1

Chapter 1 DECISION MODELS

Topics: 1. Introduction to Decision Models & Decision variables. 2. Types of Decision Models 3. Steps involved in Decision Modeling 4. Possible Problems in developing Decision Models 5. Need for Problem formulation 6. Application and Scope of Decision Models 7. Advantages of Decision Models. Topic 1: DECISION MODELS Decision Model is a scientific approach to decision Making. It is also referred to as Quantitative analysis or Management science or Operations research. IMPORTANCE OF DECISION MODELS Decision Models can be used to (a) Solve complex problems. (b) Provide analytical framework for evaluating modern business problems. (c) Provide techniques applicable in many areas such as (i) Accounting, Economics and Finanace (ii) Logistics, Management and Marketing (iii) Production, Operations and Transportation DECISION VARIABLES Decision variable is a variable that determines the problem.

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QUANTITATIVE DATA Quantitative Data is the numeric values that indicate how much or how many. Example: Rate of return, Financial ratios, Cash flows etc. QUALITATIVE DATA Qualitative Data is the labels or names used to identify an attribute. Example: Pending state or federal legislation, New technological breakthrough

Topic 2:
TYPES OF DECISION MODELS Decision Models can be classified into two as follows  Deterministic Models  Probabilistic Models
1. DETERMINISTIC MODELS

If all the information needed is known with certainty then, the Model is called Deterministic Model. The Most commonly used Deterministic Modeling Technique is Linear Programming.

2. PROBABILISTIC MODELS If some of the data or information is not known with certainty then, the Model is called Probabilistic Model. It is also called as Stochastic Models.

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Topic 3: STEPS INVOLVED IN DECISION MODELING 1.Formulation Acquiring Input Data

Defining the Problem Developing a Model 2.Solution

Developing a Solution Testing the Solution Analyzing the Results

3.Interpretation Fig.1 STEPS INVOLVED IN DECISION MODELING Implementing the Results In Decision Modeling, the following are the basic steps involved: 1. Formulation 2. Solution 3. Interpretation

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Step 1: Formulation

Defining the Problem Define the Problem by developing clear and concise problem statement Developing a Model Select and develop a decision model with appropriate decision variables. Also develop relevant mathematical relation for consideration and evaluation. Acquiring Input Data Collect accurate data for use in model. Some of the possible sources of data are y y y Official company reports Accounting, operating and financial information Views and opinions form knowledgeable individuals.

Step 2: Solution

Developing a Solution It involves manipulating model to arrive at best (optimal) solution. That is, developing solution for set of mathematical expressions by alternative trial and error iterations. Testing the Solution It involves testing of obtained solution by examining and evaluating data utilized in model.

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Step 3: Interpretation

Analyzing the Results Vary data input values and examine differences in various optimal solutions. Make changes in model parameters and examine differences in various optimal solutions. Implementing the Results Optimal solution must be implemented carefully. Solution implementation usually requires making changes within the organization. Recommendations often require changes in data, data handling, resource mixes, systems procedures, policies and personnel. But Managers and others may resist recommended solutions.

Topic 4

POSSIBLE PROBLEMS IN DEVELOPING DECISION MODELS

y y y y y y y y

Defining problem Conflicting view points Impact on other Departments Beginning Assumptions Solution Outdated Developing a Model Fitting Textbook Models Understanding Model

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y y y y y y y y Acquiring Input Data Using Accounting Data Validity of Data Developing a solution Hard to understand Mathematics Only one Answer is limited Testing solution Analyzing Results

Topic 5 Need for Problem formulation

Topic 6 Application and Scope of Decision Models

Topic 7 Advantages of Decision Models.

UNIT 2 LINEAR PROGRAMMING

1. GRAPHICAL METHOD 2. SIMPLEX METHOD 3. BIG M METHOD 4. SENSITIVITY ANALYSIS Theory Questions: 1. Essentials Of Linear Programming Model 2. Steps involved in the Formulation Of Linear Programming 3. Applications of Linear Programming in Management.

PROBLEMS Topic 1. Graphical Method

7\SH: 1. Maximize z ! 5 x1  3 x 2 subject to

5 x1  2 x2 e 10, x1 , x2 u 0 (Solution : Maximum z ! 12 .7 , x1 ! 1.1 , x 2 ! 2.4 ) 2. Maximize z ! 7 x1  3 x 2 subject to x1  2 x 2 e 3 3 5 , x1  x 2 e 4 , 0 e x1 e , 0 e x 2 e . 2 2 (Solution : maximum z ! 18 .4 , x1 = , x 2 = ) 3. Minimize z !  x1  2x 2 subject to  x1  3 x 2 e 10 , x1  x 2 e 6 , x1  x 2 e 2 , x1 , x 2 u 0 (solution : Minimum z= -2 , x1 ! 2 , x 2 ! 0 ).

3 x1  5 x2 e 15,

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4. Maximize z ! 2 x  3 y subject to

x  y e 30 , x  y e 0 , y u 3 , 0 e x e 20 , 0 e y e 12
5. Maximize z ! 5 x1  7 x 2 subject to

x1  x 2 e 4, 3x 1  8 x 2 e 24, 10x 1  7 x 2 e 35, x1 , x2 u 0 .(Solution: Maximum z=24.8, x1 =1.6, x2 =2.4). 6. Maximize z ! 2 x1  10 x 2 subject to 2 x1  5 x 2 e 16 , 6 x1 e 30 x1 , x2 u 0 (Solution : Maximum z=32, x1 =0, x2 =3.2)
7. Solve the following LPP Graphically: Maximize z ! 5 x1  3 x 2 subject to the constraints 4 x1  5 x 2 e 1000 , 5 x1  2 x 2 e 1000

x1 , x2 u 0 . (Solution: Maximum z=1000 , x1 =200 , x2 =0)

Type 2 : Unbounded Solution 8. Find the Maximum value of z ! 6 x1  x 2 subject to 2 x1  x 2 u 3 , x1  x 2 u 0 , x1 ,

3 x1  8 x 2 e 1200 ,

x2 u 0 .
9. Solve by Graphical Method Maximize z ! 3 x1  2 x 2 subject to x1  x 2 e 1 ,

x1  x 2 u 3 , x1 , x2 u 0 . Type 3 : No Solution
10.Solve by Graphical Method Maximize z ! x1  x 2 subject to x1  x 2 e 1 ,

 3 x1  x 2 u 3 , x1 , x2 u 0 . 11.Solve Graphically the following LPP :

Maximize z ! x1 

1 x 2 subject to 2 3 x1  2 x 2 e 12 , 5 x1 e 10 , x1  x 2 u 8 ,  x1  x 2 u 4 , x1 , x2 u 0 .

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Type 4: Formulation of LPP: 12.A person wants to decide the constituents of a diet which will fulfill his daily requirements of proteins (Pro), fat and carbohydrates (carbo) at the minimum cost. The choice is to be made from your different types of foods. The yields per unit of these foods are given in the following table: Yield per unit Food Type Pro Fats Cost Carbo / unit 6 4 7 4 45 40 85 65

1 2 3 4 Minimum Requireme nt

3 4 8 6

2 2 7 5

800

200

700

Formulate the problem as a LPP and solve by graphical method. 4. A firm manufactures headache pills in two sizes A and B. Size A contains 2 grains of Aspirin, 5 grains of Bicarbonate and 1 grain of Codeine. Size B contains 1 grain of Aspirin, 8 grains of Bicarbonate and 6 grain of Codeine. It is found by users that it

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requires at least 12 grains of Aspirin, 74 grains of Bicarbonate and 24 grains of Codeine for providing immediate effect. It is required to determine the least number of pills to cure Headache. Formulate the problem

as a LPP method.

and

solve

by

graphical

5. A T.V. company operates two assembly sections Section A, Section B. Each section is used to assemble the components of three types of T.V.colour, standard, Economy. The expected daily production is TV Model Section A Section B Colour 3 1 Standard 1 1 Economy 2 6 The daily running costs for two sections average Rs.6000 for section A and Rs.4000 for Section B.It is given that company must produce atleast 24 colours, 16 standard and 40 economy TV sets. Formulate this as an LPP. 6. A company makes two types of leather products A & B. Product A is of high quality & Product B is of low quality. The respective profits are Rs. 4 and Rs.3 per product. Each product A requires twice as much time as product B and if all products were of type B, the company could make 1000 per day (Both A and B Combined). Product A requires a special spare part and only

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400 per day are available. There are only 700 special spare parts a day available for product B. Formulate this as an LPP.

TOPIC 2. SIMPLEX METHOD

Type 1 : Maximization Problem 7. Solve by Simplex method : Maximize z ! 10 x1  x 2  2 x3 subject to

x1  x 2  2 x3 e 10 , 4 x1  x 2  x 3 e 20 , (Solution : Maximum x1 , x2 , x 3 u 0 . z = 50 , x1 =5 , x2 =0, x 3 =0)

8. Solve by simplex method : Maximize z ! 5 x1  3 x 2 subject to

x1  x 2 e 2 , 5 x1  2 x 2 e 10 , 3 x1  2 x 2 e 12 , x1 u 0 , x2 u 0 . (Solution : Maximum z=10 x1 =2 x2 =0 ).

9. Solve by simplex method : Maximize z ! 3 x1  5 x 2 subject to 3 x1  2 x 2 e 18 ,

0 e x1 e 4 , 0 e x1 e 6 (Solution : Maximum z=36 , x1 =2 , x2 =6 ).

10. Solve by simplex method : Maximize z ! 10 x1  x 2  2 x3 subject to

x1  x 2  2 x3 e 10 , 4 x1  x 2  x 3 e 20 , x1 , x2 , x 3 u 0 . (Solution : Maximum z=50 ,

x1 =5 , x2 =0, x 3 =0 )
11. Use simplex method to solve the following LPP : Maximize z ! 4 x1  10 x 2 subject to 2 x1  x 2 e 50 , 2 x1  5 x 2 e 100 ,

2 x1  3 x 2 e 90 , x1 , x2 u 0 .

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12. Solve the following LPP by simplex method: Maximize z ! 3 x1  2 x 2  5 x3 subject to x1  4 x 2 e 420 ,

3 x1  2 x3 e 460 ,

x1  2 x 2  x 3 e 30 , x1 , x2 , x 3 u 0 .

(Solution : Maximum z=1180 , x1 =0, x2 =15, x 3 =230) 13. A company during the festival season, combines two items A and B to form gift packs. Each pack must weight 5 kg and should contain atleast 2 kg of A and not more than 4 kg of B. The net contribution to the company is Rs. 10 per kg of A and Rs. 12 per kg of B. The company wants to determine the optimum __. Formulate the above as LPP to Maximize net contribution per pack and solve the same by simplex method. Type 2 Minimization problem 14. Solve the following LPP by simplex method: Minimize z !  x1  2x 2 subject to

 x1  2 x 2 e 8 , x1  2 x 2 e 12 , x1  2 x 2 e 3 , x1 , x2 u 0 .
Type 3 Unbounded solution 15. Solve by simplex method: Maximize z ! 107 x1  x 2  2 x 3 subject to

14 x1  x 2  6 x3  3x 4 ! 7 , 16 x1  x 2  6 x3 e 5 , 3 x1  x 2  x3 e 0 ,
x1 , x2 , x3 , x4 u 0 .
Type 4

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16. Maxi z ! 8 x1  4 x 2 subject to

4 x1  5 x 2 e 20 ,  x1  3 x 2 u 23 , x1 u 0 , x2 unrestricted in sign.

(Hint: Take the unrestricted variable x2 = x3-x4, where x3 u 0 and x4 u 0 . Replace x2 by x3-x4 in all the inequalities given in the problem. Then apply the simplex procedure )

Topic 3. BigM

Method

1. The solution is optimum basic feasible if in the final iteration table, the Artificial variables does not exist or exist with zero value.

2. The solution is not feasible if in the final iteration table, the Artificial variables exist with positive values

Type 1 Maximization Problem

17. Maximize z ! 3 x1  2 x 2  3 x3 ,

Subject to

2 x1  x 2  x3 e 2 , 3 x1  4 x 2  2 x3 u 8 , x1 , x2
, x3 u 0 . 18. Solve by Big M Method: Maximize z ! 2 x1  3 x 2 subject to x1  2 x 2 e 4 ,

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x1  x 2 ! 3 , x1 , x2 u 0 . (Solution: Maximum z=7, x1 =2, x2 =1).
19. Solve by Big M Method: Maximize z ! 3 x1  x 2 subject to 2 x1  x 2 u 2 ,

x1 , x2 u 0 . (Solution : Maximum z=9 , x1 =3, x2 =0)

20. Use Penalty (or Big M) Method to solve the LPP: Maximize z ! 6 x1  4 x 2 subject to

x1  3 x 2 e 3 , x2 e 4 ,

2 x1  3 x 2 e 30 , 3 x1  2 x 2 e 24 , x1  x 2 u 3 , x1 , x2 u 0 .
(Hint: Alternate solution exist ) 21. Solve the following LPP using Big M Method : Maximize z ! 3 x1  2 x 2 subject to

2 x1  x 2 e 2 , 3 x1  4 x 2 u 12
. Type 2 Minimization Problem

, x1 u 0 , x2 u 0

22. Solve : Minimize z ! 4 x1  3 x 2 subject to the constraints

2 x1  x 2 u 10 , 3 x1  2 x 2 e 6 , x1  x 2 e 6 , x1 , x2 u 0 .

23. Solve by Big M Method: Minimize z ! 12 x1  20 x 2 subject to the constraints

6 x1  8 x 2 u 100 , 7 x1  12 x 2 u 120 , , x2 u 0 .

x1

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UNIT 4 1.Sequencing
Topic 1: Sequencing of n jobs and 2 machines Topic 2: Sequencing of n jobs and 3 machines Topic 3: Sequencing of n jobs and m machines

Problems: Topic 1: Sequencing of n jobs and 2 machines [Johns Algorithm]

Type 1: 1. The time required (in minutes) by each of the six persons in a company plan is given below: Position P1 P2 P3 P4 P5 Aptitude Test 140 180 150 200 170 Job Interview 70 120 110 80 100 In order to minimize the waiting time of management personnel, in what order the position filling be handled? P6 100 90 the

2. We have five jobs each of which must go through the two machines A and B in the order BA. Processing times in hours are given below in the table: Job Machine Machine A Machine B 1 5 2 2 1 6 3 9 7 4 3 8 5 10 4

Determine a sequence for five jobs that will minimize the elapsed time.

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Type 2: 3. Find the optimum sequence of jobs: JOB J1 J2 J3 J4 J5 J6 Machine A 1 3 8 5 6 3 Machine B 5 6 3 2 2 10

4. A book binder has one printing press, one binding machine, manuscripts of a number of different books. The time required to perform the printing and binding operations for each book are shown below. Determine the order in which books should be processed in order to minimize the total time required to turn out all the books Book 1 2 3 4 5 6 Printing Time(Hrs) 30 120 50 20 90 110 Binding Time (Hrs) 80 100 90 60 30 10 5. Determine the order in which the books should be processed in order to minimize the total time required to process all the books Book 1 2 3 4 5 Printing Time(Hrs) 40 90 80 60 50 Binding Time (Hrs) 50 60 20 30 40 6. A readymade garments manufacturer has to process 7 items through two stages of production cutting and sewing. The time taken for each of these items at different stages are given below Item 1 2 3 4 5 6 7 Cutting Time(Hrs) 5 7 3 4 6 7 12 Sewing Time (Hrs) 2 6 7 5 9 5 8 Find the order in which these items are to be processed through these stages so as to minimize the total processing time.

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Topic 2: Sequencing of n jobs and 3 machines
Condition for conversion of 3 machines A,B,C to 2 machines problem P=A+B,Q=B+C is Minimum time on A u Maximum time on B Minimum time on C u Maximum time on B (or)

7. Find the sequence that minimizes total time required in performing the following jobs on three machines in the order ABC Job 1 2 3 4 5 6 Machine A 8 3 7 2 5 1 Machine B 3 4 5 2 1 6 Machine C 8 7 6 9 10 9 8. Determine the optimum sequence of jobs that minimizes the total elapsed time based on the following information, processing time on machines is given in hours and passing is not allowed. Job Machine M1 Machine M2 Machine M3 A 3 4 6 B 8 3 7 C 7 2 5 D 4 5 11 E 9 1 5 F 8 4 6 G 7 3 12

9. A firm works 40 hours a week and has a capacity of overtime work to the extent of 20 hours in a week. It has received seven orders to be processed on three machines A, B and C in the order CAB to be delivered in a weeks time from now. The process time in hours are recorded in the following table: Job 1 2 3 4 5 6 7 Machine A 7 8 6 6 7 8 5 Machine B 2 2 1 3 3 2 4 Machine C 6 5 4 4 2 1 5 Find the optimum sequence of jobs.

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Topic 3: Sequencing of n jobs and m machines

Condition for conversion of m machines to 2 machines problem P=M1+M2++Mm-1,Q= M2+M3++Mm is Minimum time on M1 u Maximum time on each Machines M2,M3Mm-1
(or)Minimum

time on Mm u Maximum time on each machines M2,M3Mm-1

10. Solve the following sequencing problem when passing is not allowed Machine A B C D E Item I 9 7 4 5 11 II 8 8 6 7 12 III 7 6 7 8 10 IV 10 5 5 4 8

11.

Solve the following Sequencing problem Job Machine M1 M2 M3 M4 A 10 3 5 14 B 12 2 6 7 C 8 4 4 12 D 15 1 7 8 E 16 5 3 10

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UNIT 4 2.NETWORK MODELS

Topics: Topic 1: CPM (Critical Path Method) Topic 2: PERT (Programme Evaluation and Review Technique) Topic 3: Project Crashing Theory Questions: 1. 2. 3. 4. Applications of Network Models. Rules in Constructing a network diagram. Discuss the types of float or slack. Discuss the various time estimates in PERT analysis.

TOPIC 1: CPM (Critical Path Method)

CRITICAL PATH: If total float of an activity is zero, then that activity is called critical activity. All the critical activities of a network form critical path. Notation: - Earliest Start time (EST) - Latest Finish Time (LFT) FLOAT: 1.Total float=Latest Start TimeEarliest Start Time
2.Free Float=Total float-Head Slack (ie) Free Float=Total Float-( )of end node

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3.Independent Float=Free Float-Tail Slack (ie) Independent float=Free Float-( )of start Node 4.Interference float=Total float-Free float

Problems in CPM: i) The following table gives the activities in a construction project and time duration in hours: Activity Duration 1-2 4 1-3 1 2-4 1 3-4 1 3-5 6 4-9 5 5-6 4

Activity 5-7 6-8 7-8 8-10 9-10 Duration 8 1 2 5 7 Find the Critical Path and calculate Total float, Free float and Independent float. ii) The following table gives the activities in a construction project and time duration in hours: 1 1 1 2 3 3 4 5 6 2 3 4 6 7 5 5 9 8 Duratio 2 2 1 4 5 8 3 5 1 n Find the Critical Path and calculate float, Free float and Independent float.
Activit y

7 8 8 9 4 3 Total

iii) Draw the network for the following Project: 1- 1- 2- 3- 4- 4- 5- 6- 7Activity 2 3 4 4 5 6 7 7 8 Duration 5 4 6 2 1 7 8 4 3 Find (i)Earliest Start and Finish Time (ii)Latest Start and Finish Time (iii) Critical Path (iv) All the types of slack.

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iv) The following table gives the activities in a construction project and time duration in hours: 1- 1- 2- 2- 3- 3- 4- 4- 5- 62 3 4 5 4 6 5 6 7 7 Duration 4 5 2 12 3 8 10 6 8 10 (i) Draw the arrow diagram (ii) Identify the critical path and find the total project duration (iii) find total float, free and independent float. Activity v) For the following project activities, Activity: 1-2 Duration: 8 1-3 7 1-5 12 2-3 4 2-4 10 3-4 3

Activity: 3-5 Duration: 5

3-6 10

4-6 7

5-6 4

Find(i)Earliest start,Earliest finish time. (ii) Latest start and Latest Finish time. (iii)Total,Free and Independent Float. vi) Find the critical path for the following project given below: Activity : 1-2 1-3 2-4 2-5 3-4 4-5 Duration : (in days) 8 4 10 2 5 3

v)

The following table gives the activities of a construction project and duration Activity: 1-2 1-3 2-3 2-4 3-4 4-5

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Duration: 20 25 10 12 6 10 Draw the network for the project and find the critical path.

TOPIC 2 PERT(Programme Evaluation and

Review Technique)

Notations:
1. Optimistic time - to 2. Pessimistic time - tp 3. Most likely time - tm 4. Relation: to < tm < tp Formulae:

1. Expected time te =

(t o  4t m  t p ) 6
2

2. Expected Variance W

t p  to ! 6

3. Normal variate z o !

Due date  Expected date Pr oject var iance

4. Probability of completing the project in due date is P(z e s zo)= 0.5 s J (zo)

where J (zo) denotes value from the standard normal table. Problems in PERT:

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i) A project is given below: Task Optimistic Pessimistic Time Time 1-2 5 10 1-3 18 22 1-4 26 40 2-5 16 20 2-6 15 25 3-6 6 12 4-7 7 12 5-7 7 9 6-7 3 5 Mostlikely Time 8 20 33 18 20 9 10 8 4

Determine (i) Expected Task time and variance (ii) Earliest and Latest times to each node (iii) Critical Path (iv)Probability of a node occurring at the proposed completion date if the original contract time of completing the project is 41.5.

ii) The following table lists the jobs of a network along with their time estimates:

Job to tm tp i j 1 2 3 6 15 1 6 2 5 14 2 3 6 12 30 2 4 2 5 8 3 5 5 11 17 4 5 3 6 15 6 7 3 9 27 5 8 1 4 7 7 8 4 19 28 (1) Draw the project network (2) Find the critical path (3) Find the probability of completing the project before 31 days. (4)What is the chance of project duration exceeding 46 days.

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iii) The data for a PERT network is displayed in the table given below. Determine the(i)probability that the project duration will exceed 60 days. (ii)probability of completing the project between 45 and 54 days.

1-2 1-3 a 2 6 b 4 6 c 6 6 [Hints: 1.Here

activity

1-4 2-3 2-5 6 2 11 12 5 14 24 8 23 a<b<c so take

3-4 3-6 4-6 5-6 15 3 9 4 24 6 15 10 45 9 27 16 a=to,b=tm,c=tp

2.For solution of (ii) P(Between 45 and 54) find Z1=(45-expected date)/ r oject var iance

and Z2= (54-expected date)/ Pr oject var iance . Then find P(Z1 e Z e Z2)=P(Z e Z2)- P(Z e Z1)] iv) A project consists of the following activities and time estimates : Activity to tm tp 1-2 1-3 1-4 2-5 2-6 3-6 4-7 5-7 6-7 3 2 6 2 5 3 3 1 2 6 5 12 5 11 6 9 4 5 15 14 30 8 17 15 27 7 8

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a)Draw the network.b)Find CPM.c)What is the probability that the project will be completed in 27 days? v) A project schedule has the following characteristics: Activity Optimistic MostLikely Pessimistic time 1-2 2-3 2-4 3-5 4-5 4-6 5-7 6-7 7-8 7-9 8-10 1 1 1 3 2 3 4 6 2 4 1 time 2 2 3 4 3 5 5 7 4 6 2 3 3 5 5 4 7 6 8 6 8 3 time

9-10 3 5 7 Construct a PERT network and find out 1.Expected activity and their variance 2.Earliest and latest expected times 3.The critical path 4.The probability factor for completing the project in 30 weeks.

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TYPE 2 - CONSTRUCTION OF NETWROK
i) Construct the network for the following information and find the critical path. Acitivity Immediate Predecessors :Estimated time :3 (in weeks) 5 4 A 2 B 3 C 9 :A B C D E F

Acitivity Immediate

Predecessors : Estimated time : (in weeks)

D,E 8

B 7

H,F 9

ii)

A Small project consists activities for which the are given below: Preceding Activity Activity A B C D A,B E A,B F C,D,E G C,D,E

of seven relevant data Duration (in days) 4 7 6 5 7 6 5

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1.Draw the network and find the completion time 2.Calculate the total float for each activity. iii) Tasks A,B,C,D,E,F,G,H,I Constitute a project. The notation x<y means that the task x must be finished before y can begin With this notation A<D, A<E, B<F, D<F, C<G, C<H, F<I, G<I Draw a graph to represent the sequence of tasks and find the minimum time of completion of the project when the time (in days) of completion of each task is given as follows: Task: Time: A 8 B 10 C 8 D 10 E 16 F 17 G 18 H 14 I 9

iv) Construct the network diagram comprising of activities B,C,....Q and N such that the following constraints are satisfied: B<E,F; C<G,L; E,G<H; L,H<I; L<M; H<N; H<J; I,J<P; P<Q

v) Draw the network for the following project: Activity Preceding Activity Preceding 1-2 1-3 2-4 3-4 4-5 --1-2 1-3 2-4 4-6 5-7 6-7 7-8 2-4 & 3-4 4-5 4-6 6-7 & 5-7

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TOPIC 3: Project Crashing
Resource analysis in Network Scheduling considers the question of resource requirements for different activities, the availability of resources, their allocation to activities and some other problems. Assume that the resources required for each activity of a project and the resource restrictions are known.

PROJECT COST
The total project cost comprises Direct Costs and Indirect Costs.

Total Project Cost=Direct Costs+Indirect Costs

The DIRECT COSTS are those expenditures associated with individual activities such as Manpower, Equipment utilized, materials consumed directly etc. in respect of various activities. The INDIRECT COSTS are those expenditures associated with the entire project such as administration costs or Supervision costs, Insurance, depreciation, Loss of revenue, Fixed overheads etc.

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CRASHING
The process of reducing the project duration by adding extra resources to an activity is called crashing.

CRASHING THE ACTIVITY

The process of reducing the avcitivy duration by adding extra resources is called crashing the activity.

CRASH TIME AND CRASH COST

Crash time represents the minimum possible time to complete the activity. Any further reduction of time would raise the activitys direct costs without reducing the time.

The activity cost corresponding to the crash time is called Crash cost. Crash cost is equal to the minimum direct cost required to achieve the crash time.

NORMAL TIME AND NORMAL COST

Normal time represents the normal time duration to complete the activity. The activity cost corresponding to the normal time is called Normal cost.

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Normal Cost represents direct costs required to activity. the absolute complete the

COST SLOPE

[OR]

COST/TIME TRADE-OFF

Cost slope represents the rate of increase in the cost of performing the activity per unit decrease in time. It is also called as Cost/Time trade off. It varies from activity to activity.

Cost

lope !

Crash cos t 

ormal Cost

ormal time  Crash time

STEPS INVOLVED IN PROJECT CRASHING

Step 1: Find the Critical Path. Step 2: Find Cost Slope for each Activity by using the formula

Cost Slope !

Crash cos t  Normal Cost Normal time  Crash time

Step 3: Rank the activities in the ascending order of cost slope. Step 4: Crashing: Crash the activities in the critical path with minimum cost slope. Calculate the new direct cost by cumulative adding of the cost of crashing to the normal cost.

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Step 5: Parallel Crashing: As the critical path duration is reduced by the crashing in Step 4, other paths also become critical i.e. we get parallel

critical paths. This means that the project duration can be reduced duly by simultaneous crashing of activities in the parallel critical paths. Step 6: Optimal duration: Crashing as per Step 3 and 4, an optimal project duration is determined. It would be the time duration corresponding to which the total cost is a minimum.

PROBLEMS

i)

The following table gives the activities in a construction project and other relevant information:
Activity i-j Normal Time (days) Crash Time (days) Normal Cost (Rs.) Crash Cost (Rs.)

1-2 1-3 2-3 2-4

20 25 10 12

17 25 8 6

600 200 300 400

720 200 440 700

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3-4 5 2 300 420 4-5 10 5 300 600 4-6 5 3 600 900 5-7 10 5 500 800 6-7 8 3 400 700 (a)Draw the activity network of the project. (b) Find the total float and free float for each activity (c) Using the above information crash the activity step by step until all paths are critical. ii) Determine the least cost schedule for the following project. Overhead cost per day is Rs.6. The number above and below the activities have the usual meaning. 4-1

5-3 1 2

4-2 3 6-3

3-1 (6) 4

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iii) The table below provides cost and estimates for a seven activity project:
Activity i-j Time estimates (in weeks) Normal Crash Direct Cost Estimate (Rs.000) Normal Crash

A(1,2) 2 1 10 15 B(1,3) 8 5 15 21 C(2,4) 4 3 20 24 D(3,4) 1 1 7 7 E(3,5) 2 1 8 15 F(4,6) 5 3 10 16 G(5,6) 6 2 12 36 You are required to (a) Draw the network corresponding to normal time (b) Determine the critical path and normal duration and cost of the project (c)Crash the activities so that the project completion time reduces to 9 weeks iv) For the data given in table below, draw the network. Crash systematically the activities and determine the optimal project duration and cost:
Activity i-j Normal Time Cost (days) (Rs.) Crash Time Cost (days) (Rs.)

1-2 8 1-3 4 2-4 2 2-5 10 3-4 5 4-5 3 Indirect cost =

100 6 200 150 2 350 50 1 90 100 5 400 100 1 200 80 1 100 Rs.70 per day

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UNIT-5 1.REPLACEMENT THEORY
Topics: Topic 1: Replacement of Equipments that deteriotes gradually. Topic 2: Replacement of Equipments that fail suddenly.

TOPIC 1
Replacement of Equipments that deteriotes gradually. Case 1: When money value is not considered. Case 2: When money value is considered.

Case 1: When money value is not considered.

Notations: 1. C Purchase price of the equipment or capital Cost or initial cost. 2. S Scrap value or Salvage value or Resale value or Trade-in value 3. Rn- Running cost in the year n.
4. Running cost = Maintenance cost + Operating cost

Formula:

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1. Total cost TC=C-S+ R n where cumulative of Running cost. 2. Average cost AC=

R n is
C-S+ n
n

TC n

(or) AC =

Problems in case 1:

Type 1: When Scrap value S is same for each year

i) The cost of a machine is Rs.6100 and its scrap value is Rs.100. The maintainance cost found from experience are as follows: Year : 1 2 3 4 5 6 7 8
Maintainance: Cost

100 250 400 600 900 1200 1600 2000

When should the machine be replaced and what will be the average yearly cost of owning and operating the machine? ii) A firm is considering replacement of a machine whose cost price is Rs.17500 and the scrap value is Rs.500. The maintenance cost (in Rs.) are found from experience as follows: Year : 1 2 3 4 5 6 7 8
Maintainance:200 300 3500 1200 1800 2400 3300 4500 Cost

Find the Replacement year.

36
Type 2: When Scrap value S is given for each year

iii) Following table gives the running cost per year and resale price of a certain equipment whose purchase price is Rs.5000. Year: 1 2 3 4 5 6 7 8
Running Cost Resale Value

:1500 1600 1800 2100 2500 2900 3400 4000

:3500 2500 1700 1200

800

500

500

500

At what year is the Replacement due?

iv) An Engineering Company has a machine whose purchase price is Rs.80000. The expected maintenance cost and resale price in different years are as given below: Year : 1 2 3 4 5 6 Running Cost: 1000 1200 1600 2400 3000 3900 Resale Value: (in 000s) After what time interval should the machine be replaced? (Hints: Here Resale value is given in 000s. It means we should take 75 for year 1 as 75000 72 for year 2 as 72000 and so on.) 75 72 70 65 58 50

Type 3: When Operating & Maintenance cost is given

37
v) Fleet cars have increased their cost as they continue in service due increased direct operating cost and increased maintenance. The initial cost is Rs.3500 and trade-in value

drops as time passes until constant value of Rs.500.

it

reaches

Given the cost of operating, maintenance and trade in value determine the proper length of service before cars should be replaced.
Years of service :

4 500

5 500

Year end Trade-in Value:1900 Annual Operating cost : Annual Maintenance cost:

1050 600

1500 1800 2100 300 400 600

2400 2700 800 1000

(Hints: Here Running cost Rn=Annual Operating cost+ Annual Maintenance cost and Trade in Value is S)

Type 4: Comparison of Machines [The machine with minimum Average cost AC is the best machine] vi) (a) Machine A costs Rs.9000. Annual operating costs are Rs.200 for the first year and then increases by Rs.2000 every year. Determine the best age at which to replace the machine A. If the optimum replacement policy is followed what will be the average yearly cost of owning and operating the machine? (b)Machine B costs Rs.10000. Annual operating costs are Rs.400 for the first

38
year and then increase by 800 every year. You have a machine of Type A which is of one year old. Should you replace it with B, if so when? vii) A machine costs Rs.10000. Operating costs are Rs.50 per year for the first five years. In the sixth and succeeding years operating costs increase by Rs.100 per year. Find the optimum length time to hold the machine before replacing it.

CASE 2: When money value is considered with time.

PRESENT WORTH FACTOR (pwf): If we have to make a payment of one rupee in n years time, it is equivalent to making a payment of (1+r)-n rupees today. The quantity (1+r)-n is called Present Worth Factor. (here r denotes rate of interest)

Formulae: 1. Discount Rate v = (1+r)-1

39
2. Weighted Average cost W(n) = where V
n 1

 V

n 1

R n 1

n 1

R n  1 is cumulative of the product

Vn  1R n  1 and Vn 1 is the cumulative of the

pwf (present worth factor) Vn  1 Type 1:

i) The initial cost of an item is Rs.15000 and the maintenance or running cost (in Rs.) for different years are given below: Year: 1 2 3 4 5 6 7 Rn : 2500 3000 4000 5000 6500 8000 10000

What is the replacement policy to be adopted if the capital is worth 10% and there is no salvage value. ii) The initial price of a machine is Rs.5000. Running cost varies as follows: Year: 1 2 3 4 5 6 7 Running Cost: 400 500 700 1000 1300 1700 2100

What would be the optimum replacement interval if the capital is worth 10% and there is no salvage value? iii) Assume that the present value of one rupee to be spent in a years time is 0.9 and the Capital cost is Rs.3000, and the running cost is given in the table below. When should the machine be replaced? Year : 1 2 3 4 5 6 7

40
Running Cost:500 600 800 1000 1300 1600 2000 (Hints: Here discount rate V=0.9 is given directly in the problem) iv) The cost of new machine is Rs.5000 the maintenance cost of nth year is given by Rn = 500(n-1) where n = 1,2,3...... Suppose that the discount rate per year is 0.5 after how many years it will be economical to replace the machine by a new one? v) Let the value of money be assumed to be 10% per year and suppose that Machine A is replaced after every 3 years whereas machine B is replaced after every 6 years. The yearly costs for both the machines are given below: Year : 1 2 3 4 5 6 Machine-A: 1,000 Machine-B: 1,700 200 100 400 200 1,000 200 400 300 400 500

Determine which machine should be purchased?

Type 2: Comparison of Machines

[If W(n1)<W(n2), then machine A is best. If W(n2)<W(n1), then machine B is best.]

vi) An Engineering company is offered two types of material holding equipment A and B. Equipment A is priced at Rs.60000 including cost of installation and cost of operation and maintenance are estimated to be Rs.10000 for each of the first five

41
years, increasing by Rs.3000 per year in the sixth and subsequent years. Equipment B with a rated capacity same as A requires an initial investment of Rs.30000 but in terms of operation and maintenance costs more than A. The cost for B are estimated to be Rs.13000 per year for the first six years, increasing by Rs.4000 per year from 7th year onwards. The company expects a return of 10 percent on all its investments. Neglecting the scrap value of the equipment at the end of its economic life, determine which equipment the company should buy. vii) A manufacturer is offered two machines A and B. A is priced at Rs.5000 and running cost are estimated at Rs.800 for each of the first five year,increasing by Rs.200 per year in the sixth and subsequent years. Machine B which has the same capacity as A, costs Rs.2500 but will have running costs of Rs.1200 per year for the first six years, increasing by Rs.200 per year thereafter. If the money is worth 10% per year, which machine should be purchased?

TOPIC 2
Replacement of Equipments that fail suddenly There are situations when the failure of a certain item occurs all of a sudden and results in complete breakdown of the system. There are two policies followed are types of replacement

Individual Replacement Policy:Under this policy, an item is replaced immediately after its failure.

42
Group Replacement Policy: Under this policy, we have to determine when all the items must be replaced irrespective of the fact that items have failed or not failed with a provision that if any item fails before the optimal time, it may be individually replaced.

Type 1: Given End of year or month or week and the probability value with last value as 1.

i) There are 1000 bulbs in Failure rate is given below: End of month: 1 2 3 Probability Of failure : 0.10 0.3 0.55

the 4

system. 5

0.85

The Group Replacement of 1000 bulbs costs Rs.100 and the individual replacement is Re.0.50 per bulb. Suggest suitable replacement policy. ii) It has been suggested by a data processing firm that they adopt a policy of periodically replacing all the tubes in a certain piece of equipment. A given type is known to have the mortality distribution shown in the table: End of Week : 1 2 3 4 5 6 7 Prob of failure:0.07 0.15 0.25 0.45 0.75 0.9 1 There are approximately 1000 tubes of this type in all the combined equipment. The cost of replacing the tubes on an individual basis is estimated to be Re.1.25 per tube and the cost of group

43
replacement policy average Re.0.60 per tube. Compare the cost of preventive replacement with that of remedial replacement.

iii) The following failure rates have been observed for a certain type of transistors in a digital computer: End of the week: 1 2 3 4 5 6 7 8
Probability of Failure to date:.05 .13 .25 .43 .68 .88 .96

The cost of replacing an individual failed transistor is Rs.1.25. The decision is made to replace all these transistors simultaneously at fixed intervals and to replace the individual transistors as they fail in service. If the cost of group replacement is 30 paise per transistor, what is the best interval between group replacements? At what group replacement price per transistor become preferable to the adopted policy.

Type 2: Given Per week or month and the last probability value is not 1, (ie) Pi value is given directly.

iv) The following have certain items: Tube failure/week: 1 Prob of failure : 0.3

been 2 0.1

observed 3 0.1 4 0.2

for 5 0.3

There are approximately 1000 tubes of this type in all the combined equipment. The cost of replacing the tubes on an individual

44
basis is estimated to be Re.1 per tube and the cost of group replacement average is Re.0.3 per year. Compare the cost of preventive replacement with that of remedial replacement.

v) India Electric company operates three large banking ovens used to manufacture electric motors and generators. Each oven contains 2400 heating resistors. It costs Rs.80 to replace an individual resistor when it burns out. If all the resistors are replaced (on Sunday night) it costs Rs.72000. When resistor fails it must be replaced immediately. When group replacement is followed, all the resistors are replaced at one time regardless of age. Statistical data provided by the research department of India Electric company provide the following probability distribution for resistor failure. Week: 1 2 3 4 5 6 Prob:0.02 0.08 0.15 0.30 0.25 0.20

Is individual or group replacement more desirable?

Type 3: vi) There are 1000 bulbs in the system. Survival rate is given below. Week : 0 1 2 3 4 Bulbs in operation : 1000 at the end of the week The group replacement of 1000 bulbs costs Rs.100 and the individual replacement is 850 500 200 0

45
Re.0.50 per bulb. Suggest suitable replacement policy.

[Hints: Instead of probability of failure here number of bulbs in operation at the end of the week is given. So the required probability is found as follows: Initially N=1000 bulbs Week 0 1 2 3 4 Bulbs failed 1000-1000=0 1000-850=150 1000-500=500 1000-200=800 1000-0 = 1000 Probability 0 (150/1000)=0.15 (500/1000)=0.5 (800/1000)=0.8 (1000/1000=1

Now the problem comes under Type 1 of Topic 2]

vii) An electronic assembly contains 1600 units of a particular component, failure of any of them stops the functioning of that assembly and hence failed components need immediate replacement when the failure occurs. The mortality pattern of these components based on the past data is as follows: Month end : 1 2 3 4 5 6 % of failure: 5 25 45 70 85 100

The cost of the component replaced under the presently followed individual replacement policy is Re.1 each and the cost of disruption is Rs.9 per failure. If all the components are replaced concurrently, the cost of replacement including disruption cost works out to be Rs.7. Decide whether it would be worthwhile to

46
switch over group replacement policy from the existing individual replacement policy and if so, find the optimal replacement period and cost.

[Hints: Instead of probability of failure, here percentage of failure is given in problem. So let us find the probability as follows: Month end 1 2 3 4 5 6 % of failure 5 25 45 70 85 100 Probability (5/100)=0.05 (25/100)=0.25 (45/100)=0.45 (70/100)=0.70 (85/100)=0.85 (100/100)=1

Now the problem comes under type 1 of topic 2]

QUEUING THEORY
PART A 1. For (M/M /1): ( g / FIFO) Model, write down the Littles formula. 2. For (M/M/1) : (K/FIFO) model, write down the formula for (a)Average number of customers in the queue (b)Average waiting time in the system. 3. What is the probability that a customer has to wait more than 15min. to get his service completed in a M/M/1 queuing system, if

P ! 6 per hour and Q ! 10 per hour.

4. In

queuing

system

M/M/1/ g /FCFS,

47

V ! .6 , what is the probability that the

queue contains 5 or more customers? 5. What is the effective arrival rate for M/M/1/4/FCFS queuing model when

P ! 2 andQ ! 5.
6. Find the average number of customers in the PART-B 1. In a Railway Marshalling yard, goods trains arrive at a rate of 30 trains per day. Assuming that the inter arrival time follows an exponential distribution and the service time distribution is also exponential with an average 36 minutes. Calculate (i) the mean Queue size (line length) (ii) Probability that the queue six exceeds 10. 2. Assume that the goods trains are coming in a yard at the rate of 30 trains per day and suppose that the inter arrival time follows an exponential distribution. The service time for each train s assumed to be exponential with an average of 36 minutes. If the yard can admit 9 trains at a time (there being 10 lines, one of which is reserved for shunting purpose) Calculate (i)the probability that the yard is empty (ii) Average Queue length. 3. Consider a single server queuing system with a Poisson input, exponential service times. Suppose the mean arrival rate is 3 calling units per hour, the expected service time is 0.25 hours and the maximum permissible number calling units in the system is two. Derive the steady state probability distribution of the number of calling units in the system, and then calculate the expected number in the system. 4. In a given M/M/1 queueing system, the average arrivals is 4 customers per M/M/1/N queuing system when

P!Q

48
minute: V ! .7 .What are (1) Mean number of customers in the system.(2) Mean number of customers in the queue.(3)Probability that the server is idle (4)Mean waiting time in the system. 5. A TV repairman finds that the time spent on his job has an exponential distribution with mean 30 minutes. If he repairs sets in the order in which they come and if the arrival of sets is approximately Poisson with an average rate of 10 per 8 hours day, what is his expected idle time each day? How many jobs are ahead of the set just brought in. 6. On average 96 patients per 24 hour day require the service of an emergency clinic. Also on average a patient requires 10 min of active attention. Assume that the facility can handle only one emergency at a time. Suppose that it costs the clinic Rs.100 per patient treated to obtain an average servicing time of 10 minutes and that each minute of decrease in this average would cost Rs. 10 per patient treated. How much would have to be budgeted by the clinic to decrease the average size of the queue

from 7. Customers arrive at a one-window drive-in bank according to a Poisson distribution with mean 10 per hour. Service time per customer is exponential with mean 5 minutes. The car space in front of the window, including that for the service can accommodate a maximum of 3 cards. Other cars can wait outside this space. (a) What is the probability that an arriving customer can drive directly to the space in front of the window? (b) What is the probability that an arriving customer will have to wait outside the indicated space? How long is an arriving

1 1 patient to patient? 3 2

49
customer expected to wait before starting service? 8. In a railway station only one train is handled at a time, the railway yard is sufficient only for two trains to wait while other is given signal to leave station. Trains arrive at the station at an average rate of 6 per hour and railway station can handle them on an average of 12 per hour. Assuming Poisson arrivals and exponential service distribution, find the steady state probabilities for the various number of trains in the system. Also find the average waiting time of a new train coming into the yard. 9. If for a period of 2 hours in a day (8 to 10 am) trains arrive at the yard every 20 minutes but the service time continues to remain 36 minutes. Calculate (a) the probability that the yard is empty. (ii) Average number of trains in the system on the assumption that the line capacity of the yard is limited to 4 trains only. 10. A Petrol pump station has 2 pumps. The service times follow the exponential distribution with mean of 4 minutes and cars arrive for service is a Poisson Process at the rate of 10 cars per hour. Find the probability that a customer has to wait for service. What is the probability that the pumps remain idle?

11. Customers arrive at a watch repair shop according to a Poisson process at a rate of one per every 10 min, and the service time is an exponential random variable with mean 8 minutes. 1. Find the average number of customers in the shop 2. Find the average time a customers spends in the shop. 3. Find the average number of customers in the queue. 4. What is the probability that the server is idle? 12. Customers arrive at a box office window, being manned by single individual, according to a Poisson input process with a mean rate of 30 hour. The time

50
required to serve a customer has an exponential distribution with a mean of 90 seconds. Find (i) the average waiting time of a customer (ii) The average number of customer in the system and (iii) The average queue length