Taylor Connect operates dedicated call services for a variety of global customers in financial ser-vices, consumer products, and health sciences. Conner Beckett manages the call center in Omaha, Nebraska. This call center takes customer queries from a consumer products client. Taylor Connect employees are trained to handle calls from customers of this client in such a way that the callers believe they are talking to employees of the consumer products firm and not those of an outsourced provider of the call center (Taylor Connect). This consumer products client generates 1,200 calls a day at the Omaha call center. To handle this volume of calls, Conner requires both human operators and sophisticated technology (hardware and software). Technology allows many typical questions to be answered by prerecorded messages and by routing specific questions to agents trained to answer these queries. The following table shows how operators (also called agents) and technology can be substituted for each other in order to handle the 1,200 calls per day.

Number of Agents Number of Technology Units

8 .............150.0

9 .............133.3

10 .............120.0

11............. 109.1

12 .............100.0

13 .............92.3

14 .............85.7

15 .............80.0

16 .............75.0

17 .............70.6

18 .............66.7

19 .............63.2

20 .............60.0

To process 1,200 calls per day, Conner can either hire eight agents and purchase 150 technology units or hire 20 agents and purchase 60 technology units ( and various combinations between these two). A technology unit consists of hardware and software that can route and process calls. The various combinations of agents and technology units in the above table yield the same “quality” in the sense that callers (and the consumer products client) are indifferent among the various combinations. Agents cost $ 160 per day (salary, fringe benefits, taxes, etc.), and one technology unit costs $ 30 per day. .

Conner is evaluated as a cost center and has decision rights over how many agents to hire and how many technology units to purchase. His performance is evaluated on several criteria, including the total cost of operating his call center.

Required:

a. How many agents and technology units will Conner choose to minimize the daily operating cost of the call center?

b. The chief financial officer (CFO) of Taylor Connect decides to allocate corporate overhead (human resources, legal, accounting, etc.) to the call centers to better judge the profitability of the firm’s various decentralized call centers. Each call center will be charged $ 40 per operator (agent) per day as the mechanism to allocate this corporate overhead. Will Conner change the number of agents and technology units chosen to process the 1,200 calls per day after corporate overhead of $ 40 per agent per day is allocated? And if so, how many of each will he select?

c. The CFO justifies the allocation of overhead by arguing, “The corporate overheads have to be paid for by our operations. So it is natural to charge our call centers for these costs.” Critically evaluate the CFO’s justification for charging the call centers corporate overhead.

d. Should the call centers be charged corporate overhead? Explain.