Question

lists the number of employees in each call center and whether the call center has a labor union. Associates are paid $15 per hour and work 160 hours per month.

All associates have indirect costs associated with computing, software, training, and office space. The average of those indirect costs is $1,000 per employee per year.

Horizon considers purchasing an AI system that would answer all incoming calls from customers. The system is able to resolve simple issues (e.g. frequently asked questions or billing information). It is also able to sort more complicated requests (e.g. service change) and direct them to associates who will further interact with the customers.

It is expected that the AI system would significantly streamline the business processes in the call centers, especially the bigger ones. However, the system can only be implemented in call centers that have no labor union. In the call centers where the AI system can be implemented, the following reductions in the workforce of each call center are expected:

Total number of employees in call center	Reduction in total employees
0-100	10%
101-200	19%
201-400	26%
401-600	31%
601-800	33%
801-1000	34%

a) Compute the total cost (salaries and indirect costs) of each call center per year and for all call centers per year, without the AI system (i.e. today’s cost).

b) Compute the total cost (salaries and indirect costs) of each call center per year and for all call centers per year, with the AI system (where it can be implemented).

c) It is worth implementing the AI system if the reduction in total cost, i.e. (a) minus (b) for all call centers, is greater than the cost of the AI system over its lifetime. If an AI system is considered worth implementing and its lifetime is 3 years, what is its maximum cost?

Excel functions you may want to use: IF, AND, Vlookup

Call center	Total number of employees	call center has union?
Redmond	829	NO
Indianapolis	802	NO
Chicago	529	NO
Detroit	223	YES
St. Louis	216	NO
Iowa City	522	NO
Lincoln	781	NO
Gary	643	NO
Bloomington	386	YES
Fort Wayne	790	YES
Fond Du Lac	100	NO
Wichita	929	YES
Aurora	407	NO
Minneapolis	206	NO
Chicago	150	NO
La Crosse	853	YES
Peoria	292	NO
Springfield	78	NO
Green Bay	532	YES
Madison	732	NO
TOTAL	10000

Answer 1

(a)

(b)

(c)