You manage a large retail supercenter that sells groceries and other products to 30,000 customers per week. Currently, you employ 80 check-out clerks and 10 automated check-out machines (customers scan and pay for their purchases without a clerk's assistance). Each clerk is paid wages and fringe benefits of 800 dollars per week. It also cost you 800 dollars per week to lease each machine (price includes installation, software support and servicing). A vendor has offered you to lease you additional machines at this price. You estimate that by leasing 10 more machines you can meet your service requirements with 30 fewer clerks. Should you lease the additional machines or continue to service your customers with your current input mix? You conduct additional analysis and estimate that you can service the 30,000 customers with the following combinations of clerks and machines. Calculate the total costs for each of these combinations. What combination of inputs serves the customer at the lowest possible cost? Clerks Machines 80 10 50 20 30 30 22 40 15 50 12 603. Suppose that the marginal product of clerks at the optimal input combination is 500. Explain in words what this means. What is the marginal product of machines at this point? Explain why. Suppose that the cost of leasing a machine declines to $500 per week. What is your new optimal input mix? How does this affect your graph? Are there any others that should be considered in making this decision on the optimal mix of machineries and clerks. Discuss briefly.

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

Chapter14: Pricing Techniques And Analysis

Section: Chapter Questions

Problem 7E

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You manage a large retail supercenter that sells groceries and other products to 30,000 customers per week. Currently, you employ 80 check-out clerks and 10 automated check-out machines (customers scan and pay for their purchases without a clerk's assistance). Each clerk is paid wages and fringe benefits of 800 dollars per week. It also cost you 800 dollars per week to lease each machine (price includes installation, software support and servicing). A vendor has offered you to lease you additional machines at this price. You estimate that by leasing 10 more machines you can meet your service requirements with 30 fewer clerks.

Should you lease the additional machines or continue to service your customers with your current input mix?
You conduct additional analysis and estimate that you can service the 30,000 customers with the following combinations of clerks and machines. Calculate the total costs for each of these combinations. What combination of inputs serves the customer at the lowest possible cost?

Clerks Machines

80 10

50 20

30 30

22 40

15 50

12 60

3.
Suppose that the marginal product of clerks at the optimal input combination is 500. Explain in words what this means. What is the marginal product of machines at this point? Explain why.
Suppose that the cost of leasing a machine declines to $500 per week. What is your new optimal input mix? How does this affect your graph?
Are there any others that should be considered in making this decision on the optimal mix of machineries and clerks. Discuss briefly.

Definition Definition Benefits in addition to compensation that companies give to their employees. Fringe benefits can boost morale and productivity and keep employees motivated. Companies often use fringe benefits as a competitive advantage to recruit and retain employees. Examples of fringe benefits include pensions, vacation time, tuition reimbursement, free or subsidized meals, and gym memberships.

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