Columbia Pizza and make a pizza in 10 minutes with the one oven that they have. Their late-night business among hungry college students is booming, and they average 5 pizza orders/hour from 9 PM – 11 PM. Between 5 PM and 9 PM, they average 3 pizza orders/hour. Both order rates can be assumed arrive according to a Poisson distribution.
The owner of Columbia Pizza has discovered that if customers have to wait for more than 20 minutes from when they enter the shop to when they receive their pizza, they are likely to go next door to University Falafel, meaning that Columbia Pizza loses a $20 sale.
The owner is thinking of buying a second oven and register (e.g. a second channel). He has analyzed that it the total cost of operation (the amortized cost of the oven and the salary of the staff) would be $75 per night.
