Two machines to rent for check processing

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Reference no: EM131106056

A bank is trying to determine which of two machines to rent for check processing. Machine 1 rents for $10,000 per year and processes 1000 checks per hour. Machine 2 rents for $15,000 per year and processes 1600 checks per hour. Assume that machines work eight hours a day, five 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 exponentially distributed, which machine should the bank rent?

Reference no: EM131106056

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