NATIONAL UNIVERSITY OF SCIENCE AND TECHNOLOGY

FACULTY OF INDUSTRIAL TECHNOLOGY

BACHELOR OF ENGINEERING (HONS) DEGREE
Part Five Examination January 2013

TCE 5101 Management, Economics and Optimization

Duration of Examination 3 Hours

Instructions to Candidates

1. Answer Question One and any other Three questions.

2. Show clearly all the steps in your calculations.
3. Start the answers for each question on a new page.

1. a) What do you understand by “Budgeting”? Mention the type of budgets that the
management of a big industrial concern would normally prepare and how computers can
help the management in the matter? [5]

b) Anne hopes that it takes just 10 hours to make preparations for an important meeting.
It will probably take 12 however, and if some key things go wrong, it will take 20 hours.
How many hours should be scheduled for the meeting preparations? [3]

c) State and explain in detail four of the external factors that can affect sales? [8]

d) NUST tech packages soap bars. They hope to package a case in 30 seconds. Usually it
takes 32 seconds to package, but when the team is grouchy it takes 37 seconds. How
many seconds can they guess it will take to package a case? [4]

e) What do you understand by the following terms?

i) Budgetary control [1]
ii) Activity ratio [1]
iii) Capacity ratio [1]
iv) Efficiency ratio [1]
v) Pessimistic time [1]

2. a) What is a flexible budget and how it is different from a fixed budget? [5]

b) A company is trying to decide whether to bid for a certain contract or not. They
estimate that merely preparing the bid will cost $10,000. If their company bid then they
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 estimate that there is a 50% chance that their bid will be put on the "short-list", otherwise
their bid will be rejected. Once "short-listed" the company will have to supply further
detailed information (entailing costs estimated at $5,000). After this stage their bid will
either be accepted or rejected.

The company estimates that the labour and material costs associated with the contract are
$127,000. They are considering three possible bid prices, namely $155,000, $170,000
and $190,000. They estimate that the probability of these bids being accepted (once they
have been short-listed) is 0.90, 0.75 and 0.35 respectively. What should the company do
and what is the expected monetary value of your suggested course of action? [15]

c) Compare and contrast SWOT analysis with decision tree analysis and show which
method has more advantages? [5]

3. a) Project A has an expected duration of 48 days and a standard deviation of 4 days. What
is the probability of completing the project within 52 days? [4]
b) Maximize 13A + 23 B subject to
5A + 15B ≤ 480
4A + 4B ≤ 160
35A + 20B ≤ 1190
A B ≥ 0 using the simplex method? [12]

c) An activity has these time estimates: optimistic time = 18 weeks, most likely time =
23 weeks, and pessimistic time = 25 weeks.
i) Calculate the activity’s expected time [3]
ii) Calculate the activity’s variance [3]
iii) Calculate the activity’s standard deviation [3]

4. a) A company involved in the assembly and distribution of printers in concerned with two
types – laser and inkjet. Assembly of each laser printer takes two hours, while each inkjet
printer takes one hour to assemble, and the staff can provide a total of 40 person-hours of
assembly time per day. In addition, warehouse space must be available for the assembly
and distribution of the printers, 1 square metre for each laser printer and 3 square metres
for each inkjet printer; the company has a total of 45 square metres of storage space
available for assembled printers each day. Laser printers can be sold for a profit of $30
per unit and inkjet printers earn a profit of $25 each, but the market in which the
company is operating can absorb a maximum of 12 laser printers per day. (There is no
such limitation on the market for inkjet printers). Formulate this as a linear programming
problem and determine, using the simplex method, the number of each type of printer the
company should assemble and distribute in order to maximise daily profit? [12]

b) Outline five functions of decision making? [5]

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 c) Justify the notion that PERT is a better project management tool than CPM? [6]

d) Compare and contrast objective and subjective probability? [4]

5. a) Briefly describe the concept of sequential search giving a practical example of its
relevance in the field of chemical engineering? [4]

b) f(x,y) = xy2. Use the gradient to evaluate the path of steepest ascent at (2,2)? [7]

c) The NUST Chemical Corp. must produce 1 000 kg of a special mixture of phosphate
and potassium for a customer. Phosphate costs $5/kg and potassium costs $6/kg. No more
than 300 kg of phosphate can be used, and at least 150 kg of potassium must be used.
Solve the problem such that the company can minimize costs? [5]

d) Find the maximum and minimum values of the function

f(x,y,z) = x2+y2+z2

subject to the constraint

x4+y4+z4 = 1. [9]

END OF EXAM

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