Phoenix Computer manufactures and sells personal computers directly to customers. Or- ders are accepted by phone and through the company's website. Phoenix will be intro- ducing several new laptop models over the next few months and management recognizes a need to develop technical support personnel to specialize in the new laptop systems. One option being considered is to hire new employees and put them through a three- month training program. Another option is to put current customer service specialists through a two-month training program on the new laptop models. Phoenix estimates that the need for laptop specialists will grow from 0 to 100 during the months of May through September as follows: May20; June30; July85; August85; and September 100. After September, Phoenix expects that maintaining a staff of 100 laptop specialists will be sufficient.

The annual salary for a new employee is estimated to be $27,000 whether the person is hired to enter the training program or to replace a current employee who is entering the training program. The annual salary for the current Phoenix employees who are being con- sidered for the training program is approximately $36,000. The cost of the three-month training program is $1500 per person, and the cost of the two-month training program is $1000 per person. Note that the length of the training program means that a lag will occur between the time when a new person is hired and the time a new laptop specialist is avail- able. The number of current employees who will be available for training is limited. Phoenix estimates that the following numbers can be made available in the coming months: March15; April20; May0; June5; and July10. The training center has the capacity to start new three-month and two-month training classes each month; however, the total number of students (new and current employees) that begin training each month cannot exceed 25.

Phoenix needs to determine the number of new hires that should begin the three-month training program each month and the number of current employees that should begin the two-month training program each month. The objective is to satisfy staffing needs during May through September at the lowest possible total cost; that is, minimize the incremental salary cost and the total training cost.

It is currently January, and Phoenix Computer would like to develop a plan for hiring new employees and determining the mix of new hires and current employees to place in the training program.

Managerial Report

Perform an analysis of the Phoenix Computer problem and prepare a report that summarizes your findings. Be sure to include information on and analysis of the following items:

1. The incremental salary and training cost associated with hiring a new employee and training him/her to be a laptop specialist.
2. The incremental salary and training cost associated with putting a current employee through the training program. (Don't forget that a replacement must be hired when the current employee enters the program.)
3. Recommendations regarding the hiring and training plan that will minimize the salary and training costs over the February through August period as well as an- swers to these questions: What is the total cost of providing technical support for the new laptop models? How much higher will monthly payroll costs be in Septem- ber than in January?