Question

Catamount Inc. employs one worker to load packages on an outgoing truck. The work shift is an 8 hour day. Trucks arrive at the loading dock at an average of 40 per day. The worker can load a truck in 8 minutes. Truck drivers earn $20 per hour while the employees who load the trucks earn $18/hour. While the trucks are being loaded, the truck drivers must sit and wait with the truck.
a) Should the cost be based on truck drivers in the system or truck drivers in the queue? Explain.
b) What is the hourly cost for this system?
c) Catamount has the enough capital to make one improvement to the system. They can decrease the loading rate from 8 minutes per truck to 6 minutes per truck; OR they can add a second dock with an additional worker (each worker still loads at a rate 8 minutes per truck). If they add an additional dock, trucks will still line up in a single line and go to the first available dock. Perform a cost analysis (ignore capital improvement costs) for both options and explain which option Catamount should take. Provide all relevant cost calculations and explain your answer.

Answer 1

Answer and Explanation:

According to the scenario, computation of the given data are as follow:-

a).Work shift per day = 8 hours

Average of arriving trucks = 40

Loading time of workers = 8 min.

Earning of truck drivers = $20

Earning of workers = $18

If the truck drivers are engaged for one station, the cost may be focused on truck drivers in the system at a certain point. But if it's not, then the cost in the line must be dependent on truck drivers, since that's the best approximation of scope.

b). Hourly Cost for this System =Truck Driver Cost × No. of Trucks in an Hour + Worker Hourly Cost

= $20 × (60 ÷ 8) + $18

= $20 × 7.5+ $18

= $168

c). If they add additional dock. Then Their Total Cost in an hours

= $168 ×2

= $336 (because both worker take similar time so simultaneously 2 truck can be loaded)

If the cost doubles, the average no. of trucks service doubled too along with the ability of company to send out delivered trucks. So option 2 is better.