You must decide whether to hire another secretary, whose output is easily measured, or merely to install Voice Processor, which is a new and extremely reliable voice recognition software, and employ existing secretaries. A secretary costs $800 per month and Voice Processor, which can only be rented, costs $500 per month. Voice Processor yields 6,000 pages of output per year. The firm is only planning to be in business for one more year.
a. If a new secretary produces twice as much output (correctly typed pages) as Voice Processor, should the firm hire the secretary or rent Voice Processor?
b. Assume that half of the secretaries are twice as productive as a Voice Processor, but the other half are only equally productive. Productivity can be ascertained only after a four-month period. Neither firms nor secretaries know the productivity before work occurs. What should the firm do?
C. At how many months of required observation time is the firm indifferent between a secretary and Voice Processor?
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