Sanchez Trucking has been experiencing delays at its warehouse operations. Management hired a consultant to find out why service deliveries to local businesses have taken longer than they should. The consultant narrowed down the problem to the number of work crews loading and unloading trucks. Each crew consists of 6 employees who work as a team on a variety of tasks; each employee works a full 40 hours a week. However, costs are also a concern. The consultant advised management that they could supplement work crews with short-term employees, at a higher cost, to cover unexpected needs on a weekly basis. Each work crew permanently hired by Sanchez costs $3,500 per week in wages and benefits, while a crew of short-term employees costs $4,800 per week. Complicating the decision is the fact that the weekly hourly requirements for work crews is uncertain because of the volatility in the number of deliveries to be made. Deliberating with management, the consultant arrived at the following data. Requirements (man-hours) Probability 960 1,200 1,440 1,680 0.2 0.2 0.5 0.1 Number of crews 4 5 6 7 If the consultant wants to offer a solution that minimizes the expected weekly costs for Sanchez, how many work crews should Sanchez have on its permanent payroll? A payroll containing work crews is the lowest cost alternative, with expected weekly costs to Sanchez of $ (Enter your responses as integers.)
Sanchez Trucking has been experiencing delays at its warehouse operations. Management hired a consultant to find out why service deliveries to local businesses have taken longer than they should. The consultant narrowed down the problem to the number of work crews loading and unloading trucks. Each crew consists of 6 employees who work as a team on a variety of tasks; each employee works a full 40 hours a week. However, costs are also a concern. The consultant advised management that they could supplement work crews with short-term employees, at a higher cost, to cover unexpected needs on a weekly basis. Each work crew permanently hired by Sanchez costs $3,500 per week in wages and benefits, while a crew of short-term employees costs $4,800 per week. Complicating the decision is the fact that the weekly hourly requirements for work crews is uncertain because of the volatility in the number of deliveries to be made. Deliberating with management, the consultant arrived at the following data. Requirements (man-hours) Probability 960 1,200 1,440 1,680 0.2 0.2 0.5 0.1 Number of crews 4 5 6 7 If the consultant wants to offer a solution that minimizes the expected weekly costs for Sanchez, how many work crews should Sanchez have on its permanent payroll? A payroll containing work crews is the lowest cost alternative, with expected weekly costs to Sanchez of $ (Enter your responses as integers.)
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter9: Applications Of Cost Theory
Section: Chapter Questions
Problem 1.2CE
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Transcribed Image Text:Sanchez Trucking has been experiencing delays at its warehouse operations. Management hired a consultant to find out why service deliveries to local businesses
have taken longer than they should. The consultant narrowed down the problem to the number of work crews loading and unloading trucks. Each crew consists of 6
employees who work as a team on a variety of tasks; each employee works a full 40 hours a week. However, costs are also a concern. The consultant advised
management that they could supplement work crews with short-term employees, at a higher cost, to cover unexpected needs on a weekly basis. Each work crew
permanently hired by Sanchez costs $3,500 per week in wages and benefits, while a crew of short-term employees costs $4,800 per week. Complicating the decision
is the fact that the weekly hourly requirements for work crews is uncertain because of the volatility in the number of deliveries to be made. Deliberating with
management, the consultant arrived at the following data.
Requirements (man-hours)
Probability
960
1,200
1,440
1,680
0.2
0.2
0.5
0.1
Number of crews
4
5
6
7
If the consultant wants to offer a solution that minimizes the expected weekly costs for Sanchez, how many work crews should Sanchez have on its permanent payroll?
A payroll containing
work crews is the lowest cost alternative, with expected weekly costs to Sanchez of $
(Enter your responses as integers.)
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