Question

Imagine you have some workers and some handheld computers that you can use to take inventory at a warehouse. There are diminishing returns to taking inventory. If one worker uses one computer, he can inventory 100 items per hour. Two workers sharing a computer can together inventory 150 items per hour. Three workers sharing a computer can together inventory 160 items per hour. And four or more workers sharing a computer can together inventory fewer than 160 items per hour. Computers cost $100 each and you must pay each worker $25 per hour. If you assign one worker per computer, what is the cost of inventorying a single item? What if you assign two workers per computer? Three? How many workers per computer should you assign if you wish to minimize the cost of inventorying a single item?

Answer 1

Step-by-step explanation:

For computing the cost of inventorying, we have to apply the formula which is shown below:

= Total costs ÷ Number of items

1. Cost of inventorying = Total costs ÷ Number of items

= $125 ÷ 100 items

= $1.25

Total cost = $100 + $25 = $125

2. Cost of inventorying = Total costs ÷ Number of items

= $150 ÷ 150 items

= $1

Total cost = $100 + $25 + $25 = $150

3. Cost of inventorying = Total costs ÷ Number of items

= $175 ÷ 160 items

= $1.10

Total cost = $100 + $25 + $25 + $25 = $175

$25 is the each worker pay

To minimize the cost we required two workers as the cost of inventorying is lesser than other two.