3 Seaside Outfitters is a new internet and telephone order company selling cloth

Question

3 Seaside Outfitters is a new internet and telephone order company selling clothing designed and built for outdoor, nautical use. The company is currently investigating the possibility of purchasing an automated, internet-based system that can handle 30 orders per hour and would cost an estimated S120 per hour. Alternatively, the company is also considering hiring an experienced telephone operator who could handle a call in 2.50 minutes and cost a total of $40 per hour. Customer waiting time (time waiting and being processed) either for the automated system or the telephone operator is estimated to cost $100 per hour. The company expects an average of 20 customer orders or calls per hour. Which alternative (automated system or telephone operator) would represent the lowest total cost per hour for the company? (25 points)

Explanation / Answer

Given that the average number of calls = 20,

=> Must employee Experienced Human Operator over Automated system.

Cost of Machine Human Waiting time 2 mins (60/30) 2.5 mins Employment (per hour) 120 40 Customer waiting time 2*(20)*(100/60) = 66.667 (2.5)*(20)*(100/60) = 83.333 Total cost 186.667 123.333

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