Question 16 1 pts Connect.com is an internet service provider that caters to ind

Question

Question 16 1 pts Connect.com is an internet service provider that caters to individual consumers and small businesses that require a high level of service and willing to pay a premium for it. One of Connect.com's services is its online help desk. Customers who are experiencing technical problems or who simply have a question about their account can interact directly with an expert. Problems are usually resolved quickly and Connect.com's customers often list the help desk as one of their top reasons for staying with the service. Presently Connect.com has enough capacity to handle 900,000 customer interactions per year although management doesn't expect that number to change much from the current level of 800,000 interactions annually A firm in India has offered to host the help desk as a third party provider. The company would host the help desk and has fluent English speaking representatives, all with college degrees and advanced technical training. Labor rates are a fraction of U.S. labor rates. The labor savings would be passed on, in part to Connect.com. Since the help desk function is internet- based, customers would see no change in service after the switch. The following information and yearly costs are provided: Current Online Help Desk Personnel costs 40 full time equivalent (FTE) technical experts @ $40,000 per year (salary and benefits) 3 supervisors @ $70,000 per year (salary and benefits) Equipment costs:

Explanation / Answer

Current cost data is given as follows:

Therefore the correct answer is $3,038,000

At the current level (800,000 customers) cost of outsourcing = $1,500,000 (fixed) + $400,000 (variable@.50)

Therefore the correct answer is $1,900,000.

In case of downturn for 400,000 interactions, comparable costs are as follows:

Under both the cases, it is recommended to go for outsourcing based on minimum total cost criteria.

Personnel cost 40 FTE @ $40,000 1600000 3 supervisors @ $70,000 210000 Equipment cost 4 servers @$2000 8000 20 PCs @$1000 20000 Variable costs $1.50 per customer 1200000 Total Cost $ 3038000

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