K. J.

Somaiya Institute of Management

Program: MMS Trimester III

Subject: Operations Research

(End Term Examination)

Maximum Marks: 50 Date: 27th July, 2020

Duration: 3 hours
Notes:
1. You have to attempt 5 questions in all.
2. Make suitable assumptions if required and state them.
3. Write all relevant answers in your excel sheet.
4. Use Excel as required and keep saving the file every ten minutes or so.
5. Make only 1 Excel file with different worksheets pertaining to each question.
6. Name the file with your name, roll number and division.

1. 10 Marks
a. A toy manufacturer makes three versions of a toy robot. The first version requires 10
minutes for fabrication and packaging and 2 pounds of plastic, the second version
requires 12 minutes for fabrication and packaging and 3 pounds of plastic, and third
version requires 15 minutes for fabrication and packaging and 2 pounds of plastic.
There are 8 hours of fabrication and packaging time available and 200 pounds of plastic
available for the next production cycle. The unit profits are Rs. 1 for version 1, Rs. 5 for
version 2 and Rs. 6 for version 3. A minimum of 10 units of each version of robot must
be made to fill previous orders. Formulate and solve an LPP that will determine the
optimal production quantities for profit maximization.

b. The manager of a small firm is considering whether to produce a new product that
would require leasing some special equipment at a cost of Rs. 20,000 per month. In
addition to this leasing cost, a production cost of Rs. 10 would be incurred for each unit
of the product produced. Each unit sold would generate Rs. 20 in revenue.
i. Develop a mathematical expression for total cost.
ii. Develop a mathematical expression for total revenue.
iii. Develop a mathematical expression for total profit.
iv. Determine how large the number of units produced needs to be each month
to make it profitable to produce the product.
v.What profit or loss would result if 4,000 units of product are sold?

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2. 10 Marks

a. Solve the following LPP using Excel Solver.

Max 5x1 + 10x2

s.t.
2x1 + 4x2 ≥ 20
x1+2x2 ≥ 15
x1, x2 ≥ 0

b. The manager of Home office Supplies has prepared the following information on a
transshipment problem. Locations labeled as A, B and C are supply points; locations D
and E are intermediate transshipment nodes; and locations F, G and H are destinations.

Units Shipping Costs from Source to Units Shipping Costs from

Transshipment Points Transshipment Points to Destinations

To D E
To F G H
From
From
A 20 15
D 9 7 4
B 12 14
E 8 6 5
C 11 12

The source supplies and destination demands are shown in the following tables.

Source Supply Destination Demand

A 200 F 150
B 300 G 400
C 100 H 50

Solve the transshipment problem.

3. The manager of FGH, a small manufacturer of horseback riding accessories, has received a
staff report that contains an LP model. Solve the model using Excel Solver. Also
determine binding and non-binding constraints. Generate the sensitivity report and
answer any 5 parts:

x1 = Quantity of product F
x2 = Quantity of product G
x3 = Quantity of product H

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 Max 15x1 + 20x2+ 14x3 (Profit)
s.t.
5x1 + 6x2+ 4x3 ≤ 210 Pounds (A)
10x1 + 8x2+ 5x3 ≤ 200 Hours (B)
4x1 + 2x2+ 5x3 ≤ 170 Square Feet (C)
x1, x2, x3 ≥ 0

a. By how much would you increase the objective function value of x1 so that it takes non-
zero value in the optimal solution?
b. Determine the range of optimality for objective function coefficients of x1, x2 and x3.
c. If the objective function coefficient of x2 is increased to 22, what will be the new
optimal solution?
d. What is the range of feasibility of the 3rd constraint? Interpret.
e. If the manager could obtain additional pounds in constraint A, how much more could
be used effectively?
f. Interpret the dual prices of 1st and 2nd constraints.
g. If the RHS of 1st constraint is decreased to 200 and RHS of 2nd constraint is decreased
to180, will the dual price change? 10 Marks
4. 10 Marks
a. An industrial engineer has prepared a table that shows the costs (in Rs.) for each
possible combination of men and machines as shown:
Machine
A B C D
1 45 75 80 --
2 55 60 60 65
Men
3 70 65 50 45
4 60 75 70 65
5 55 70 95 55

Suppose that man 1 could not be assigned to machine D because of technical problems.
Determine the minimum-cost assignment for this problem. What is the total cost for the
optimal assignment? Which man is not assigned any machine?

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 b. The president of a small manufacturing firm is concerned about the continual increase
in manufacturing costs over the past several years. The following figures provide a time
series of the cost per unit (in $) for the firm’s leading product over the past eight years:

Year Cost/Unit ($) Year Cost/Unit ($)

1 20 5 26.6
2 24.5 6 30
3 28.2 7 31
4 27.5 8 36

i. Graph the time series. Does a linear trend appear?

ii. Develop the equation for the linear trend component for this time series.

iii. Use the trend equation to estimate the cost/unit for 9th year.

c. What is the average cost increase per year?

5. The Style and Comfort Furniture Manufacturing Company wishes to determine its
production schedule for the next quarter. The company produces four types of furniture,
including sofas, love seats, recliners, and coffee tables. The profit contribution from selling
one sofa is Rs. 120, one love seat is Rs. 105, one recliner is Rs. 150, and one coffee table is
Rs. 73. The quarterly production budget is set at Rs. 1,80,000. Each unit of a sofa, love
seat, recliner, and coffee table costs Rs. 400, Rs.300, Rs.500, and Rs. 150 respectively. The
sales forecasts indicate that the potential sales volume is limited to 200 units of sofas, 150
units of love seats, 100 units of recliners, and 400 units of coffee tables.

There are an aggregate of 800 machine hours available and 1,200 labor hours available.
Following table summarizes the number of machine hours and the number of labor hours
required per unit of each product.

Product Machine Hours/Unit Labor Hours/Unit

Sofa 2 2.5
Love Seat 1 2
Recliner 2.2 3
Coffee Table
[
0.75 1

The management also imposed the following policy constraints:

a) At least 40% of sofas should be produced out of total items being manufactured.

b) At least 25% recliners should be manufactured out of total items being produced.

c) There must be at least 30% love seats manufactured out of total items being produced.

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 Formulate and solvean LP model for this problem that will determine the optimal
quantities of sofas, love seats, recliners, and coffee tables to be manufactured in order to
maximize the profit. 10 Marks

6. 10 Marks
a. The Statewide Auto Insurance Company developed the following probability
distributionfor automobile collision claims paid during the past year:

Payment($
) 0 500 1,000 2,000 5,000 8,000 10,000
Probability 0.82 0.06 0.05 0.02 0.02 0.02 0.01

Using the following random numbers, simulate the paymentsfor 10 policyholders.

Random numbers: 61, 96, 30, 32, 03, 88, 48, 28, 88, 18.

How many claims are paid and what is the total amount paid tothe policyholders?

b. The Future Furniture Company recently began construction of a new warehouse. During
the construction period, several changes have occurred that require development of a new
distribution plan.
The current figures for supply are:
Plant Supply (Pieces per week)
East LA 600
West LA 800
El Toro 400
The current figures for demand are:

Warehouse Demand (Pieces per week)

Orange County #1 300
Orange County #2 400
Long Beach 200
Los Angeles 900

Shipping costs per unit (in $) are:

To Orange County Orange County Long Los
From #1 #2 Beach Angeles
East LA 8 -- 6 4
West LA 10 7 2 3
El Toro 5 7 9 12
Solve the transportation problem to determine the optimal shipping schedule that
minimizes the total cost.