Simulation Case Study:
Phoenix Boutique Hotel Group

Phoenix Boutique Hotel Group (PBHG) was founded in 2007 by Bree Bristowe. Having worked for several luxury resorts, Bristowe decided to pursue her dream of owning and operating a boutique hotel. Her hotel, which she called PHX, was located in an area that included several high-end resorts and business hotels. PHX filled a niche market for “modern travelers looking for excellent service and contemporary design without the frills.” Since opening PHX, Bristowe has invested, purchased, or renovated three other small hotels in the Phoenix metropolitan area: Canyon Inn PHX, PHX B&B, and The PHX Bungalows.

One of the customer service enhancements Bristowe has implemented is a centralized, toll-free reservation system. Although many customers book specific hotels online, the phone reservation system enables PBHG to find the best reservation match at all properties. It has been an excellent option for those customers who have preferences regarding the type of room, amenity options, and the best price across the four hotel locations.

Currently, three agents are on staff for the 6 a.m. to 2 p.m. call shift. The time between calls during this shift is represented in Table 1. The time to process reservation requests during this shift is in Table 2.

Table 1: Incoming Call Distribution

Table 2: Service Time Distribution

Bristowe wants to ensure customers are not on hold for longer than 2 minutes. She is debating hiring additional staff for this shift based on the available data. Additionally, Bristowe and PBHG will soon be featured in a national travel magazine with a circulation of over a million subscriptions. Bristowe is worried that the current operators may not be able to handle the increase in reservations. The projected increase for call distribution is represented in Table 3.

Table 3: Incoming Call Distribution

Bristowe has asked for your advice in evaluating the current phone reservation system. Create a simulation model to investigate her concerns. Make recommendations about the reservation agents.

The catering manager of LaVista​ Hotel, Lisa​ Ferguson, is disturbed by the amount of silverware she is losing every week. Last Friday​ night, when her crew tried to set up for a banquet for 500​ people, they did not have enough knives. She decides she needs to order some more​silverware, but wants to take advantage of any quantity discounts her vendor will offer.

follows≻For

a small order

​(2 comma 0002,000

pieces or​ less) her vendor quotes a price of

​$1.801.80​/piece.

follows≻If

she orders

2 comma 0012,001

to

5 comma 0005,000

​pieces, the price drops to

​$1.601.60​/piece.

follows≻5 comma 0015,001

to

10 comma 00010,000

pieces brings the price to

​$1.401.40​/piece,

and

follows≻10 comma 00110,001

and above reduces the price to

​$1.251.25​/piece.

​Lisa's order costs are

​$200200

per​ order, her annual holding costs are

55​%,

and the annual demand is

44 comma 90044,900

pieces. For the best option​ (the best option is the price level that results in an EOQ within the acceptable​ range):

a. what is the optimum ordering quantity? (round to the nearest whole number)

b.what is the annual holding cost? (round to two decimal places)

c. what is the annual ordering cost? ( round to two decimal places)

d. what are the annual costs of the silverware itself with an optimal order quantity? (round to the nearest whole number)

e. what is the total annual cost, including ordering, holding, and purchasing the silverware? (round to two decimal places)

Developing an Equation from Average Costs
Paradise Pub is a high-end dog hotel located in New York. Assume that in March, when dog-days occupancy was at an annual low of 500 days, the average cost per dog-day was $26. In July, when dog-days were at a capacity level of 4,500, the average cost per dog-day was $10.

(a) Develop an equation for monthly operating costs. (Let X = dog-days per month)
Total cost = $Answer

+ $Answer

* X

(b) Determine the average cost per dog-day at an annual volume of 28,000 dog-days. (Round to the nearest cent.)
$Answer

High-Low Cost Estimation
Assume the local YRC Worldwilde delivery service hub has the following information available about fleet miles and operating costs:

Use the high-low method to develop a cost-estimating equation for total annual operating costs. (Let X = annual fleet miles.)

Total annual costs = Answer

+ Answer * X

Automatic versus Manual Processing
Image Solutions operates a printing service for customers with digital cameras. The current service, which requires employees to download photos from customer cameras, has monthly operating costs of $7,000 plus $0.30 per photo printed. Management is evaluating the desirability of acquiring a machine that will allow customers to download and make prints without employee assistance. If the machine is acquired, the monthly fixed costs will increase to $13,000 and the variable costs of printing a photo will decline to $0.05 per photo.

(a) Determine the total costs of printing 20,000 and 50,000 photos per month.

(b) Determine the monthly volume at which the proposed process becomes preferable to the current process.
Answer units

Unit- and Batch-Level Cost Drivers
KC, a fast-food restaurant, serves fried chicken, fried fish, and french fries. The managers have estimated the costs of a batch of fried chicken for KC's all-you-can-eat Friday Fried Fiesta. Each batch must be 50 pieces. The chicken is precut by the chain headquarters and sent to the stores in 10-piece bags. Each bag costs $4. Preparing a batch of 50 pieces of chicken with KC's special coating takes one employee two hours. The current wage rate is $9 per hour. Another cost driver is the cost of putting fresh oil into the fryers. New oil, costing $6.50, is used for each batch.

Round answers to two decimal places, when applicable.

(a) Determine the cost of preparing one batch of 50 pieces.
$Answer

(b) If management projects that it will sell 150pieces of fried chicken, determine the total batch and unit costs.
Batch cost $Answer

Unit cost $Answer

(c) If management estimates the sales to be 350 pieces, determine the total costs.
$Answer

(d) How much will the batch costs increase if the government raises the minimum wage to $10 per hour?
$Answer

(e) If management decided to increase the number of pieces in a batch to 100, determine the cost of preparing 350 pieces. Assume that the batch would take twice as long to prepare, and management wants to replace the oil after 100 pieces are cooked.
$Answer

Suppose we all agree that the emission of carbon into the atmosphere is a policy problem
.Further, assume we know that the private marginal cost of a ton of Co2 is $17
while the true social marginal cost of a ton of carbon is $32. Clearly layout a policy of
carbon taxes that would result in the socially optimal level of carbon emissions.
Demonstrate your argument graphically and carefully explain. Evaluate the relative costs
and benefits of carbon taxes relative to emission targets/restrictions. How would your
analysis change if you believed innovation in carbon saving technologies was going to
improve in the near future?

In January 2017, Mitzu Co. pays $2,700,000 for a tract of land with two buildings on it. It plans to demolish Building 1 and build a new store in its place. Building 2 will be a company office; it is appraised at $854,000, with a useful life of 20 years and a $90,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $427,000 that are expected to last another 14 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,769,000. The company also incurs the following additional costs:

3. Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the 12 months of 2017 when these assets were in use.

• Record the year-end adjusting entry for the depreciation expense of Building 2.

• 2

  Record the year-end adjusting entry for the depreciation expense of Building 3.

• 3

  Record the year-end adjusting entry for the depreciation expense of Land Improvements 1.

• 4

  Record the year-end adjusting entry for the depreciation expense of Land Improvements 2.

Question 1.

Company Z had the following transactions in its first year of operations:

(1) On January 15, purchased 5,000 units of inventory for $20 each

(2) On March 1, purchased 10,000 units of inventory for $22 each

(3) On March 30, sold 7,000 units of inventory for $48 each

(4) On June 20, purchased 9,000 units of inventory for $25 each

(5) On August 10, sold 12,000 units of inventory for $50 each

(6) On September 3, sold 1,000 units of inventory $49 each

Company Z records transactions using a perpetual system. Calculate the cost of goods sold and ending inventory using (1) average cost, (2) FIFO, and (3) LIFO.

Company Z asks you to advise them on which inventory method to use. What method would you choose if the company wants to take out a loan from a bank in the near future that requires the company to meet a large threshold for its current assets’ value? What method would you choose if the company has a near-term investment opportunity that requires more cash on hand? Explain your answers.

a. Assume that a society is composed of two polluters, with the marginal abatement costs of polluters 1 and 2, respectively, equal to:

MAC1 = 18 – E1

MAC2 = 12 – 2E2

Where MAC1 refers to the marginal abatement costs of polluter 1, and E1 refers to the level of emissions of polluter 1. What is the unregulated level of pollution for each polluter? Find the total level of emissions that would be generated if a per-unit pollution tax of four dollars were imposed. Perform the same exercise for taxes of six dollars and eight dollars.

b. Given the same two marginal abatement cost function in part (a), find the market price of a marketable pollution permit if pollution was limited to eighteen units through the issuance of marketable pollution permits. Assume initially that each polluter is given nine permits (that allow 1 unit of pollution each).

c. Given a societal marginal abatement cost function of:

MAC = 100 – 3E

and a societal marginal damage function of:

MD = 2E,

find the optimal level of pollution and the per-unit pollution tax that would achieve it.

d. MAC1 and MAC2 are two different societal marginal abatement cost functions. Which one is more likely to be associated with an optimal level of pollution that is at or near zero? Why?

MAC1 = 10 – 0.2E

MAC2 = 1/E

Dandy's Fun Park is evaluating the purchase of a new game to be located on its Midway.? Dandy's has narrowed their choices down to? two: the Wacky Water Race game and the

Whackminus?Aminus?Mole

game. Financial data about the two choices follows.

What is the total present value of future cash inflows and residual value from the

Whackminus?Aminus?Mole

?game?

A parking garage charges R7.50 minimum fee to park for up to three and half
hours. The garage charges an additional R1.50 per hour for each hour or part
thereof in excess of three hours. The maximum charge for any given 24- hour
period is R25.72. Write a program that calculates and prints the parking
charges for each of three customers who parked their cars in this garage at
some time. You should enter the hours parked for each customer. Your
program should print the results in a neat tabular format and should calculate
and print the total of receipts. The program should use the function
calculateCharges to determine the charge for each customer. The payment
amounts should be printed inside the body of main().