A call center in India used by U.S. and U.K. credit card holders has a capacity
ID: 1113921 • Letter: A
Question
A call center in India used by U.S. and U.K. credit card holders has a capacity of 1,400,000 calls annually The fixed cost of the center is $800,000 with an average variable cost of S1 and revenue of $2.50 per call (a) Find the percentage of the call capacity that must be placed each year to break even. b) The center manager expects to dedicate the equivalent of 500,000 of the 1,400,000 capacity to a new product line. This is expected to increase the center's fixed cost to $900,000 of which 50% will be allocated to the new product line. Determine the average revenue per call necessary to make 500,000 calls the breakeven point for only the new product. How does this required revenue compare with the current centre revenue of $2.50 per call?Explanation / Answer
TR = 2.5*Q
TC = 800000+Q
Breakeven such that TR = TC
2.5Q = 800000+Q
1.5Q = 800000
Q = 800000/1.5
Q = 533,333.3
b) New Total cost = 90000
TR = 500000Q
Break even P such that:
TR = TC
500000Q = 4500000
P = 0.9
New revenue = 0.9*500000+ 2.5*(33333.3)
=$533,332.5
The new revenue is less than that was there before the introduction of new product line.
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