cost Call Rate Minutes Cost Call Rate Minutes Cost Daytime 0.44 130 57.2 0.54 130 70.2 $80 130 80 Evening 0.19 50 9.5 0.15 50 7.5 50 0 Fixed Service Charge 20 20 20 Total Cost 86.7 97.7 100

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