Question

A company sells medical supplies to hospitals and healthcare facilities that are mostly located in the Michiana region. The company has 150 employees, and it is about to decide whether part of them should be encouraged to work remotely, and if so, how many employees should do that. There are many aspects to be analyzed such as productivity and collaboration, but you will focus on the costs of space and IT at the company’s main office versus the costs of working remotely.

The costs of office space include building rent and maintenance, utilities, cleaning, and insurance. The company estimates that those costs could be either one of three scenarios: (A) $60,000 per month for a building where all employees can be accommodated; (B) $50,000 per month for a building that can accommodate 100 employees; or (C) $40,000 per month for a building for 50 employees.

The main costs of IT include the lease, operation and maintenance of equipment (a desktop computer for each employee, and the office’s Wi-Fi access points, cabling, routers for the LAN/MAN) and a contract with a fixed Internet service provider. The equipment cost is $7,500 per month for scenario (A), $5,500 for (B) or $3,500 for (C). The cost with the fixed Internet service provider is (A) $5,000 per month for all employees; (B) $4,000 per month for 100 employees; or (C) $2,500 per month for 50 employees.

If some of the employees no longer work frequently at the central office, then the company can operate on a smaller office (i.e. B or C instead of A). On the other hand, the company will provide a laptop, smartphone and a cellular plan for each employee working remotely. The company already has a corporate cellular contract with Cerizon for some employees. If some employees are to work remotely, then the company will add them to the same contract. The contract includes the smartphones at no extra cost, and Cerizon charges $10 per GB for employees who use less than 5GB per month, $8 per GB for employees who use 5GB or more but less than 10GB per month, and $6 per GB for employees who use 10GB or more per month. The cost of each laptop is $1,000, which the company considers that depreciates linearly over its lifetime of 2 years.

What are the office and remote costs in scenarios (A), (B) and (C)? For the scenario with the lowest total cost, which employees should work remotely? The IT department has a table with the average data traffic of fixed Internet for each employee. Assume that an employee working remotely would have 60% of his/her fixed Internet traffic added to the corporate cellular plan (the remaining 40% would use the employee’s home Internet, hotel, etc., at no cost for the company).

Average data traffic of fixed Internet per month " Em. is the employees"

Em. GB

1 14

2 19

3 6

4 97

5 49

6 28

7 80

8 90

9 6

10 99

11 41

12 49

13 85

14 30

15 2

16 69

17 9

18 93

19 34

20 12

21 92

22 1

23 31

24 46

25 33

26 97

27 76

28 57

29 88

30 72

31 49

32 91

33 1

34 23

35 60

36 17

37 50

38 29

39 20

40 97

41 65

42 56

43 56

44 64

45 71

46 79

47 5

48 25

49 35

50 24

51 76

52 76

53 5

54 50

55 39

56 2

57 88

58 12

59 37

60 38

61 65

62 29

63 21

64 84

65 38

66 81

67 7

68 28

69 65

70 74

71 14

72 26

73 47

74 24

75 33

76 65

77 70

78 48

79 9

80 16

81 85

82 2

83 91

84 23

85 48

86 8

87 13

88 48

89 88

90 20

91 94

92 83

93 42

94 43

95 65

96 96

97 45

98 17

99 23

100 30

101 60

102 19

103 70

104 95

105 96

106 80

107 55

108 45

109 57

110 63

111 70

112 13

113 81

114 71

115 97

116 77

117 51

118 26

119 20

120 23

121 42

122 3

123 28

124 16

125 1

126 93

127 78

128 28

129 69

130 60

131 10

132 17

133 37

134 47

135 66

136 31

137 22

138 26

139 12

140 42

141 71

142 8

143 68

144 82

145 5

146 25

147 52

148 24

149 77

150 84

Answer 1

Ans : Lowest cost is for scenario C. (See Explanation below)

Total Employees are 150. There are three scenarios, A, B and C based on which total cost has to be calculated.

In the below sheet, we see the following :

Scenario (Per month costs)	No. of On Job Emp	No. of Remote Emp	Cost of Building	Cost of Equipment	Cost of Fixed ISP
A	150.00	0.00	60,000.00	7,500.00	5,000.00
B	100.00	50.00	50,000.00	5,500.00	4,000.00
C	50.00	100.00	40,000.00	3,500.00	2,500.00

Now, we have the laptop costs. This will be incurred only in Plan B and C. Cost of Laptop is $1000 which will depreciate in 2 years linearly. This means the cost will be divided equally between two years. Here, we want the monthly cost of laptop that will be incurred per remote employee.

Total Cost of Laptop	1000	Depreciating linearly in 2 years
Cost Per year (=Total cost/2)	1000/2	500
Cost per month for laptop (=Cost per year/12)	500/12	41.66666667

This means that approx. $41.67 will be the cost of laptop per month per remote employee.

Following is the cellular plan given :

Cellular Plan	Avg Internet Traffic	Cost per month
	<5 GB	10
	5<=GB<10	8
	<=10 GB	6

In the question, the average data traffic of fixed Internet per month for each employee is given. Also, for remote employees it is given, 60% of his/her fixed Internet traffic added to the corporate cellular plan (the remaining 40% would use the employee’s home Internet, hotel, etc., at no cost for the company). This means, we will consider only 60% of the avg. data traffic for calculating the cellular plan costs.

For this, we can assume, we want the employees which will contribute the lowest to the cellular plan to be added for working remotely.

Do the following: Calculate 60% of the avg data traffic for all the employees. Now, based on the above cellular plan logic, find the cost per employee if he/she works remotely. Sort the employees based on the cellular plan cost.

Scenario (Per month costs)	Cellular Plan
A	0.00
B	300
C	600

For every scenario, B and C, choose employees which contribute the lowest to the cellular plan cost.

Cost of Laptop for Scenario B or C = Cost of 1 laptop per month * Total No. of Remote employees

Based on this following is added to the cost structure of the three scenarios.

Scenario (Per month costs)	Cost of Laptop
A	0.00
B	2,083.33
C	4,166.67

Now add all the costs :

Scenario(Per month costs)	On Job Emp	Remote Emp	Cost of Building	Cost of Equipment	Cost of Fixed ISP	Cost of Laptop	Cellular Plan	Total Cost
A	150.00	0.00	60,000.00	7,500.00	5,000.00	0.00	0.00	72,500.00
B	100.00	50.00	50,000.00	5,500.00	4,000.00	2,083.33	300.00	61,883.33
C	50.00	100.00	40,000.00	3,500.00	2,500.00	4,166.67	600.00	50,766.67

Lowest cost is for scenario C.

Following are the employees who were selected for remote working :

Em.
10
4
26
40
115
96
105
104
91
18
126
21
32
83
8
29
57
89
13
81
64
150
92
144
66
113
7
106
46
127
116
149
27
51
52
70
30
45
114
141
77
103
111
16
129
143
135
41
61
69
76
95
44
110
35
101
130
28
109
42
43
107
147
117
37
54
5
12
31
78
85
88
73
134
24
97
108
94
93
121
140
11
55
60
65
59
133
49
19
25
75
23
136
14
100
38
62
6
68
123