Dandy Collectibles is opening a new warehouse. Bob Lee, the warehouse manager, is trying to determine the labor compensation package that most productively utilizes resources. The typical compensation plan offers an hourly wage rate of $13. Mr. Lee is also considering an incentive plan. The incentive plan rewards solely on performance with order pickers earning $0.40/unit prepared for shipping. A typical week shows the number of ordered units that
must be prepared for shipping. Errors sometimes happen in Dandy's order picking. Product mishandling occurs in I percent of the orders under the incentive plan and in 0.5 percent of the orders under the hourly wage plan. Errored orders are scrapped and result in lost revenue of $60 per occurrence. Hourly workers pick 20 units per hour. Incentive workers pick 28 units per hour. Regardless of the plan designation, employees work 40-hour weeks. Union restrictions prevent Dandy from operating on Saturday and Sunday. The labor union also restricts Dandy from hiring part-time workers. Orders need not be filled daily, but all orders must be
shipped by week’s end (Friday). Assume that hiring and training costs are negligible.

a. How many workers are needed under each plan for the typical week's demand?
b. Which plan meets the typical week’s demand at the lowest cost, including lost sales resulting from errors?

Onsider the following subscription behavior information from genie, a web site that provides tools for constructing a family tree (ancestor search). subscriptions cost $9.99 per month, but you are charged for the entire year at the time of purchase. there is a one-year minimum term when you sign up for the service. once purchased, subscriptions are set to renew automatically unless the subscriber cancels them. when a membership renews, it renews for a one-year term and again you are charged for the entire year. there are no variable costs associated with providing this service to an individual customer, but genie does engage in customer relationship activities that they believe will increase customer retention. these customer relationship activities cost genie about $10 per year per customer. based on a sample of 1000 customers that joined genie five years ago, near the time when the company was founded, they were able to determine how many of those customers remained subscribers in the second year, third year etc. based on this information, genie calculated the average annual retention rate to be 20%. genie uses an annual discount rate of 8%. a. last year, genie spent $10,000 placing advertisements on google. genie management believes that these advertisements were responsible for about 300 new subscribers. would you recommend to genie management that they purchase more google ads? b. suppose a newly-introduced loyalty program increases the number of customers that remained to 30%. does this new data change your answer to 9.a? c. do you have any hesitations or concerns about making recommendations to management based on your above estimate of customer lifetime value?