Chapter 12.1, Problem 38E

Answer the following questions using complete sentences and your own words.

▪ PROJECTS

You manage the Fee-Based Technical Support Division of a large computer software firm. You have sufficient resources to provide up to $1,000\text{hours}$ of technical support each week. Often, this is not enough time to meet demand. As a result, you must develop a policy to allocate technical support time. Your firm’s warranty specifies that customers who have purchased software in the last year can purchase technical support for $\$49$ per incident. Software purchased more than a year ago is not under warranty. However, your firm continues to provide technical support at the same rate after the warranty has expired to maintain customer goodwill. Each under-warranty support incident requires an average of $30\text{minutes}$ of support and each out-of-warranty support incident requires an average of $\text{one hour}$ of support. Your firm’s CEO has asked that you allot between $700$ and $800$ $\text{hours}$ per week to customers whose software is still under warranty to ensure that they have sufficient access to technical support. Your CEO has also asked that you allot between $100$ and $250$ $\text{hours}$ per week to customers whose software is no longer under warranty to ensure that they still have some success to technical support.

a. Create a specific allocation policy that maximizes revenue.

b. One year after you instituted the allocation policy in part (a), demand has increased. As a result, you are considering increasing the fee to customers whose software is no longer under warranty from $\$49$ to $\$149$ per incident. Create a new specific allocation policy that maximizes revenue.