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Columbia Pizza has one oven that can make a whole pie in about 10 minutes. Their late-night business among hungry college students is booming, and from 9 pm – 11 pm, they average 8 pie orders per hour. However, from 5 pm – 9 pm, they average only 5 pie orders per hour. Both order rates can be assumed arrive according to a Poisson distribution.
The owner of Columbia Pizza has discovered that if people have to wait for more than 20 minutes from when they get in the door to when they receive their pie, they are likely to simply go next door to University Falafel, meaning that Columbia Pizza would lose out on their $10 sale.
The owner is thinking of buying a second pizza oven and register (e.g. a second channel) that he thinks would cost $75 per night to operate (for the sake of our example, that is both the amortized cost of the oven and the pay of the person who is taking orders for the six hours that the pizza shop is open).
Based on your calculations, should Columbia Pizza buy the second oven?
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