Question

10. Westgate has decided to hire service representatives to implement a proactive service call strategy to address service issues using the following approach. Customers were divided into 4 groups based on the contribution to the company profit. Large customers who accounted for 40% of the profit were grouped as Class A customers. Given the importance of these customers, service representatives call on Class A customers 20 times a year. These service representatives meet with multiple groups within the firm and spend about 1.5 hours for each call. The next group of large customers were grouped as Class B customers and were visited once every month with each call lasting about 45 minutes. The next two groups accounted for 35% of the profits. Service reps make a regular call every 2 months to Class C customers and spendabout 20 minutes each. Class D customers are visited once every three months for 20 minutes call. Table 1 below provides you the call frequency for customer groups. Table 1 Number of Class of No of Calls per % Profit Provided by the Call Duration Year per Customer Customers | Customer Segment Minutes Call Customer 70 40% B 300 25% 45 C 800 20% 6 20 D 1830 15% 4 20 TOtal 3000 100% At Westgate employees work 40 hours per week and have 4 weeks of vacation time per year. Workload research shows that sales and service employees spend about 23.7% of their time in travelling, 16.3% in report writing and administrative tasks, 15% of the time in in departmental meetings and the remaining 45% in face-to-face service calls. a. Determine the number of service representatives Westgate need to hire using the workload approach. b. Service representatives are paid a salary of $ 65,000 per year. Firms incurs an additional 40% of the salary in benefits. Determine the new break-even sales in units and $. Α 20 90 12

Answer 1

(A)

Class of customers	Number of customers	% Profit	Number of calls per year per customer	Call duration(hours/call)	Total hours(No. of customers x No. of calls per year x Call duration)
A	70	40%	20	1.5	2100
B	300	25%	12	0.75	2700
C	800	20%	6	0.33	1600
D	1830	15%	4	0.33	2440
TOTAL	3000	100%			8840

Work hours of an employee in a week = 40

Total working weeks = 52 - 4 = 48

Work hours of an employee in a year = 40 x 48 = 1920 hours

Actual hours for face to face service calls = 45% of 1920 = 864 hours

Number of service representatives required = Total service hours / Service hour of 1 employee = 8840 / 864 = 10.23.

Hence, the company needs 11 service representatives.