Question

Imagine you have some workers and some handheld computers that you can use to take inventory at a warehouse. There are diminishing returns to taking inventory. If one worker uses one computer, he can inventory 150 items per hour. Two workers sharing a computer can together inventory 200 items per hour. Three workers sharing a computer can together inventory 250 items per hour. And four or more workers sharing a computer can together inventory 260 items per hour. Computers cost $125 each and you must pay each worker $30 per hour.

a. If you assign one worker per computer, what is the cost of inventorying a single item? Instructions: Round your answer to two decimal places.
$ _____ per item
b. If you assign two workers per computer, what is the cost of inventorying a single item? Instructions: Round your answer to two decimal places.
$ _____ per item
c. If you assign three workers per computer, what is the cost of inventorying a single item? Instructions: Round your answer to two decimal places.
$_____ per item
d. If you assign four workers per computer, what is the cost of inventorying a single item? Instructions: Round your answer to two decimal places.
$_____ per item.
e. How many workers per computer should you assign if you wish to minimize the cost of inventory per single item?
_____ worker(s) per computer

Answer 1

Answer and Explanation:

The computation of each point is shown below:-

a. If one worker per computer, so the cost of inventorying a single item is

Cost = Total cost ÷ Number of units inventoried

= ($125 + $30) ÷ 150

= $155 ÷ 150

= $1.03

b. If two workers per computer, so the cost of inventorying a single item is

Wage = $30 × 2

= $60

Cost = Total cost ÷ Number of units inventoried

= ($60 + $125) ÷ 200

= $175 ÷ 200

= $0.88

c. If three workers per computer, so the cost of inventorying a single item is

Wages = $30 × 3

= $90

Cost = Total cost ÷ Number of units inventoried

= ($90 + $125) ÷ 250

= $215 ÷ 250

= $0.86

d. If four workers per computer so, the cost of inventorying a single item is

Wages = $30 × 4

= $120

Cost = Total cost ÷ Number of units inventoried

= ($120 + $125) ÷ 250

= $245 ÷ 250

= $0.98

e. According to the above calculation, there are three workers which are to be assigned per computer so that the inventory amount can be reduced.