A property title search firm is contemplating using online software to increase its search productivity. Currently,

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 higher productivity in terms of revenue per dollar of input?

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ANSWER:

Search

Approach

Search Average

Time (min.)

Cost per Search

Output ($)

Productivity per

Dollar Input

Current 40 40 min. x $2/min. = $80 $400

$400/$80 = $5.00

Company A

30

(40 – 10)

(30 min x $2/min.) + $3.50/search = $63.50

$400

$400/$63.50 = $6.30

Company B

28

(40 – 12)

(28 min. x $2/min.) + $3.60/search = $59.60

$400

$400/$59.60 = $6.71

This problem expresses the output in terms of standard price rather than in units.

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