Answered: analyst at Delta Airlines, you are…

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter11: Linear Optimization Models

Section: Chapter Questions

Problem 10P: The management of Hartman Company is trying to determine the amount of each of two products to...

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Question

As an analyst at Delta Airlines, you are asked to help the operations staff. Operations has identified a new method of loading baggage that is expected to result in a 35 percent reduction in labor time but no changes in any other costs. The current labor cost to load bags is $12 per bag. Other costs are $11 per bag.

Required:

a-1. What differential costs should the operations staff consider for the decision to use the new method next year?
a-2. What would be the cost savings per bag using it?
b. How would management use the information in requirement (a) and any other appropriate information to proceed with the contemplated use of the new baggage loading method?

Differential costs would not play a significant role in management's decision.

Management would use the information, but would also want to know the effect on quality.

Management would make their decision based strictly on the differential costs.

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