The Lock Box Department at Bank 21 Handles the Processing

question 13

Multiple Choice

The lock box department at Bank 21 handles the processing of monthly loan payments to the bank, monthly and quarterly premium payments to a local insurance company, and bill payments for 85 of the bank's largest commercial customers. The payments are processed by machine operators, with one operator per machine. An operator can process one payment in 0.25 minute. Setup times are negligible in this situation. A capacity cushion of 20 percent is needed for the operation. The average monthly (not annual) volume of payments processed through the department currently is 400,000. However, it is expected to increase by 20 percent. The department operates eight hours per shift, two shifts per day, 260 days per year. How many machines (not operators) are needed to satisfy the new total processing volume? (Round up to the next whole integer.)

• A) fewer than 7
• B) 7
• C) 8
• D) more than 8

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Definitions:

AVC Curve

A graph that represents the average variable cost of producing each quantity of output, showing how these costs vary with changes in output levels.

Short-Run Situation

A period in which at least one of a firm's inputs is fixed, limiting its capacity to adjust output levels quickly.

Marginal Revenue

The increase in revenue a business gets from the sale of an extra unit of a product or service.

Marginal Cost

The incremental cost of producing an additional unit of a product or service.