Question
A bank is trying to determine which of two machines should be rented to process checks. Machine 1 rents for $10,000 per year and processes
A bank is trying to determine which of two machines should be rented to process checks. Machine 1 rents for $10,000 per year and processes 1,000 checks per hour. Machine 2 rents for $15,000 per year and processes 1,600 checks per hour. Assume that the machines work 8 hours a day, 5 days a week, 50 weeks a year. The bank must process an average of 800 checks per hour, and the average check processed is for $100. Assume an annual interest rate of 20%. Then determine the cost to the bank (in lost interest) for each hour that a check spends waiting for and undergoing processing. Assuming that interarrival times and service times are exponential, which machine should the bank rent?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started