A property title search firm is contemplating using online software to increase its search
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’s 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?
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.