Management Development Institute

Management Science Models

PGPM(2020-22) : Term II : End-term Examination
Faculty : Joydip Mitra Examination Date : Jan 07, 2021
Maximum Marks: 40 Maximum Duration: 120 minutes
Weightage: 40% of total term evaluation
Instructions:
1. All four questions in this one-page paper are compulsory & carry equal marks.
2. You may use -- Books, Notes, Laptop.
3. Do not attach Excel sheet.

Questions:

1. Sumit is in jail and requires $6 for his bail. He has $3 and plays a betting
game with the following rules: in each round (i) every round he bets $1, (ii) he
has a 75% chance of winning in each round, and, (iii) the game ends as soon as
he reaches $6 or becomes broke. (a) Define states so that the above becomes
a Markov Chain, and write the transition probability matrix. (b) What is the
probability that Sumit gets bail?
[5+5]
2. An insurance company offers a “no-claim discount” of 10% for each claim-
free year, up to a maximum of 30%. A customer initially has no discount.
For each claim-free year, next year the customer either moves to the next
higher discount level (if there is any higher level), or remains at the present
discount level (if recent discount is maximum). If the customer makes a claim
this year, then next year the customer will have 0% discount. Suppose that
the probability of any customer making a claim in any year is 0.1, and this
probability is independent of what happens in other years. (a) Establish the
composition of customer profile in the long run. (b) What is the overall per-
customer discount level in the long run? (c) What is the probability that a
customer will have 0% discount after 17 years of buying insurance?
[4+2+4]
3. Express each of the following cases as constraint(s) in LPP: (decision variables
in capital letters)
(a) Either X ≤ a or X ≥ b (0 < a < b), X ≥ 0.
(b) Either X ≤ −a or X ≥ b (a, b > 0).
(c) Exactly one of “X ≥ a” and, “Y ≥ b” is true (a, b > 0). [2+2+6]

4. The Pacific Paper Company produces paper rolls in standard width of 15 feet
each. Specific customer orders of different widths are met by slitting these
standard rolls to the desired width. A customer has ordered for 100 rolls of 6
feet width, 200 rolls of 7 feet width and 300 rolls of 8 feet width. Whenever the
standard 15 feet wide rolls are slit to various widths ordered by customers, the
operation produces trim losses of various widths and extra rolls. The company
wants to supply these rolls at minimum trim loss. How many standard rolls
should be slit and in what manner?