Question A.2: Activities at Industrial Gadgets Five workers are in a telep...
Activities at Industrial Gadgets
Five workers are in a telephone-order business cell for processing customer orders. The telephone tasks (fraction time) include taking product orders (75%); logging customer-order following up, complaints, and feedback (10%); and providing on-line product inquiry assistance (15%). The nontelephone tasks include invoicing and billing orders (35%), order shipping preparation (25%), and inventory updating and maintenance (40%). The five workers split their time as follows between telephone and nontelephone tasks: two (100%/0%), one (50%/50%), and two (10%/90%). Assume a 2000-hour work-year and a rate of $15.00 per hour for salary and benefits. Calculate the annual business cost per item. Each year, there are 12,000 product orders, 2000 customer complaints/feedback, 1500 on-line product inquiries, 10,000 orders, and 10,000 inventory updates.
One full-time employee annual costs = (2,000 hours/year)($15/hour) = $30,000/year.
Employee time as full-time equivalents (FTE):
FTE_{tel.} = 2 · 1 + 1 · .5 + 2 · .1 = 2.7 Employees
FTE_{nontel.} = 2 · 0 + 1 · .5 + 2 · .9 = 2.3 Employees
Telephone Tasks:
Taking product orders:
30,000 · 2.7 · .75 = $60,750 per year/12,000 calls = $5.06/order
Logging follow-up/customer complaints/feedback:
30,000 · 2.7 · .1 = $8100 per year/2000 calls = $4.05/call
Providing on-line product inquiry assistance:
30,000 · 2.7 · .15 = $12,150 per year/1500 calls = $8.10/call
Subtotal = $81,000 per year
Nontelephone Tasks:
Invoicing/billing orders:
30,000 · 2.3 · .35 = $24,150 per year/10,000 orders = $2.42/order
Order shipping preparation:
30,000 · 2.3 · .25 = $17,250 per year/10,000 orders = $1.73/order
Inventory updating/maintenance:
30,000 · 2.3 · .40 = $27,600 per year/10,000 orders = $2.76/order
Subtotal = $69,000 per year