MGSC 1205 **Final Exam** Winter 2008

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ID Number:_____________________

Section: ______ Instructor: _________________

MGSC 1205.2

**FINAL EXAMINATION**
SOLUTION KEY

Winter 2008

1. You have THREE hours.

2. Your exam paper consists of 10 pages. Please make sure that you have a complete set of exam paper.
The point total is 100.
3. Values of individual questions are indicated in the left margin.
4. Remember that you must define all variables that you introduce and you must give WORD
answers to word problems.
5. Answer all questions on the exam paper. Use the backs of pages for extra work space.
6. If you have questions, ask one of the instructors for clarification.
7. No cell phones, PDA’s and other electronic devices are permitted, except calculators.

Simple Interest F = P (1 + rt ) P = F (1 + rt ) −1

1
F = P (1 + i ) P = F (1 + i )
−n
Compound Interest n
=F
(1 + i ) n

Future Value of an Annuity F =R

(1 + i ) n − 1 R=F
i
i (1 + i ) n − 1

1 − (1 + i ) i
−n
Present Value of an Annuity P=R R=P
1 − (1 + i )
−n
i

reff = (1 + i ) −1
m
Effective interest rate

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MGSC 1205 **Final Exam** Winter 2008
#1. Farmer Frank raises pumpkins and squash using two fields. Since the fields are in different locations, there are
differences in yields and costs of growing the two crops, depending on the field used, as given in the table below.
Field I Field II
Field I has 20 hectares and field II has Pumpkins Squash Pumpkins Squash
15 hectares available for planting. yield per hectare 400 pumpkins 700 squash 280 820
Frank wants a total yield of at least cost per hectare $370 $620 $300 $550
9,000 pumpkins and 12,000 squash.
Suppose Frank plants P1 hectares of pumpkins and S1 hectares of squash in field I; P2 hectares of pumpkins and S2
hectares of squash in field II. Formulate an LP model to help him determine how many hectares in each field he
should plant in each crop to minimize his total costs. DO NOT SOLVE.
Minimize C = 370 P1 + 620 S1 + 300 P2 + 550 S 2
Subject to:
400 P1 + 280 P2 ≥ 9,000
700 S1 + 820 S 2 ≥ 12 ,000
7 pt All variables ≥ 0 .
P1 + S1 ≤ 20
P2 + S 2 ≤ 15
#2. The Recycling Alliance of South Hubbards (TRASH) operates three major collection depots throughout the
south shore area of the province, and ships used newspapers to two processing plants, A and B. The following
table gives the cost per ton shipped from each depot to each plant, along with the maximum amounts that can be
collected at the depots each week and the minimum amounts required each week at the plants for processing.
Formulate an LP model to help TRASH determine that amount of used newspaper to ship from each depot to each
processing plant per week in order to minimize their shipping costs. DO NOT SOLVE.
From\To Plant A Plant B Max tons avail
Depot I $70 $35 170
Depot II $25 $65 250
Deposit III $40 $80 100
9 pts Min tons needed 300 220

Let A1, A2, & A3 be # tons of old newspapers shipped from Depots I, II and III to Plant A;
Let B1, B2, & B3 be # tons of old newspapers shipped from Depots I, II and III to Plant B.

Minimize C = 70 A1 + 25 A2 + 40 A3 + 35 B1 + 65 B2 + 80 B3
Subject to:
A1 + A2 + A3 ≥ 300
B1 + B2 +B 3 ≥ 220
A1 + B1 ≤ 170 All variables are non-negative.
A2 + B2 ≤ 250
A3 + B3 ≤ 100

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MGSC 1205 **Final Exam** Winter 2008
#3. Consider the following LP model
Maximize P = 2x +5y
s.t.
2 x +3 y ≤ 60 (1)
2x + y ≤ 40 (2)
2x − y ≥0 (3)
x, y ≥0

a) Sketch a graph and shade in the feasible region;

5 pts
40
(2)
35

30

25
(3)
20

15
D
C
10

5 (1)
B
0
A
0 5 10 15 20 25 30

b) Label all feasible corner points and determine their coordinates. Determine the optimal corner point and the
corresponding objective function value.

4 pts

Corner Coordinates P = 2x + 5y

A (0, 0) 0

B (20, 0) 40

C (15, 10) 80

D (7.5, 15) 90

Therefore, the optimal solution is corner D, where x = 7.5, y = 15, and Max P = 90.

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MGSC 1205 **Final Exam** Winter 2008
#4. Anderson Electronics (AE) is considering the production of four potential products: VCRs, stereos, TVs and DVD
players. The production uses three resources: electronic components, nonelectronic components and assembly time.
The profits per unit for the products are given in the following LP model.
Let V, S, T and D denote the number of VCRs, stereos, TVs and DVD payers to make, respectively.
Maximize total profit: P = 32V + 29 S + 54T + 72 D
Subject to:
4V + 3S + 3T + 4 D ≤ 5000 (electroni c components , units)
2V + 2 S + 3T + 4 D ≤ 4500 (nonelectr onic components , units)
V + S + 2T + 3D ≤ 2750 (assembly time, hours)
V , S,T , D ≥ 0 (non - negativity )

a) Using the LP model in Excel:

(1) Fill in the following blanks with the formulas used to calculate the value in the given cells.
2 pts H11 = sumproduct($D$10:$G$10,D11:G11)

H14 = copy H11

(2) Fill in the Solver setup. 3 pts

Set Target Cell: _H11_____________________________________

By Changing Cells:_D10:G10______________________________

Subject to Constraints: __H13:H15<=J13:J15_________________

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MGSC 1205 **Final Exam** Winter 2008
b) What is the maximum profit represented by the objective function?
1 pt Max P = $76,000
c) In the optimal solution, how many units of each product will be made?
2 pts VCR: 350 TV: 1200
DVD: 0 Stereo: 0
d) Which resource(s) is/are binding? What is the corresponding shadow price?

2 pts Binding constraints: Electronic components, shadow price = $2 per unit

Assembly time, shadow price = $24 per hours
e) Which resource(s) is not binding? How many units are not used?

1 pt Non-binding constraint: non-electronic components, 200 units not used

f) What is the new profit if the number of nonelectronic components available is down to 4400 units?

1 pt
Profit remains to be $76,000 because the constraint is not binding and shadow
price = 0.

g) What is the new profit if the number of electronic components is increased by 500 units (to a total of
5500units)?

1 pt P = 76,000 + 500*2 = 77,000

h) If you could hire an extra hand to work in the assembly department, what is the maximum hourly wage you
would like to pay? How many more hours do you like to get?
2 pts
The maximum wage = $24 per hour

To get no more than 166.67 hours

i) What would be the total profit if the management decides to make 100 stereos?
1 pt
P = 76,000 – 100*1 = 75,900

j) What is the minimum profit per unit for DVD payers before Anderson should consider producing them?

2 pts $80
k) Now, Anderson plans to have promotional sales on VCR. How much could they low the price per unit for
VCR so that the optimal production plan is not affected? What would be the new profit after the price is reduced?
2 pts The maximum discount in price is $1.67 per unit. And the new profit is
$75,415.50.

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#5. Snookers Restaurant is open from 8 am to 10 pm daily. Besides the hours they are open for business, workers are
needed an hour before opening and an hour after closing for setup and clean up activities. The restaurant operates with
both full-time (8hour shifts) and part-time (4-hour shifts) workers on the following shifts, and the full-time workers are
paid higher than the part-time workers (due to the difference in benefits coverage).
Shift Variable Duration Wage/hour Pay per shift Hours Workers needed
full 1 F1 7 am to 3 pm $12 $96 7 am to 9 am 11
time 2 F2 11 am to 7 pm $12 $96 9 am to 11 am 13
3 F3 3 pm to 11 pm $12 $96 11 am to 1 pm 25
1 P1 7 am to 11 am $10 $40 1 pm to 3 pm 18
part 2 P2 11 am to 3 pm $10 $40 3 pm to 5 pm 12
time 3 P3 3 pm to 7 pm $10 $40 5 pm to 7 pm 24
4 P4 7 pm to 11 pm $10 $40 7 pm to 9 pm 15
9 to 11 pm 9

a) Let F1 = number of full time workers working in the shift 1, from 7 am to 3 pm, similarly for F2, F3, P1, P2,
P3, & P4. Determine the daily labour cost function.

1 pt Minimize C = 96 ( F1 + F2 + F3 ) + 40 ( P1 + P2 + P3 + P4 )

b) The number of workers needed is listed in the table above right for each of the indicated time blocks. Develop
a constraint function for each of the eight time blocks, where number of workers working is more than or equal
to the number of workers needed in that time period.
Workers
Hours F1 F2 F3 P1 P2 P3 P4 needed
7 am to 9 am F1 P1 11
9 am to 11 am F1 P1 13
11 am to 1 pm F1 F2 P2 25
1 pm to 3 pm F1 F2 P2 18
3 pm to 5 pm F2 F3 P3 12
5 pm to 7 pm F2 F3 P3 24
7 pm to 9 pm F3 P4 15
9 to 11 pm F3 P4 9

4 pts Therefore,
F1 + P1 ≥ 13
F1 + F2 + P2 ≥ 25
F2 + F3 + P3 ≥ 24
F3 + P4 ≥ 15

c) At least two full time workers must be available during the hour before opening and after closing.
Additionally, at least 40% of the employees should be full-time (8-hour) workers during the restaurant’s busy
periods from 11 am to 1 pm and 5 pm to 7 pm. Write a constraint for each of the conditions.

F1 ≥ 2 F1 + F2 ≥ 0.4( F1 + F2 + P2 )
4 pts
F3 ≥ 2 F3 + F2 ≥ 0.4( F3 + F2 + P3 )

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#6. A developer of video game software has five proposals for new games. Unfortunately, the company cannot develop
all the proposals because its budget for new projects is limited to $950,000 and it has only 20 programmers to assign to
new projects. The financial requirements, returns, and the number of programmers required by each project are
summarized below.
Project 1 2 3 4 5
Expense 350 275 300 250 145 ($’000)
# programmers Required 7 6 9 5 6
Estimated Profit 650 550 600 450 375 ($’000)
Projects 1 and 4 require specialized programming knowledge that only one of programmers has. Both of these
projects cannot be selected because of the programmer with the necessary skills can be assigned to only one of the
projects. In addition, project 3 requires the technology to be developed in project 2. If project 3 is selected, therefore,
project 2 must be selected, too. Formulate the integer programming model for the problem to maximize the total
estimated profit. DO NOT SOLVE.

1 if project i is selected;
Let xi =  where i = 1, 2, 3, 4, 5.
0 otherwise
Maximize P = 650 x1 + 550 x 2 + 600 x3 + 450 x 4 + 375 x5
Subject to:
350 x1 + 275 x 2 + 300 x3 + 250 x 4 + 145 x5 ≤ 950
7 x1 + 6 x 2 + 9 x3 + 5 x 4 + 6 x5 ≤ 20
7 pts
x1 + x 4 ≤ 1
x3 ≤ x 2

#7 Angela Tykes, an investment counselor, must plan a $75,000 portfolio for investment over the next year (four
quarters). She has three investment choices. The table below shows all these options with the return rates and
maturities. All the options are available at the beginning of each quarter. Since choice C is relatively risky, Angela
wants no more $25,000 in the option. She must also provide at least $4,000 at the end of quarters 1, 2, & 3, while
maximizing the total portfolio at the end of the year. Formulate the appropriate LP model. DO NOT SOLVE.
9 pts
Option A B C Maximize F = 1.04 A4 +1.09 B3 +1.12 C1
Return/period 4% 9% 12%
Maturity 3 months 6 months 1 year s.t.

t =0 A1 + B1 + C1 ≤ 75 ,000

Cash $75,000 4
t =1 1.04 A1 − A2 − B 2 ≥ 4,000
t =2 1.04 A2 +1.09 B1 − A3 − B3 ≥ 4,000
t =3 1.04 A3 +1.09 B2 − A4 ≥ 4,000

C1 ≤ 25 ,000
All variables are non-negative

0 1
#8. You deposit $300 in an account that pays 5.4% interest compounded monthly.

Invest: A1 A
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MGSC 1205 **Final Exam** Winter 2008
a) How much interest will you earn from this deposit after 3 years?

n = 36
t =3 36
0.054  0.054 
2 pts r = 0.054 i= I = F − P = 300 1 +  − 300 = 352 .63 − 300 = 52 .63
m =12
12  12 
P = 300

b) How long does it take for the deposit to be $450 in this account? (Interest is 5.4% compounded monthly)

log( 1.5)
n= = 90 .3059
450 = 300 (1 +i )
n
0.054
log( 1 + )
2 pts 1.5 = (1 +i )
n
12
log( 1.5) = n log( 1 +i ) 90 .3059
t= = 7.5 years
12

c) How much will you have after 5 years if, after the initial deposit of $300, you also deposit $500 at the end of year 3?
24
 0.054 
2 pts F1 + F2 = (352 .63 + 500 )1 +  = 949 .64
 12 
#9. Nina wants to open a saving account in a bank. She is facing two options: one saving account offers interest of
7.5% compounded weekly; the other offers interest of 7.75% compounded annually. Which account should Nina
choose?

52
 0.075 
2 pts reff = 1 +  − 1 = 7.7826 % > 7.75%
 52 

Should take the first option of 7.75% compounded weekly.

#10. Suppose you opened an account today with a deposit $500. If you save $100 at the end of each month for 2 years
at the interest of 6% compounded monthly. How much will be in the account at the end of the second year?

t =2 n = 24
P1 = 500
r = 0.06 0.06
i= = 0.005 R = 100
m =12 12

3 pts F1 + F2 = 500 (1 + 0.005 )

24
+ 100
(1.005 ) 24 −1 = 563 .58 + 2,543 .20 = 3,106 .78
0.005

#11. Peter’s parents established a 4-year term trust fund from which Peter can withdraw $2000 every three months. If
they also want to have a $5000 balance in the account after 4 years, how large should the trust fund be if the interest is
6.5% compounded quarterly?

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MGSC 1205 **Final Exam** Winter 2008
t =4 n = 16
F1 = 5000
r = 0.065 0.065
i= = 0.01625 R = 2000
m =4 4

1 − (1.01625 )
−16
P1 + P2 = 5000 (1.01625 )
−16
3 pts + 2000 = 3,863 .32 + 27 ,979 .73 = 31,843 .05
0.01625

#12. Chris purchased a condominium recently. He took out a mortgage of $200,000. The interest rate for such a
mortgage amortized over a 15-year period is at 6.25% interest compounded monthly.
a) What is Chris’ monthly payment?

t =15 n = 180
P = 200 ,000
2 pts r = 0.0625 0.0625
i= = 0.005208 R =?
m =12 12

0.0625
R= 12 (200 ,000 ) = 1,714 .85
−180
 0.0625 
1 − 1 + 
 12 

b) How much interest will Chris pay over the 15-year life of the loan?

2 pts 18 Total interest = n×R – P = 180×1,714.85 – 200,000

= 308,672.23 – 200,000
= 108,672.23

c) In Chris’ first payment, how much is towards interest, and how much is applied against the principal of the
mortgage?
2 pts Interest in the 1st month = P × i = 200,000 × 0.005208 = 1041.67

Amount against principal = R – Interest = 1,714.85 – 1041.67 = 673.

d) What will the balance of the mortgage be after 5 years?

t =10 n = 120
P1 = ?
3 pts r = 0.0625 0.0625
i= = 0.005208 R = 1714 .85
m =12 12

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MGSC 1205 **Final Exam** Winter 2008
−120
 0.00625 
1 − 1 + 
P = 1714 .85  12  = 152 ,729 .65
0.00625
12

#13. a) Use the information given below to construct an amortization table for the first 3 monthly payments.
4 pts
A B C D E F
1 Mortgage Loan Amortization Table
2 Interest rate 6% Monthly
3 Monthly rate 0.5% Payment $100
4 Initial principal $8,000
5 Initial Amount against New
6 Month Balance Payment Interest Princpal Balance
7 1 8,000.00 100.00 40.00 60.00 7,940.00
8 2 7,940.00 100.00 39.70 60.30 7,879.70
9 3 7,879.70 100.00 39.40 60.60 7,819.10

b) When you setup the amortization table in Excel, formulas could be used in cells B7:F7, & B8, and then, cells
C7:F7 could be copied to C8:F8, and finally cells B8:F8 could be copied to all the remaining rows. Fill in the
following blanks with the formulas needed in calculation.
3 pts
B7 = B4 E7 = C7 – D7
C7 = $D$3 F7 = B7 – E7
D7 = B7*$B$3 B8 = F7

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