Laurie Daley is examining customer service costs in the southern region of capit

Question

Laurie Daley is examining customer service costs in the southern region of capital products. Capital Products has more than 200 separate electrical products that are sold with a six-month guarantee of full repair or replacement with a new product. when a product is returned by a customer, a service report is prepared. This service report includes details of the problem and the time and cost of resolving the problem. Weekly data for the most recent 8-week period are as follows

week       customer- service department costs           number of service reports

1          13700              190

2                20900          275

3               13000            115

4               18800           395

5              14000             265

6               21500             455

7               16900            340

8             21000               305

Explanation / Answer

  SERVICE DEPT. COST($)   NO. OF SERVICE REPORT

HIGHEST OBSERVATION 21500 455

LOWEST OBSERVATION 13000 115

DIFFRENCE 8500 340

CUSTOMER SERVICE DEPT. COST= FIXED COST +( VARIABLE COST * NO OF SERVICE REPORT)

VARIABLE COST= $8500 / 340

=$25 PER SERVICE REPORT

FIXED COST=$21500 - ($25 * 455)=$10125

=$13000 - ($25 * 115)=$10125

CUSTOMER SERVICE DEPARTMENT COST= $10125 + $25 PER SERVICE REPORT

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