Concept explainers
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 $.45 a minute for daytime calls and $.20 a minute for evening calls. Plan B has a charge of $.55 a minute for daytime calls and $.15 a minute for evening calls. Plan C has a flat rate of $80 with 200 minutes of calls allowed per month and a charge of $.40 per minute beyond that, day or evening.
a. Determine that total charge under each plan for this case: 120 minutes of day calls and 40 minutes of evening calls in a month.
b. Prepare a graph that shows total monthly cost for each plan versus daytime call minutes.
c. If the agent will use the service for daytime calls, over what range of call minutes will each plan be optimal?
d. Suppose that the agent expects both daytime and evening calls. At what point (i.e., percentage of call minutes for daytime calls) would she be indifferent between plans A and B?
a)
To determine: The total charge of each plan for 120 minutes of day calls and 40 minutes of evening calls.
Introduction: Capacity planning is the process of planning the required production output based on the requirement or the demand that is predicted.
Answer to Problem 6P
Explanation of Solution
Given information:
A real estate is considered changing her cell phone plan which incurs a monthly service charge of $20. There are three plans available.
Plan A: $0.45 per minute for a day calls and $0.20 per minute for evening calls.
Plan B: $0.55 per minute for a day calls and $0.15 per minute for evening calls.
Plan C: $80 for allowed 200 calls per month and $0.40 per minutes beyond that irrespective of day or evening
Calculate the total cost for Plan A:
It is calculated by adding the monthly service charge, the multiple of cost per minute of day calls and total minutes given for day calls, and the multiple of cost per minute of evening calls and total minutes given for evening calls.
Hence, the total cost for Plan A is $82.
Calculate the total cost for Plan B:
It is calculated by adding the monthly service charge, the multiple of cost per minute of day calls and total minutes given for day calls, and the multiple of cost per minute of evening calls and total minutes given for evening calls.
Hence, the total cost for Plan B is $92.
Calculate the total cost for Plan C:
It is calculated by adding monthly service charge, call cost for the allowed 200 minutes, and the multiple of call minutes beyond 200 and the cost per minutes. The total call minutes is 160 (120+40). As it does not exceed 200 minutes, there would 0 remaining minutes.
Hence, the total cost for Plan C is $100.
b)
To prepare: A graph for monthly charge for each plan versus day time minutes.
Introduction: Capacity planning is the process of planning the required production output based on the requirement or the demand that is predicted.
Answer to Problem 6P
Explanation of Solution
Given information:
A real estate is considered changing her cellphone plan which incurs a monthly service charge of $20. There are three plans available.
Plan A: $0.45 per minute for a day calls and $0.20 per minute for evening calls.
Plan B: $0.55 per minute for a day calls and $0.15 per minute for evening calls.
Plan C: $80 for allowed 200 calls per month and $0.40 per minutes beyond that irrespective of day or evening
Prepare a graph of monthly charge for each plan versus day time minutes:
c)
To determine: The optimal call minutes for each plan if the agent would use only day calls.
Introduction: Capacity planning is the process of planning the required production output based on the requirement or the demand that is predicted.
Answer to Problem 6P
Explanation of Solution
Given information:
A real estate is considered changing her cellphone plan which incurs a monthly service charge of $20. There are three plans available.
Plan A: $0.45 per minute for a day calls and $0.20 per minute for evening calls.
Plan B: $0.55 per minute for a day calls and $0.15 per minute for evening calls.
Plan C: $80 for allowed 200 calls per month and $0.40 per minutes beyond that irrespective of day or evening
Determine the optimal call minutes for each plan if the agent would use only day calls:
D refers to day time calls
The volume of Plan B is more than Plan A. Hence, it should be omitted, as it would obvious have high cost.
Calculate the total cost for Plan C:
It is calculated by adding monthly service charge, call cost for the allowed 200 minutes, and the multiple of call minutes beyond 200 and the cost per minutes. The total call minutes is 160 (120+40). As it does not exceed 200 minutes, there would 0 remaining minutes.
Hence, the total cost for Plan C is $100.
Determined the value of D in the equation of Plan A by comparing the equation with the total cost of Plan C:
The equation of Plan A (considering the day calls) should be compared with the total cost of Plan C.
Hence, the day call minutes are 177.78 minutes.
Conclusion: Plan A would be optimal when the day call minutes are less than 177.78 minutes and Plan C would be optional when it exceeds up to 200 minutes.
d)
To determine: The percentage of call minutes would be indifferent between Plan A and Plan B if the agent would both day calls and evening calls.
Introduction: Capacity planning is the process of planning the required production output based on the requirement or the demand that is predicted.
Answer to Problem 6P
Explanation of Solution
Given information:
A real estate is considered changing her cellphone plan which incurs a monthly service charge of $20. There are three plans available.
Plan A: $0.45 per minute for a day calls and $0.20 per minute for evening calls.
Plan B: $0.55 per minute for a day calls and $0.15 per minute for evening calls.
Plan C: $80 for allowed 200 calls per month and $0.40 per minutes beyond that irrespective of day or evening
Determine the percentage of call minutes would be indifferent between Plan A and Plan B if the agent would both day calls and evening calls:
D refers to day time calls
E refers to evening calls
Compare the equations to solve D:
The equation of Plan A and Plan B considering both day and evening calls should be compared to determine the value of D.
It should that day calls are half of the evening calls.
For example: If E=100 minutes,
It states the following equations:
Hence, at 33.33% of total call time, the agent would be indifferent between the plans A and B.
Want to see more full solutions like this?
Chapter 5 Solutions
Loose-leaf for Operations Management (The Mcgraw-hill Series in Operations and Decision Sciences)
- Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardProblem: We have been operating our mobile food truck business now for 30 days at the Harvard University Campus. Our daily sales and number of customers are increasing at a constant rate. Our problem is that we do not know if our customers are happy with the quality and variety of the food, the level of pricing, or the courtesy of our staff. You will design a four-to-five question survey that we could pose to our prospects to solve our problem.arrow_forwardYou have two design options for your new line of high-resolution monitors for Computer-Aided Design (CAD)workstations. The production run is for 110,000 units. Design option A has a .90 probability of yielding 65good monitors per 100 and a .10 probability of yielding 70good monitors per 100. This design will cost $1,000,000. Design option B has a .80 probability of yielding 65good units per 100 and a .20 probability of yielding 60good units per 100. This design will cost $1,350,000. Good or bad, each monitor will cost $75. Each good monitor will sell for $150. Bad monitors are destroyed and have no salvage value. We ignore any disposal costs in this problem. Demonstrate how decision trees can be used in order to choose the design option based on the above situation. Calculate the expected monetary value (EMV) of each option and determine which option you will propose.arrow_forward
- Prescribed fire is an important tool for foresters. A recent article describes how decision analysis is used to decide when, where and what to burn. In one example, a number of areas in the Tahoe National Forest in California had been logged and were being prepared for replanting. Preparation included prescribed burning, and two possible treatments were available: burning the slash as it lay on the ground, or “yarding of and merchantable material” (YUM) prior to burning. The latter treatment involves using heavy equipment to pile the slash. YUM reduces the difficulty of controlling the burn but costs an additional $100 per acre. In deciding between the two treatments two uncertainties were considered critical. The first was how the fire would behave under each scenario. For example, the buyer could be fully successful, problems could arise which could be controlled eventually, or the fire could escape entailing considerable losses. Second if problems developed, they could result in…arrow_forwardDemand has grown at Dairy May Farms, and it is considering expanding. One option is to expand by purchasing a very large farm that will be able to meet expected future demand. Another option is to expand the current facility by a small amount now and take a wait-and-see attitude, with the possibility of a larger expansion in two years.Management has estimated the following chances for demand: The likelihood of demand being high is 0.80. The likelihood of demand being low is 0.20. Profits for each alternative have been estimated as follows: Large expansion has an estimated profitability of either $51,600 or $23,600, depending on whether demand turns out to be high or low. Small expansion has a profitability of $13,800, assuming that demand is low. Small expansion with an occurrence of high demand would require considering whether to expand further. If the company expands at that point, the profitability is expected to be $41,900. If it does not expand further, the profitability is…arrow_forwardAn operatlons consultant for an automatic car wash wishes to plan for enough capacity to handle 60 cars per hour. Each car will have wash time of 2 minutes, but there is to be a 20 per centallowance for setup, delays and payment transactions. The installation capacity of car wash stalls should bearrow_forward
- Please use the attached to answer the following questions. 1. What is the average number of phones the company has in store? 2. How long does a customer on average have to wait for the phone? 3. What are the total daily expenses for telephone cards?arrow_forwardCentral city museum the recently completed new building to house the exhibits and staff of thearrow_forwardThe vessel, nicknamed Lovers Deep, is a specially adapted leisure submarine designed and furnished for couples to spend their time together in complete isolation and harmony underwater. Staffed by an onboard crew of three, consisting of a captain, chef, and personal butler, Lovers Deep has a unique capability of being moored at various locations chosen by customers, whether that be a stunning coral reef off the coast of St. Lucia or a sunken battleship in the Red Sea, In which industry would you place the leisure submarine? Select one: a. Travel & tourism b. Hospitality & travel C Tourism & hospitality d: Travel, tourism & hospitalityarrow_forward
- Change information to 95,000 to install, but will increase customer traffic in the store by 12,000 customers per year. Assume a discount rate of 7%arrow_forwardCreate a simple but realistic S-curve showing the budget and time allotment for renovating a room, give at least 2 tasks for room renovating.arrow_forwardFedori Corporation has a Parts Division that does work for other Divisions in the company as well as for outside customers. The company's Machinery Division has asked the Parts Division to provide it with 4,000 special parts each year. The special parts would require P23.00 per unit in variable production costs. The Machinery Division has a bid from an outside supplier for the special parts at P37.00 per unit. In order to have time and space to produce the special part, the Parts Division would have to cut back production of another part-the YR24 that it presently is producing. The YR24 sells for P40.00 per unit, and requires P28.00 per unit in variable production costs. Packaging and shipping costs of the YR24 are P3.00 per unit. Packaging and shipping costs for the new special part would be only P1.50 per unit. The Parts Division is now producing and selling 15,000 units of the YR24 each year. Production and sales of the YR24 would drop by 20% if the new special part is produced for…arrow_forward
- Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,