Wastewater treatment, The consulting agency's client

Wastewater treatment

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Reference no: EM134045744

Question

The consulting agency's client traditionally charges $1.50/litre for wastewater treatment. On the average their facility processes 26 million litres per day. The variable costs per litre is $1. The consulting agency has decided to try using yield management approaches for their client to reduce surge demand. Since their facility is operating at 85% capacity on the average each day, if wastewater surges past the average 26 million litres per day, the source of the surge will be identified using newly installed sensors so that source can be charged a premium price of $2/litre. While if under the average 26 million litres per day, the charge will be reduced to $1.30/litre for those served. The plan considers that higher charges will have sources with regular surges seeking to reduce wastewater into their system. They estimate 8 million litres per day comes from sources with regular surge demand issues while 14 million litres per day is from sources without this issue. Variable costs will not change.

Using Revenue (or Yield) Management, compare single price and two prices. What should they do?

Reference no: EM134045744

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