Can she justify leasing new equipment on an economic basis

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Reference no: EM13251139

First Local Bank would like to improve customer service at its drive-in facility by reducing waiting and transaction times. On the basis of a pilot study, the bank's process manager estimates the average rate of customer arrivals at 30 per hour. All arriving cars line up in a single file and are served at one of four windows on a first-come/first-served basis. Each teller currently requires an average of 6 minutes to complete a transaction. The bank is considering the possibility of leasing high-speed information-retrieval and communication equipment that would cost $30 per hour. The new equipment would, however, serve the entire facility and reduce each teller's transaction processing time to an average of 4 minutes per customer. Assume that interarrival and activity times are exponentially distributed.

If our manager estimates the cost of a customer's waiting time in queue to be $20 per customer per hour, can she justify leasing the new equipment on an economic basis?

Although the waiting-cost figure of $20 per customer per hour appears questionable, a casual study of the competition indicates that a customer should be in and out of a drive-in facility within an average of 8 minutes. If First Local wants to meet this standard, should it lease the new high-speed equipment.

Reference no: EM13251139

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