Arvind eye hospital is one of the busiest hospital in the country which operate round the perform

maximum of surgeries. A survey is conducted by the management in order to streamline its operations.
Survey disclose that there is uneven rush of patients and uneven supply of doctors (i.e. maximum
during day shifts and minimum during night shifts), which sometime create a mismanaged situation.
Most of the doctors and assistants are the medical students who are available at different times. Duty
shifts are of 8 hours and there are five shifts per day As per the requirement of different shifts the
honorarium of doctors also vary in different shifts. The following table disclose the requirement of
doctors, timing of shifts and honorarium per shift.

Time Requirement of Timing of duty Honorarium per shift

Doctors Shifts(Hours) (Rs.)
6.00 am to 8.00am 48 6.00 am to 2.00 pm 1700
8.00 am to 10.00am 79 8.00 am to 4.00 pm 1600
10.00 am to noon 65 Noon to 8.00 pm 1750
noon am to 2.00pm 87 4.00 pm to Midnight 1800
2.00 pm to 4.00pm 64 10.00 pm to 6.00 pm 1950
4.00 pm to 6.00pm 73
6.00 pm to 8.00pm 82
8.00 pm to 10.00pm 43
10.00 pm to midnight 52
Midnight to 6.00am 15

Since Arvind Eye Hospital is running as a charitable institution it always face problems in managing its
financial affairs. Hospital has a bank loan of Rs. 500,000 for which bank wants atleast security deposit of
Rs. 100,000. It normally perform three types of operations whose variable cost per surgery is given
below which is to be made in cash within the same month of purchases, where as honorarium of doctors
can be made in next month.

Bank Loan Rs. 500,000

FDR(given to bank as Security Deposits) Rs. 100,000

Monthly revenue Rs.400,000

Variable cost:- Surgery Type I Rs.,10,000

Variable cost:- Surgery Type II Rs.,4,000

Variable cost:- Surgery Type III Rs.,2,000

Formulate the above problem as LPP and find out the minimum cost for hospital for honorarium which
satisfy the requirement of patients. Also analyze the impact of above mentioned decision from
managerial point of view.
Following are the summarized balance sheets of ESS GEE Ltd. as on December, 31 2001 and 2002

which is engaged in investment of number of project.

Liabilities 2001 2002 Assets 2001 2002

Rs. Rs. Rs. Rs.

Share Capital 1,00,000 1,30,000 Land & Building 1,001000 95,000

General Reserve 25,000 30,000 Machinery 75,000 84,500

Profit and Loss A/c 15,200 15,400 Stock 50,000 37,000

Bank Loan (Long-term) 35,000 - Sundry Debtors 40,000 32,100

Sundry Creditors 75,000 67,500 Cash 200 300

Provision for tax 15,000 17,500 Bank - 4,000

Goodwill - 7,500

2.65,200 2.60,400 2.65.200 2,60,400

The cost of capital of ESS GEE Ltd. Is 10 % and it made investment in five projects, whose cash flows are
given in the following matrix

Year 0 1 2 3
Projects:- P1 (100,000) (50,000) (10,000) 70,000
Projects:- P2 (20,000) (60,000) (70,000) 10,000
Projects:- P3 (30,000) Nil (40,000) (80,000)
Projects:- P4 (40,000) (60,000) 50,000 10,000
Projects:- P5 (20,000) (60,000) 50,000 (5,000)
Projects:- P6 (60,000) (20,000) 40,000 20,000
Available 120,000 200,000 Nil Nil
resources
Cash generated by a particular project can also be reinvested in the same year.

The accounting department of the organization has also computed the NPV of all the projects at 10%
discount rate which is given in the following table

Projects NPV at 10% discount rate

P1 20,000
P2 15,000
P3 20,000
P4 15,000
P5 20,000
P6 10,000
Formulate the above problem as LPP if the objective of the organization is to maximize NPV within given
resources. Also find out the optimum mix of investment keeping in mind that the cost of capital is 10%.
If ESS GEE Ltd. has surplus money of Rs. 200,000 then in which project it is to be invested.