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The Case Study

04 Apr

The Case Study

Telemarketing Incorporated (TI) is a service company with its primary business base in the Rocky Mountain region. TI is a service organization in the business of collecting and selling information for contracted clients.

Production Information

TI made 5,221,782 calls in 2004 to households all over the Rocky Mountain region from its main telemarketing facility in Colorado Springs. There were a total of 330 working days in 2004, for which TI conducted telemarketing calls. In 2004 TI completed, on average, over 15,800 calls a day.

TI’s main facility was designed to achieve a capacity level of between 17,000–18,000 calls a day (from 7:00 a.m. to 12:00 midnight). However, company analysis has shown that the best operation level (BOL) for TI is 17,600 calls a day. At the BOL level, TI is able to achieve its lowest unit cost per call given several variables associated with the information collected and calling costs as contracted with clients.

TI has a company policy, which states, “Any one-month period where total calls exceed 500,000 the excess is considered service cushion or capacity cushion.” (Look at capacity cushion in this line of work along the line of a product-focused company that produces bottles, cars, computers, or some other tangible product in excess of demand.) The company is compensated for these “cushion” periods at a rate of $10 per call over 500,000 with a cap of 11,500 over the 500,000.

The following is a monthly breakdown of TI’s service call rates for all of 2004. This information was obtained in its raw form, and some normalizing of the data is required.

Table Information

You’ll need to normalize Table 1 below before completing the 14 questions that follow.

Table 1 – TI’s 2004 Monthly/Daily Production Data (Requiring Normalization)

Month

Production Numbers

Number of Working Days During Month

January

15,000 units/day

27 working days

February

15,900 units/day

26 working days

March

419,720 units/month

28 working days

April

16,790 units/day

27 working days

May

504,900 units/month

27 working days

June

17,600 units/day

28 working days

July

391,972 units/month

28 working days

August

12,897units/day

29 working days

September

11,569 units/day

27 working days

October

463,681 units/month

29 working days

November

17,689 units/day

27 working days

December

19,000 units/day

27 working days

Total: 330

Notes:

  • When completing this problem, a symmetrical curve for both economies and diseconomies of scale is assumed.
  • Calculate capacity utilization rates as compared to the ideal BOL level.

Answer the Following Questions Based on the Information Provided:

Questions:

  • Based on 2004 information, what is TI’s annual design capacity production range (quantity)?
  • What was its annual capacity utilization rate for 2004 as compared to the company’s BOL?
  • What would the company’s annual calls completed output be if it produced at its BOL for all of 2004 year?
  • Which are the second, third, and fifth most underutilized months with regard to capacity utilization?
  • What is the capacity underutilization percentage for these three months (reference: Question 4)?
  • What three months did TI complete calls at the lowest per unit cost?
  • What three months did TI complete calls at the highest per unit cost?
  • Based on the completion of Question 8 and other information provided, what was TI’s total “cushion” compensation for 2004 (please show in total dollars)?
  • What month/s fall under the term – economies of scale, excluding the BOL month/s?
  • What was the cost of January’s underutilization performance (think along the lines of the BOL) if each unit not produced cost the company $15? (Think along the lines of what was produced and what could have been produced.)
  • If you were the operations manager, and the growth profile forecast for 2005 reflected a 10% growth in the number of calls made over 2004, an 8% growth in 2006 over 2005, and a 7% growth in 2007 over 2006, what business strategies would you be considering for the company?
  • Was/were there any month/s for which service or capacity cushion applied?
  • If so, what was/were the month/s?
  • What was the cushion in calls (quantity) and capacity cushion percentage for the month or months in question?
  • Compare the underutilized capacity of February with September; which of these two months better utilized the capacity available?
  • Which of these two months most likely had the higher per call rate cost for the company?
  • Compare the underutilized capacity of February with September; which of these two months better utilized the capacity available?
  • Which of these two months most likely had the higher per call rate cost for the company?

Note: Do not exceed two pages in your discussion of this question. A solid one-page would be expected as the minimum in discussing/analyzing this question. Single or 1½ spacing is fine. Do not double space your work on this final question.

 
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Posted by on April 4, 2018 in Academic Writing

 

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