UNIVERSITY EXAMINATIONS: 2021/2022

FINAL EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE

AND BACHELOR OF PROCUREMENT&LOGISTICS

MAT 1203: MANAGEMENT MATHEMATICS II

WEEKEND AND DISTANCE LEARNING

DATE: DECEMBER 2021 TIME: 2 HOURS

Answer ALL Questions; You must show your workings

QUESTION ONE [20 MARKS]

(a) Newspaper readers will either buy the Nation, Standard or The people newspaper. The number of
readers and the likely changes are shown below.

TO

Nation Standard People

Nation 200 100 200
Standard 200 100 100
People 20 30 50

The number of readers as at November 1st 2021 were

Nation 500
Standard 400
People 100
i) Formulate the transition probability matrix. (2 Marks)
ii) Predict the market shares as at the end of December 2021. (5 Marks)

b) The demand function for product W has been estimated as q=100,000-200p where q is the number of
units demanded each year and p is the price in dollars. The total cost is given as
TC=150,000+100q+0.003q^2.
i) Formulate the profit function. (2 Marks)
1
 ii) Determine the number of units that should be produced to maximize annual profit.
(2 Marks)
iii) Determine the price that should be charged for each product of W to generate a demand
given in (ii) above. (2 Marks)
iv) Determine the maximum annual profit. (2 Marks)
c) Happy foods, Garden Superstores and Quick Stop groceries are the only three grocery stores in
Utopia town. A market research involving shoppers over a ten-week period indicated that Happy
foods retains 85% of its shoppers while 10% and 5% shift to Garden superstores and Quick Stop
respectively each subsequent week. Garden superstores lose 20% to happy foods and 5% to Quick
stop. Of those who shop in Quick stop, 15% and 10% shift to happy foods and Garden superstores
respectively. The total grocery store customers in Utopia town are estimated at 10,000. Each
shopper generates revenue of about KSh. 500 per week. What are the projected weekly revenues for
each grocery store at equilibrium? [5 Marks]

QUESTION TWO [15 MARKS]

a) A retailer of motorized bicycles has examined cost data and has determined a cost function which
expresses the annual cost of purchasing, owning, and maintaining inventory as a function of the
size (number of units) of each order it places for the bicycles. The total cost function is given by,
C  4860 / q  15q  750,000

Where C equals annual inventory cost, stated in dollars and q equals the number of cycles
ordered each time the retailer replenishes the supply.
i. Determine the order size, which minimizes annual inventory cost. [6 Marks]
ii. What is minimum annual inventory cost expected to equal? [2 Marks]

b) The marginal cost and fixed costs of a product are given by M.C = 500 + 210 q and FC = 60 where q is
the number of units produced

Required

a) Total cost function (C ) [3 Marks]

b) Average fixed cost function (AFC) [1 Marks]
c) Average total cost function (A. C) [1 Marks]

2
c) State and explain two limitations of markov process [2 Marks]

QUESTION THREE [15 MARKS]

There are 3 Supermarkets in Mwingi town; A, B and C. It is believed that A will retain 40% of its
customers but loose only 20% to C. It is also believed that B will retain 50% of its customers and
loose 10% to A. C believes that it will loose 20% of its customers A and 30% to Z.
i) Form the transition probability matrix. (3 Marks)
ii) Determine the steady state. (4 Marks)

(b) The Marginal Cost of a firm is given by the function MC = 36 + (q – 8)2 and its Marginal Revenue
by MR = 100 – 2q where q is quantity of units for a given firm. Find: -
i. The profit maximizing output of the firm. [3 Marks]
ii. The total cost and total revenue function assuming that fixed cost and fixed revenue is
equal to zero. [2 Marks]
iii. The value of maximum profit. [3 Marks]