QM350: Operations Research

Take Home Exam

Submission Deadline 31 May 2015
11 June 2015 - Time: 2 Hours

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Problem 1
A payoff table is given as
State of Nature
Decision s1 s2 s3
d1 250 750 500
d2 300 -250 1200
d3 500 500 600

a. What choice should be made by the optimistic decision maker?

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b. What choice should be made by the conservative decision maker?

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c. What decision should be made under minimax regret?

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d. If the probabilities of d1, d2, and d3 are .2, .5, and .3, respectively, then what choice should be made
under expected value?

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e. What is the EVPI?

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Problem 2
Use graphical sensitivity analysis to determine the range of values of the probability of state of nature s1
over which each of the decision alternatives has its largest expected value.

State of Nature
Decision s1 s2
d1 8 10
d2 4 16
d3 10 0

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Problem 3
Fold back the decision tree and state what strategy should be followed.

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Problem 4
The number of new contributors to a public radio station's annual fund drive over the last ten years is
63, 58, 61, 72, 98, 103, 121, 147, 163, 198
Develop a trend equation for this information is T = 24 + 15.345 t
Use the trend equation to predict next year's number of new contributors and calculate the Mean
Squared Error

Time Period Actual Value Forecast Forecast Error

1 63

2 58

3 61

4 72

5 98

6 103

7 121

8 147

9 163

10 198

THE MEAN SQUARE ERROR ………………………

THE FORECAST FOR PERIOD 11 ……………………………

Problem 5
A customer comment phone line is staffed from 8:00 a.m. to 4:30 p.m. five days a week. Records are
available that show the number of calls received every day for the last five weeks.

Week Day Number Week Day Number

1 M 28 4 M 35
T 12 T 17
W 16 W 16
TH 15 TH 20
F 23 F 29
2 M 29 5 M 37
T 10 T 19
W 14 W 18
TH 14 TH 21
F 26 F 28
3 M 32
T 15
W 15
TH 18
F 27

a. Use this information to calculate a seasonal index.

Centered Moving
Week Day Number Seasonal-Irregular
average
1 M 28

T 12

W 16

TH 15
F 23

2 M 29
T 10

W 14
TH 14

F 26

3 M 32
T 15

W 15
TH 18
 F 27

4 M 35

T 17
W 16

TH 20
F 29

5 M 37

T 19

W 18

TH 21

F 28

Days Average Seasonal Index Adjusted Seasonal Index

M

TH
F

b. The trend line of the deseasonalized data is 16.918 + .347(t). Forecast the calls for week 6.

THE FORECAST FOR PERIOD 26 M

THE FORECAST FOR PERIOD 27 T

THE FORECAST FOR PERIOD 28 W

THE FORECAST FOR PERIOD 29 TH

THE FORECAST FOR PERIOD 30 F

Problem 6
Over a five-year period, the quarterly change in the price per share of common stock for a major oil
company ranged from –8% to _12%. A financial analyst wants to learn what can be expected for price
appreciation of this stock over the next two years. Using the five-year history as a basis, the analyst is
willing to assume the change in price for each quarter is uniformly distributed between –8% and 12%.
Use simulation to provide information about the price per share for the stock over the coming two-year
period (eight quarters).
a. Use the following random numbers to simulate the quarterly price change for each of the eight
quarters:
.52, .99, .12, .15, .50, .77, .40, .52

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b. If the current price per share is $80, what is the simulated price per share at the end of the two-year
period?

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Problem 8
A small garage only has one self-service petrol pump. As a consequence, cars arriving at the garage
frequently have to queue. Due to customer complaints the owner of the garage decides to investigate
the characteristics of the queue in terms of average queue length and the average time customers have
to wait. The owner should be able to obtain probability distributions on car arrivals and the time taken
for customers to fill their cars. Two sample tables are given below:

Arrival table
Time Between
Probability
Arrivals (min)
1 0.4
2 0.5
3 0.1

Service table
Time to fill car with
Probability
petrol (min)
3 0.5
4 0.3
5 0.2

Simulation was used and random numbers were generated as shown in the following simulation table:

Time in
Arrival Inter- Service Service Start of End of Waiting
Car Arrival the
Random arrival Random Time the the Time
No. Time system
Number Time (min) Number (min) service service (min)
(min)
1 0.2 0.4
2 0.6 0.7

3 0.95 0.1

a. Define the random number ranges for the arrival and service probability tables.

Arrival table

Time Between Arriving (mins) Probability Random Number Range

1 0.4

2 0.5

3 0.1
 Service table
Time to fill car with petrol (mins) Probability Random Number Range

3 0.5

4 0.3
5 0.2

b. Complete the simulation table above.

c. Compute the average waiting time.

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d. Determine the average time spent in the system.

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