Question

write down your solution clearly.

1. You are a manager of a telephone service provider in Sydney. You have two plans for your customers as follows:

Plan1: Bill=15+0.05T; and Plan 2: Bill = 25 + 0.03T;

Where, ‘Bill’ is your monthly bill in dollars and ‘T’ is your monthly total duration of calls in minutes.

(a) Find the break-even level of total duration of monthly telephone calls in minutes.

(b) If your customer’s average monthly duration of call is 400 minutes, advise which plan would be suitable for your customer?

(c) If your customer’s average monthly duration of call is 600 minutes, advise which plan would be suitable for this customer?

(d) If there is a $5 reduction in the monthly fixed fee in Plan 2, then what would be your advice to the customer whose average monthly call is 400 minutes?

Answer 1

a) break-even level of total duration if monthly telephone calls in minutes:

15 + 0.05T = 25 + 0.03 T

0.02T = 10

T = 500 minutes

b) If customer's average monthly call is 400 minutes then

Plan 1: Bill = 15 + 0.05 * 400 = 35

Plan 2: Bill = 25 + 0.03 * 400 = 37

Since, 35 < 37, you should advise the customer to go with plan 1.

c) If customer's average monthly call is 600 minutes then

Plan 1: Bill = 15 + 0.05 * 600 = 45

Plan 2: Bill = 25 + 0.03 * 600 = 43

Since, 43 < 45, you should advise the customer to go with plan 2.

d) if there is $5 deduction in plan 2 fixed fee, i.e. Bill = 20 + 0.03T then if customer's average monthly call is 400 minutes then

Plan 1: Bill = 15 + 0.05 * 400 = 35

Plan 2: Bill = 20 + 0.03 * 400 = 32

Since, 32 < 35, you should advise the customer to go with plan 2.