Commitment and consumption of activity resources Steel max, Inc. sells of¬

fice furniture in the Chicago metropolitan area. To better serve its business customers, Steelmax recently introduced a new same-day service. Any order placed before 2 p.m. is delivered the same day.

Steelmax hires five workers on an eight-hour daily shift to deliver the of¬ fice furniture. Each delivery takes 30 minutes on average. If the number of customer orders exceeds the available capacity on some days, workers are asked to work overtime to ensure that all customer orders are delivered the same day. Regular wages are $12 per hour. Overtime wages include a 50% premium in addition to the regular wages.

The Steelmax management has noticed considerable fluctuation in the number of customer orders from day to day over the last three months as shown here:

Steelmax has now decided to pursue a more flexible hiring policy It will reduce the number of delivery workers to four on Mondays and Tuesdays and increase the number to six on Fridays. 7 REQUIRED

(a) Determine the total and unit delivery cost when the number of dailv cus¬ tomer orders is 70, 80, or 90.

(b) Determine the expected total delivery cost per day and the expected deliv¬ ery cost per customer order based on both the old and the new hiring pol¬ icy. What is the expected value per week of the new flexible hiring policy?
110 Chapter 3

Transcribed Image Text:

DAY OF THE WEEK Monday Tuesday Wednesday Thursday Friday AVERAGE NUMBER OF ORDERS 65 70 80 85 95