The Insurance Department at Shear's Has Two Agents,each Working at a Mean

question 9

Essay

The insurance department at Shear's has two agents,each working at a mean speed of eight customers per hour.Customers arrive at the insurance desk at a mean rate of one every six minutes and form a single queue.Management feels that some customers are going to find the wait at the desk too long and take their business to Word's,Shear's competitor.​
In order to reduce the time required by an agent to serve a customer,Shear's is contemplating installing one of two minicomputer systems: System A that leases for $18 per day and will increase an agent's efficiency by 25% or System B that leases for $23 per day and will increase an agent's efficiency by 50%.Agents work eight-hour days.​
If Shear's estimates its cost of having a customer in the system at $3 per hour,determine if it should install a new minicomputer system,and if so,which one?

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Definitions:

Unadjusted Cost of Goods Sold

Unadjusted Cost of Goods Sold (COGS) is the initial calculation of all costs directly associated with the production of goods before any adjustments for inventory changes or other factors.

Journal Entry

A record in the accounting journal that represents a business transaction and its effect on the accounts.

Manufacturing Overhead

All indirect costs associated with the production process, from maintenance expenses of the production facility to the supplies needed for operation.

Work in Process

Goods that are midway through the manufacturing process but are not fully finished.