Question

A property title search firm is contemplating using online software to increase its search productivity. Currently an average of 40 minutes is needed to do a title search. The researcher cost is $2 per minute. Clients are charged a fee of $400. Company A’s software would reduce the average search time by 10 minutes, at a cost of $3.50 per search. Company B’s software would reduce the average search time by 12 minutes at a cost of $3.60 per search. Which option would have the highest productivity in terms of revenue per dollar of input?

Answer 1

Answer:

Current = 5.00

Company A = 6.30

Company B = 6.71

The company B would have the highest productivity in terms of revenue per dollar of input, that is 6.71.

Explanation:

Current:

Average time = 40 minutes

Cost = 40 minutes x $2 = $80

Productivity (Revenue per $ input) = $400 / $80 = 5.00

Company A:

Average time = 40 - 10 = 30 minutes

Cost = (30 minutes x $2) + $3.50 = $60 + $3.50 = $63.50

Productivity (Revenue per $ input) = $400 / $63.50 = 6.30

Company B:

Average time = 40 - 12 = 28 minutes

Cost = (28 minutes x $2) + $3.60 = $56 + $3.60 = $59.60

Productivity (Revenue per $ input) = $400 / $59.60 = 6.71

Current = 5.00

Company A = 6.30

Company B = 6.71

The company B would have the highest productivity in terms of revenue per dollar of input, that is 6.71.

Hope this helps!