Question

Students are threating to boycott the student centre food service because the cashier is too slow. The Students' Union President has therefore sought to improve the service by taking the following action: "Employ an Earn & Study Student, who will work at the same pace as the current cashier, but who will stand back to back in adjoining cubicles. This will eliminate students moving between lines (jockeying). Assume that student customers will divide themselves equally between each line, so that the arrival rate for each cashier will be half of the prior arrival rate for a single cashier. The service rate for each cashier will remain the same as the previous service rate. The Union Treasurer has estimated that this alternative will enable an additional 150 students to cash their lunches in a timely manner. These students would not otherwise have bought lunch in the student centre. The Treasurer has projected that the Union will earns $135 000 in additional income for 5 consecutive school days. However, employing the additional student cashier over that time would cost $6200 per day in wages plus a one-time cost of $12500 for the 5-day period. b) Would you advise the president to implement his new alternative plan? Your response must be derived from a cost benefit analysis which must be included as part of your response to the president. Otherwise full marks will not be given. [15 marks]

Answer 1

Additional Student	150
Benefit: Additional Income from 5 days	135000
Student cashier cost/day	6200
Student cashier cost/5day	31000
One time cost per 5days	12500
Total cost (31000+12500)	43500
Benefit-cost (135000-43500)	91500

Yes, I will like to advise president to impliment new alternative plan as profit from this plan is greated than cost. Profit-cost=$91500