Dr.

Mulugeta Kebede

ALPHA UNIVERSITY COLLEGE

MBA PROGRAM
Worksheet (Practice Questions) for the course Quantitative Analysis for Management
Decision
1. A bank is attempting to determine where its assets should be invested during the current year.
At present, $500,000 is available for investment in bonds, home loans, auto loans, and personal
loans. The annual rate of return on each type of investment is known to be: bonds, 10%; home
loans, 16%; auto loans, 13%; personal loans, 20%. To ensure that the bank’s portfolio is not
too risky, the bank’s investment manager has placed the following three restrictions on the
bank’s portfolio:
a. The amount invested in personal loans cannot exceed the amount invested in bonds.
b. The amount invested in home loans cannot exceed the amount invested in auto loans.
c. No more than 25% of the total amount invested may be in personal loans.
The bank’s objective is to maximize the annual return on its investment portfolio.
Formulate an LP model that will enable the bank to meet this goal.
2. A retail store stocks two types of shirts A and B. These are packed in attractive cardboard
boxes. During a week the store can sell a maximum of 400 shirts of type A and a maximum of
300 shirts of type B. The storage capacity, however, is limited to a maximum of 600 both types
combined. Type A shirt fetches a profit of $2 per unit and type B a profit of $5 per unit. How
many of each type the store should stock per week to maximize the total profit? (Use the
graphic approach to solve the Problem).
3. Supermarket store chain has hired an advertising firm to determine the types and amount of
advertising it should have for its stores. The three types of advertising available are radio and
television commercials, and newspaper advertisements. The retail chain desires to know the
number of each type of advertisement it should purchase in order to maximize exposure. It is
estimated that each ad or commercial will reach the following potential audience and cost the
following amount.
Exposure (people/ad or
Type of Advertisement Cost (birr)
commercial)
Television commercial 15,000 20,000
Radio commercial 12,000 6,000
Newspaper advertisement 9,000 4,000
The company must consider the following resource constraints.
1. The budget limit for advertising is Birr 100,000
2. The television station has time available for 4 commercials.
3. The radio station has time available for 10 commercials.
4. The newspaper has space available for 7 ads.
 Dr. Mulugeta Kebede

5. The advertising agency has time and staff available for producing no more than a total of
15 commercials and/or ads.

Required:
a. Formulate an LPP model for the problem.
b. Use the simplex algorithm to determine the number of each type of advertisement the
retail chain should purchase in order to maximize total exposure. Interpret the results.
4. ABC private limited company is engaged in the production of power and traction transformers.
Both of these categories of transformers pass through three basic processes: core preparation,
core to coil assembly, and vapor phase drying. A power transformer yields a contribution of
Birr 50,000 and traction transformer contributes Birr 10,000. The time required in the
production of these two products in terms of hours for each of the processes is as follows.
Power transformer Traction Transformer
Core preparation 75 15
Core to Coil Assembly 160 30
Vapor Phase Drying 45 10

If the capacities available are 1000, 1500, and 750 machine hours in each processes
respectively, formulate the problem as LP, and find the number of both types of products to be
produced in order to maximize the company’s profit.? [Solve the problem using both graphic
approach and the Simplex method].
5. A diet for a sick person must contain at least 4000units of vitamins, 50 units of minerals and
1400 calories. Two foods A and B are available at a cost of $4 and $3 per unit respectively. If
one unit of food A contains 200 units of vitamins, 1 unit of mineral and 40 calories, and one
unit of food B contains 100 units of vitamins, 2 units of minerals and 40 calories. Answer the
following questions based on the above information, given the objective is to serve the patient
with minimum possible cost.
a. Formulate a linear programming model for the problem.
b. Determine the combination of foods that needs to be used to serve the patient with least
cost? [Use the Simplex method to solve the problem].
c. Find the cost of the optimum solution and interpret the result.
6. Consider the following linear program to answer the questions that follow.
Minimize z = 2x1 + x2,
subject to:
-4x1 + 3x2 - x3 ≥ 16,
x1 + 6x2 + 3x3 ≥ 12,
x1, x2, x3 ≥ 0
a. Write the associated dual problem.
b. Solve the primal problem, using the dual simplex algorithm.
c. Utilizing the final tableau from part (b), find optimal values for the dual variables y1
and y2. What is the corresponding value of the dual objective function?
 Dr. Mulugeta Kebede

7. In a paper mill, the machines are being replaced. Two types of cardboard-cutting machines can
be purchased: machine A can cut 3 boxes per one minute, one person is needed to operate it,
and it costs 15,000 units of money; machine B machine can make 5 boxes per minute, but it
requires two people to supervise it, and it costs 20,000 units of money. The production plan is
to produce at least 32 boxes per minute with at most 12 workers involved. How many A and
B machines need to be purchased to fit the production plan with minimized costs?
a. Define the above “resource acquisition” problem as a linear programing model.
b. Find an initial basic solution.
c. Solve the linear program with the primal or the dual simplex algorithm.
8. The Hardrock Concrete Company has plants in three locations and is currently working on
three major construction projects, each located at a different site. The shipping cost per
truckload of concrete, daily plant capacities, and daily project requirements are given below.
To Plant
Project A Project B Project C
From capacities
Plant 1 $10 $4 $11 70
Plant 2 12 5 8 50
Plant 3 9 7 6 30
Project Requirements 40 50 60
a. Formulate the Hardrock Concrete Company transportation problem as a linear program
b. Find an initial feasible solution to the problem using NWC, LCM and VAM.