Question

Chipper Payroll Services knows the demand for its services during the current year is around 50,000 workerhours and with current operations covers all customer demand (i.e., Chipper’s capacity currently is 50,000 worker-hours). Chipper is planning on a 5% growth rate each year. Chipper’s current office space and staff will eventually outgrow demand. Expanding the office space and staff depends mostly on the hours that will be worked total in the facility. If we let x=total worker-hours, Chipper will incur a one- time cost of $15x to expand [i.e., if Chipper goes from 50,000 worker-hour capacity to 70,000 worker-hour capacity, it will incur a cost of $15x(70,000-50,000) = $300,000]. Chipper needs to expand its current space and staff, since any new business will be lost to its competitors if it cannot accommodate the new customers. Each customer serviced incurs a variable cost of $3.00 per worker-hour. It also costs Chipper $6.00 per worker-hour of capacity per year (i.e., if Chipper has 70,000 worker hours total then Chipper incurs $6x70,000 = $420,000 per year in costs). Chipper garners $25 per worker hour from its customers.
Required:
Determine what the projected revenue, costs, and potential profits would be over the next 10 years based on the current capacity, 50,000 worker-hours, an expansion to 70,000 workerhours, and an expansion to 90,000 worker hours.

Answer 1

Answer: ..,,..

Explanation: