How to minimize the total average hourly costs


Response to the following problem:

Customers arrive at Dave & Steve's bookstore according to a Poisson process at a mean rate of 48 per hour. The store pays its sales clerks $7.50 per hour in wages and benefits. Dave & Steve's estimates the goodwill cost of a customer waiting to be served at $ 6 per hour and the goodwill cost of a customer being served at only $1.00 per hour. Customer service times follow an exponential distribution and average 2 minutes.

a. Determine the number of sales clerks Dave & Steve's should employ to minimize the store's total average hourly costs.

b. If the customer arrival rate increases by 50% and the goodwill cost of a customer waiting to be served and being served were doubled, determine how many sales clerks Dave & Steve's should employ to minimize the store's total average hourly costs.

 

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Cost Accounting: How to minimize the total average hourly costs
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