Question

A property title search firm is contemplating using online software to increase the productivity of the researcher performing the search. Currently, an average of 59 minutes is needed to do a title search. The researcher cost is $1.30 per minute. Clients are charged a fee of $400. Company A’s software would reduce the average search time by 16 minutes, at a cost of $3.60 per search. Company B’s software would reduce the average search time by 17 minutes at a cost of $5.60 per search.Which would have the higher productivity in terms of revenue per dollar of input?

Answer 1

Answer:

PRESENT= $5.21

COMPANY – A = $6.72

COMPANY – B= $6.64

Explanation:

Calculation for the higher productivity in terms of revenue per dollar of input

PRESENT

Average time =59 minutes

Cost=59 minutes x$1.30 per minute

Cost = $76.7

Productivity (per $input)=$400/$76.7

Productivity (per $input)= $5.21

COMPANY – A

Average time= (59 minutes-16 minutes)

Average time=43 minutes

Cost= 43 minutes x $1.30 per minute + $3.60

Cost=$55. 9+$3.60

= $59.50

Productivity (per $input)=$400/$59.50

Productivity (per $input) = $6.72

COMPANY – B

Average time= (59 minutes - 17 minutes)

Average time=42 minutes

Cost= 42 minutes x $1.30 per minute + $5.60

Cost=$54. 6+$5.60

= $60.20

Productivity (per $input)=$400/$60.20

Productivity (per $input) = $6.64

Summary

PRESENT:Productivity (per $input)= $5.21

COMPANY – A:Productivity (per $input) = $6.72

COMPANY – B:Productivity (per $input) = $6.64

Therefore COMPANY – A with the amount of $6.72 would have the higher productivity in terms of revenue per dollar of input because it has the highest amount.