A retail catalog operation employs a bank of six telephone operators who process orders using computer terminals. When a terminal breaks down, it must be disconnected and taken to a nearby electronics repair shop, where it is repaired. The mean time between terminal breakdowns is six working days, and the mean time required to repair a terminal is two working days (both exponentially distributed). As a result of lost sales, it costs the mail-order operation an estimated $50 per day in lost profits each day a terminal is out for repair. The company pays the electronics repair shop $3000 per year on a service agreement to repair the terminals. The company is considering the possibility of signing a new service agreement with another electronics repair shop that will provide substitute terminals while the broken ones are at the repair shop. However, the new service agreement would cost the mail-order operation $15,000 per year. Assuming that there are 250 working days in a year, determine what the mail-order operation should do.

  • CreatedApril 10, 2014
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