Question:

Last summer Sydney studied in London and now she wants to keep in touch with some of her English friends by telephone. She is considering three different international calling plans, whose costs are summarized below:

AT&T charges $3.00 per month for the calling plan, and then all calls to England are $0.13/minute.

Verizon charges $6.95 per month for the calling plan, and then all calls to England are $0.08/min. If $25 worth of calls are made in any month, that month’s charge is reduced to $2.95, and if $50 worth of calls are made in any month, the monthly charge is waived.

Credo charges $2.95 per month for their calling plan, and then all calls to England are $0.10/minute.

Let’s assume that quality of service is equal among the three providers and that cost is solely what Sydney is concerned with. Use break-even analysis to help Sydney determine which provider to use (which obviously depends on her planned volume of calls, which is unknown). You can use the POM-QM software and/or do the calculations yourself, but be thorough, and specify the best provider for all possible levels of volume.