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Homework answers / question archive / Regional Airlines Case Recall the single-server in-class assignment: Regional Airlines is establishing a new telephone system for handling flight reservations
Regional Airlines Case Recall the single-server in-class assignment: Regional Airlines is establishing a new telephone system for handling flight reservations. During the 10:00 AM to 2:00 PM time period, calls to the reservation agent occur randomly at an average rate of one call every 3.75 minutes. Historical service time data show that a reservation agent spends an average of 3 minutes with each customer. The waiting line model assumptions of Poisson arrivals and exponential service times appear reasonable for the telephone reservation system At a planning meeting, Regional's management team agreed that an acceptable customer service goal is to answer at least 75% of the incoming calls immediately. During the planning meeting, Regional's vice president of administration pointed out that the data show that the average service rate for an agent is faster than the average arrival rate of the telephone calls. The vice president's conclusion was that personnel costs could be minimized by using one agent and that single agent must be able to handle the telephone reservations and still have some idle time. The vice president of marketing restated the importance of customer service and expressed support for at least two reservation agents. We already analyzed the single-agent system's performance according to the opinion of vice president of administration. We concluded that operating the telephone reservation service with only one ticket agent appears unacceptable because they won't be able to meet their goal. Answer to the following questions to evaluate the opinion of vice president of marketing:
7. What is the total cost if system operates for 8 hours? The cost of a ticket reservation agent is $20 per hour. The cost of waiting caller in the system is $500 per hour (because we may lose the customer due to the waiting). What is our expected profit if, every 8 hours, 20 customers on average purchase ticket with average value of $3502
Here in the question, since it is a little unclear, I am assuming that the number of reservation agents is considered to be 2, as was suggested by VP of marketing. This is assumed as the introduction, explicitily states that the option of 1 reservation agents has already been evaluated and is not feasible, and thus we are supposed to evaluatethe VP of marketings option of 2 agents
Calculation of Total Cost for 8 Hours
| Particulars | Amount |
| Cost of reservation agents (2 agents * $20 * 8 hours) | $320 |
|
Cost of waiting caller ($500 * 8 hours) |
$4,000 |
| Total Cost | $4,320 |
Calculation of Profit for every 8 hours
| Particulars | Amount |
| Revenue (20 customers * $350) | $7000 |
|
(-) Total Cost (for 8 hours) |
$4,320 |
| Profit (for 8 hours) | $2,680 |
