Question 1

Explain the fundamental components that the following linear programming model
formulated.
Maximize Z = 75X + 95Y
 This is called Objectives of the function (problem). The objective function represents the
aim or goal of the system (i.e., decision variables) which has to be determined from the
problem. Generally, the objective in most cases will be either to maximize resources or
profits or, to minimize the cost or time. In our cases, it indicates maximizing profits.
 Let’s say a factory is producing two types of products: Table (X 1) and Chair (X2). The
company aims to gain from each product is birr 75 and 95 respectively. So, the above
mathematical formula expresses the aim of the company; which is to profit from the two
products (Table and chair). But, the number of tables and chairs that a company produces
to gain the above profits is still unknown which is called a decision variable.
 In a production problem 75 and 95 typically represent unit profit or unit cost that the
company needs to achieve. In the conventional literature, these are known as “c”.
50X + 24Y < 2400
30X + 33Y < 2100
 This is called a constraint; To accomplish the desired objective it is necessary to put some
resources, viz, manpower, material, machine, or money in the process of production or
performance. But such resources may not be available in unlimited quantity, in all cases.
Some resources may be available to a limited extent and thus create constraints or
bottlenecks in the process of performance. So, the constraint that limits the performance
of our company express mathematical. So, the above formula indicates the constraints
that are a resource of the company that limits achieving desired objectives.
 The numbers 50 and 24 can be express the raw materials that need to produce a product
whereas the numbers 30 and 33 can refer to the labor hour that needed to produce a
specific product.
 In a production problem 50, 24, 30, 33 these typically represent the unit resource
requirement to produce a specific product. In the conventional literature, these are known
as the “a”s.
X,Y > 0
 This is called a non-negative decision. This function implies that the production or
performance of the variables in the issue will never be negative. It will be either zero or
greater than zero but never less than zero.

Question 2
A traditional garment at Shiro-Meda produces Ethiopian traditional costumes which include
Ethiopian coffee dress (X1), Netela (X2), and chiffon(X3) with the process for the three costumes
passing through spinning(S1), weaning (W), and Knitting (K). the garment works for about 257
days per annum as detailed in the following table.
X1 X2 X3 Available days
S 10 8 4 100
W 7 13 8 77
K 8 4 2 80
Profit 240 120 60

Required:
A. Formulate the primal (original) linear programming problem model.
240X1 + 120X2 + 60X3 ......................................Objective function
10X1 + 8X2 + 4X3 < 100
7X1 + 13X2 + 8X3 < 77 Constraint
8X1 + 4X2 + 2X3 < 80
X1, X2 , X3 > 0 ..................... non-negative decision

B. Solve the problem using the simplex model

Iteration-1 Cj 240 120 60 0 0 0

MinRatio
B CB XB x1 x2 x3 S1 S2 S3
XBx1

S1 0 100 10 8 4 1 0 0 10010=10

S2 0 77 7 13 8 0 1 0 777=11

S3 0 80 (8) 4 2 0 0 1 808=10→

Z=0 Zj 0 0 0 0 0 0
 Zj-Cj -240↑ -120 -60 0 0 0
Negative minimum Zj-Cj is -240 and its column index is 1. So, the entering variable is x1.
Minimum ratio is 10 and its row index is 3. So, the leaving basis variable is S3.
∴ The pivot element is 8.
Entering =x1, Departing =S3, Key Element =8

iteration-2 Cj 240 120 60 0 0 0

B CB XB x1 x2 x3 S1 S2 S3 MinRatio

S1 0 0 0 3 1.5 1 0 -1.25

S2 0 7 0 9.5 6.25 0 1 -0.875

x1 240 10 1 0.5 0.25 0 0 0.125

Z=2400 Zj 240 120 60 0 0 30

Zj-Cj 0 0 0 0 0 30

Since all Zj-Cj≥0

Hence, optimal solution is arrived with value of variables as : x1=10,x2=0,x3=0 Max Z=2400

Question 3
A. What simulation is? advantage and disadvantages of simulation?
Definition of simulation?
Simulation is a technique that describes a process by developing a model of that process and then
performing experiments on the model to predict the behavior of the process over time.
Simulation is a technique of problem-solving based upon experimentation performed on a model
of a real-world situation. it is a numerical technique for conducting experiments on a digital
computer, which involves certain types of mathematical and logical relationships necessary to
describe the behavior and structure of a complex, real-world system over an extended period.

When simulation should be used?

 Actual observation of a system may be too expensive.
 The problem is too big or intricate to handle with linear, dynamic, and standard
probabilistic models.
 The standard sensitivity analysis is too clumsy and computationally burdensome for
observing the actual environment.
  It is not possible to develop a mathematical model. Even though a mathematical model
can be formulated, a straightforward analytical solution may not be available.
 It is not possible to perform validating experiments on mathematical models describing
the system.
 There may not be sufficient time to allow the system to operate extensively.

Advantage of simulation
 Simulation allows you to explore ‘what if’ questions and scenarios without having to
experiment with the system itself.
 It helps you to identify bottlenecks in material, information, and product flow.
 It helps you to gain insight into which variables are most important to system
performance.

Disadvantage of simulation
 The quality of the analysis depends on the quality of the model and the skills of the
modeler, who requires specialized training.
 It’s a time-consuming and expensive process, so should not be used if an analytical
method can provide quicker results.

B. What is Monet Caro simulation? Explain using an illustrative example

Definition:

Monte Carlo simulations are used to model the probability of different outcomes in a process that
cannot easily be predicted due to the intervention of random variables. It is a technique used to
understand the impact of risk and uncertainty in prediction and forecasting models. it is a
simulation that can be used to tackle a range of problems in virtually every field such as finance,
engineering, supply chain, and science. It is also referred to as a multiple probability simulation.

The Monte-Carlo simulation method uses random numbers for generating some data by which a
problem can be solved. These random numbers help create a new set of hypothetical data for a
problem whose behavior is known from past experience. The random numbers are generated
either on a computer or are picked up from a table. Most computers employ what is known as
pseudorandomness. This means that the numbers are generated by a series of specific operations.
Each number is generated by performing these operations on the previous number. After picking
a random number, its value is compared with the cumulative probability distribution, and the
value of process parameters is obtained.

Simulation example
The Shoa Bakery Shop keeps stock of a popular brand of cake. Previous experience indicates the
daily demand as given below:
Daily demand Probability
0 0.01
15 0.15
25 0.20
35 0.50
45 0.12
50 0.02
Consider the following sequence of random numbers: 21, 27, 47, 54, 60, 39, 43, 91, 25, 20
Using this sequence, simulate the demand for the next 10 days. Find out the stock situation, if the
owner of the bakery shop decides to make 30 cakes every day. Also, estimate the daily average
demand for the cakes on the basis of simulated data.

Solution: Using the daily demand distribution, we obtain a probability distribution as shown in
the following table.

Table 1

Daily demand Probability Cumulative Random Numbers

probability
0 0.01 0.01 0
15 0.15 0.16 1-15
25 0.20 0.36 16-35
35 0.50 0.86 36-85
45 0.12 0.98 86-97
50 0.02 1.00 98-99

At the start of the simulation, the first random number 21 generates a demand of 25 cakes as
shown in table 2. The demand is determined from the cumulative probability values in table 1. At
the end of first day, the closing quantity is 5 (30-25) cakes.Similarly, we can calculate the next
demand for others.

Table 2

Demand Random Numbers Next demand Daily production = 30 cakes

Left out Shortage
1 21 25 5  
2 27 25 10  
3 47 35 5  
4 54 35 0  
5 60 35   5
6 39 35   10
7 43 35   15
8 91 45   30
9 25 25   25
10 20 25   20
Total   320   10

Total demand = 320

Average demand = Total demand/no. of days
The daily average demand for the cakes = 320/10 = 32 cakes.

C. what is Markov Caro simulation? Explain using an illustrative example?

Definition

A Markov model is a Stochastic method for randomly changing systems where it is assumed that
future states do not depend on past states. These models show all possible states as well as the
transitions, rate of transitions, and probabilities between them. It is often used to model the
probabilities of different states and the rates of transitions among them. The method is generally
used to model systems. Markov models can also be used to recognize patterns, make predictions
and learn the statistics of sequential data.
There are four types of Markov models that are used situationally:

 Markov chain - used by systems that are autonomous and have fully observable states
 Hidden Markov model - used by systems that are autonomous where the state is partially
observable.
 Markov decision processes - used by controlled systems with a fully observable state.
 Partially observable Markov decision processes - used by controlled systems where the
state is partially observable.

Markov models can be expressed in equations or in graphical models. Graphic Markov models
typically use circles (each containing states) and directional arrows to indicate possible
transitional changes between them. The directional arrows are labeled with the rate or the
variable one for the rate. Applications of Markov modeling include modeling languages, natural
language processing (NLP), image processing, bioinformatics, speech recognition, and modeling
computer hardware and software systems. Markov models are named after their creator, Andrey
Markov, a Russian mathematician in the late 1800s to early 1900s.

Problem: Consider the Markov chain with three states S= {1,2,3}, that has the following matrix.

P=
½¼½
1/3 0 2/3
½½0
a. Draw the state transition diagram for this chain
b. If we know P(Xi = 1) = P (X2 =2) = 1/4, find P (X1 = 3 , X2 = 2, X3 = 1).
Solution
a. The state transition diagram is shown below
 b. First, we obtain
P (X1 = 3) = 1 – P (X1 =1) – P(X1 = 2)
= 1 – 1/4 - 1/4
= 1/2
We can now write
P(x1 = 3, X2 = 2, X3 =1) = P (X1 = 3). P32.P21
= 1/2 . 1/2 . 1/3
= 1/12

D. What is the difference between Monte Caro simulation and Markov chain simulation?
Monte Caro simulation advantage and disadvantage

Advantages:

 The Monte Carlo technique is best suited to analyze complex and large practical
problems when it is not possible to solve them through a mathematical method.
 It is flexible, hence changes in the system variables can be made to select the best
solution among the various alternatives.
 In the Monte Carlo simulation, the experiments are carried out with the model without
disturbing the system.
 In this technique, the policy decisions can be made much faster by knowing the options
well in advance and by reducing the risk of experimenting in the real system.

Disadvantages:

 The simulation does not generate optimal solutions.

 This technique can take a long time to develop a good simulation model.
 In some cases, the models based on this technique can be very expensive.
  This technique requires the decision-maker that provides all information (depending on
the model) about the constraints and conditions for examination, as simulation does not
give the answers by itself.

Markov Chain Simulation advantage and disadvantage

Advantages:

 Markov analysis has the advantage of being an analytical method which means that the
reliability parameters for the system are calculated in effect by a formula. 
 This has considerable advantages of speed and accuracy when producing results. 
 Speed is especially useful when investigating many alternative variations of design or
exploring a range of sensitivities. In contrast, accuracy is vitally important when
investigating small design changes or when the reliability or availability of high integrity
systems is being quantified. 
 Markov analysis has a clear advantage over MCS in respect of speed and accuracy since
MCS requires longer simulation runs to achieve higher accuracy and, unlike Markov
analysis, does not produce an “exact” answer.

Disadvantages:

 As in the case of applying MCS, Markov analysis requires great care during the model
building phase since model accuracy is all-important in obtaining valid results. 
 The assumptions implicit in Markov models that are associated with mercilessness and
the Exponential distribution to represent times to failure and repair provide additional
constraints to those within MCS. 
 Markov models can, therefore, become somewhat contrived if these implicit assumptions
do not reflect sufficiently well the characteristics of a system and how it functions in
practice. 

In order to gain the benefits of speed and accuracy that it can offer, Markov analysis depends to a
greater extent on the experience and judgment of the modeler than MCS. Also, whilst MCS is a
safer and more flexible approach, it does not always offer the speed and accuracy that may be
required in particular system studies.