Market Makers Incorporated (MMI) provides a range of services to its retail clients-customer service for inquiries, order taking, credit checking for new customers, and a variety of related services. Auto Supermarket (AS) is a large auto dealer that provides financing for the autos and trucks that it sells. AS has approached MMI to manage the inquiries that come in regarding these loans. AS is not satisfied with the performance of the call center it currently uses for handling inquiries on these loans and is considering a change to MMIMMI has been asked to estimate the cost of providing the service for the coming year. There are two types of loans at AS, one for autos and SUVs and another for light trucks. The loans for auto and truck buyers typically have different types of customers and loan terms, so the nature and volume of the inquiries are expected to differ. MMI would use its own call center to handle the AS engagement. The MMI call center's annual costs are as follows: Call center costs Salaries Utilities Leasing of facilities Other expenses Total $4, 223,555 2,487, 446 1.985,513 819,036 $9,515,550 MMI's call center is stoffed 12 hours per day with 60 call staff always available. Each staff member has a paid 10-minute break for each hour worked, and an unpaid 1-hour break for a lunch/dinner during each 12-hour shift. Thus, the call center has 12,045,000 minutes (11 hour 50 minutes 60 staff * 365 days) available for calls during the year, 6 7 AS and MMI work together to estimate the number of calls and time required for each call, based on AS's prior experience with its current call center Total Calls Average Number Total Time Inquiries Answered of Minutes/Call (minutes) Inquire re: rates and terms Autos 80,000 480,000 Trucks 32,000 224,000 Inquire re: loan application status Autos 45,000 225,000 Trucks 6,750 11 74,250 Inquire re: payment status Autos 39,000 Trucks 117,000 12,000 48,000 Inquire re: other matters Autos 29,000 11 319,000 Trucks 8,500 15 127,500 1,614, 750 5 3 4 Suppose that in addition to the call center engagement outlined earlier, MMI also provides the following annual service to 10 other clients Platinum Regional Bank Healthwise Software Incorporated Johnson Manufacturing Total Calls Average Number Answered of Minutes/call 234,000 5.0 66.788 5.0 122,665 4.0 Suppose that in addition to the call center engagement outlined earlier, MMI also provides the following annual service to 10 other clients: Platinun Regional Bank Healthwise Software Incorporated Johnson Manufacturing Lesco Online Shopping Babcock Insurance Service Garcia Electric Supply and Service Gilbert's Online Garden Supplies Financial Planning Services Incorporated Porter's Camera and Optical Jordan Auto World Incorporated Total Calls Answered 234,000 66,788 122,665 233, 756 55, 455 38,956 145, 902 68,993 198,440 965, 887 Average Number of Minutes/Call 6.0 5.0 4.0 6.0 5.5 3.4 4.5 11.0 5.5 3.5 OK ht os Required 1. What is the level of idle capacity at MMI, not assuming that AS becomes a customer? 2. Assume that AS comes back to MM with a revised proposal. The revised proposal includes call center activity as described above, but in addition, AS wants MMI to provide error checking services for those who apply for loans at AS. MMI would use some of the call center staff, after appropriate training to complete the processing of the credit checks, AS expects the following service to be needed Processing Credit Checks Requests Minutes/Request 45,600 Truck 12.500 12 Auto 7 What would be the idle capacity with the revised proposal? What would be the cost of the idle capacity