Suppose that a delivery company currently uses one employee per vehicle to deliv

Question

Suppose that a delivery company currently uses one employee per vehicle to deliver packages. Each driver delivers 50 packages per day, and the firm charges $20 per package for deliver). L07 What is the MRP per driver per day? Now suppose that a union forces the company to place a supervisor in each vehicle at a cost of $300 per supervisor per day. The presence of the supervisor causes the number of packages delivered per vehicle per day to rise to 60 packages per day. What is the MRP per supervisor per day? By how much per vehicle per day do firm profits fall after supervisors are introduced? How many packages per day would each vehicle have to deliver in order to maintain the firm's profit per vehicle after supervisors are introduced? Suppose that the number of packages delivered per day cannot be increased but that the price per delivery might potentially be raised. What price would the firm have to charge for each delivery in order to maintain the firm's profit per vehicle after supervisors are introduced?

Explanation / Answer

Each driver delivers 50 packages per day, and the firm charges $20/package delivery

Each driver has one vehicle

a) what is the MRP per driver per day?

50 x $20 = $1,000 = MRP

b) MRP = (60 x $20) - $300 = $1,200 - $300 = $900

Profits are reduced by $100 per driver

c) $300x = (50 + 10x) x $20 = $1,000 + $200x

$300x = $1000 + $200x

$100x = $1000

x = 10 supervisors, then we'd start losing money

d) (50 + 100)(p) - $300(10) = $1,000

solve for p, the price per package:

150p - 3,000 = 1,000

150p = 4000

p = $26.67 is the new price

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