MBA 2020

VU 2nd Semester Examination

Paper Code: MBA- 205

Subject: Operations Research

Q.8.Find the optimum assignment and determine the total sales to be achieved by four
salesmen.
Salesman I II III IV
Ramesh 20 30 40 25
Sujit 15 25 30 30
Akash 40 30 45 15
Akshay 30 40 25 40

Step 1: Row Deduction

Salesman I II III IV
Ramesh 0 10 20 5
Sujit 0 10 15 15
Akash 25 15 30 0
Akshay 5 15 0 15

(The minimum no. in the 1st Row was 20 which is subtracted entire from the first row like
wise 15,15, 25 are the minimum in 2nd 3rd and 4th Rows respectively).

Step 2: Column Deduction

Salesman I II III IV
Ramesh 0 0 20 5
Sujit 0 0 15 15
Akash 25 5 30 0
Akshay 5 5 0 15

(The minimum no. in the 1st Row was 0 which is subtracted entire from the first row likewise
10,0, 0 are the minimum in 2nd 3rd and 4th Rows respectively).
Since Sujit and Ramesh have exactly same zeros at same place so Ramesh has been given I
while Sujit has been given II on random basis as the total sales of them given at any place is
same so on random basis, they have been allocated the Zones.
Salesman Zones Sales in that zone (Fig in Lakhs)
Ramesh I 20
Sujit II 25
Akash IV 15
Akshay V 25
Total 85

Q.1.Discuss the advantages and drawbacks of OR Models

Ans) Advantage of OR Models:
 An OR model provides a good grip over the problem. It indicates the installation and
domain of the activity
 An OR model provides a logical, scientific & systematical approach to the problem
 Through OR models one can incorporate useful tools which help in eliminating
duplication of method applied to solve specific problem.
 Models help in finding avenues for new research & development in a system.
 They provide economic description & explanations of the operations of the system
they represent.

Drawbacks of OR Models
 Models are only an attempt to understand operation & should never be consider as
absolute in any sense
 Validity of any model with regard to corresponding operation can only be verified by
carrying the experiment & relevant data characteristics.

Q.6.Find the optimum transportation schedule and cost of transportation.

Distribution Centres
Factories Aurangaba Supply
Mumbai Pune Nagpur d
Vapi 13 12 17 16 1000
Nashik 17 15 12 13 1200
Gandhidham 12 15 14 13 800
2800/300
Requirements 950 800 650 400 0
 Since demand is not equal to supply and supply is more than demand so we will create a
dummy area to have a demand of 200.
Step 1
Distribution Centres
Factories Aurangaba Dummy Supply
Mumbai Pune Nagpur d
Vapi 13 12 17 16 0 1000
Nashik 17 15 12 13 0 1200
Gandhidham 12 15 14 13 0 800
Requirement 950 800 650 400 200 3000

Solving the above problem using VAM method

Step 2: We have to calculate the difference between the first two smallest no. in rows as well
as column so.
Distribution Centres
Factories
Mumbai Pune Nagpur Aurangabad Dummy Supply
Vapi 13 12 17 16 0 1000 12,
0(200) 1200- 12,
Nashik 17 15 12 13 200=1000
Gandhidham 12 15 14 13 0 800 12,
Requirement 950 800 650 400 200 3000
1 3 2 0 0

Since there are three places where difference is highest we will supply In that place where
cost is low and we can supply maximum so we have supplied it in 2 nd row and 3rd column and
maximum we can supply is 200 as it’s the limit that can be supplied even of the supply it to
1000. The entire column of Dummy demand can’t be allocated further supplies as the
maximum demand is exhausted
Step 3 The first step is to be repeated but taking only unallocated spaces
Distribution Centres
Factories Aurangaba Dummy Supply
Mumbai Pune Nagpur d
0 1000- 12,1
Vapi 13 12(800) 17 16 800=200
0(200) 1200- 12,1
Nashik 17 15 12 13 200=1000
Gandhidham 12 15 14 13 0 800 12,1
800 – 200 3000
Requirement 950-800=150 800 = 0 650 400
1, 1 3,3 22 0,0 0,0

Since there are two places where difference is highest we will supply In that place where
cost is low and we can supply maximum so we have supplied it in 1 st row and 2nd column and
 maximum we can supply is 800 as it’s the limit that can be supplied even if the supply is
1000 because the demand is 800 so only 800 will be allocated The entire column of Pune
can’t be allocated further supplies as the requirement of Pune is fulfilled.
Step 4
Distribution Centres
Factories Dumm Suppl
Mumbai Pune Nagpur Aurangabad y y
Vapi 13(200) 12(800) 17 16 0 1000 12, 1,3
Nashik 17 15 12 13 0(200) 1200 12,1
0 800- 12,
Gandhidham 12 15 14 13 800=0
Requirement 950-200=750 800 650 400 200 3000
1, 3,3 222 0,0 0 0,0

Since there are two places where difference is highest we will supply In that place where
cost is low and we can supply maximum so we have supplied it in 1st row and 1st column
and maximum we can supply is 150 as it’s the limit that can be supplied even if the supply is
200 because the demand is 150 so only will be allocated The entire column of Mumbai can’t
be allocated further supplies as the requirement of Mumbai is fulfilled.
Step 5
Distribution Centres
Factories Dumm Suppl
Mumbai Pune Nagpur Aurangabad y y
Vapi 13(200) 12(800) 17 16 0 1000 12, 1,3
Nashik 17 15 12 13 0(200) 1200 12,1
0 800- 12,
Gandhidham 12 15 14 13 800=0
Requirement 950-200=750 800 650 400 200 3000
1, 3,3 222 0,0 0 0,0

Since the penalty is highest at vapi so the cost with least figure among the unallocated will
be given the left over supply of 200 which ends the supply in vapi

Step 6

Distribution Centres
Factories Dumm Suppl
Mumbai Pune Nagpur Aurangabad y y
Vapi 13(200) 12(800) 17 16 0 1000 12, 1,3
Nashik 17 15 12(650) 13(350) 0(200) 1200 12,1,1,1
Gandhidham 12(750) 15 14 13(50) 0 800 12,1,1,1
Requirement 950-200=750 800 650 400 200 3000
 1, 5 3,3 222 0,0 0 0,0

Distribution Centres
Factories Dumm Suppl
Mumbai Pune Nagpur Aurangabad y y
Vapi 13(200) 12(800) 17 16 0 1000 12, 1,3
Nashik 17 15 12(650) 13(350) 0(200) 1200 12,1,1,1
Gandhidham 12(750) 15 14 13(50) 0 800 12,1,1,1
Requirement 950-200=750 800 650 400 200 3000
1, 5 3,3 222 0,0 0 0,0

Final transportation schedule

The total Cost: 13*200+12*800+12*650+13*350+0*200+12*750+13*50

2600+9600+7800+4550+0+9000+650

34200

Q.2.Formulate a linear programming problem to maximize total exposure and write its
standard form.
Max Z= 3A+ 5B+ 4C (The figures are in lakh)
Subject to
1A+2B+0.5 <= 200 (The figures are in lakh)
25<=A=>60
10<=B=>40
10<=C=>30

A>= 0
B>=0
C>=0

Q.5.What is duality? Write the steps of converting primal to dual problem.

A) Duality in linear programming is essentially a unifying theory that develops the
relationships between a given linear program and another related linear program stated in
terms of variables with this shadow-price interpretation. The importance of duality is twofold.
First, fully understanding the shadow-price interpretation of the optimal simplex multipliers
can prove very useful in understanding the implications of a particular linear-programming
model. Second, it is often possible to solve the related linear program with the shadow prices
as the variables in place of, or in conjunction with, the original linear program, thereby taking
advantage of some computational efficiencies.
Steps to convert primal into dual problem
1st If the primal is in Max model the dual should be a min model and vice versa
2nd If the primal is a max model then all the constraints should be of greater than type if not
we have to convert them and then change it into greater then type
3rd While converting the values of the constraints will be converted to the object in dual and
vice versa
4th We have to transpose all the constraints in the dual program i.e. the rows will become
column and the column will become the rows.

Q.9.Discuss the terminologies and notations used in a decision tree. Write the
applications of decision tree.
There are three notations used in a decision tree

Decision Node Dn

Chance Node Cn

Connects outcome to
their choice

Applications of Decision tree

 When the user has an objective, he is trying to achieve: max, profit, optimise cost
 When there are several courses of action
 There is a calculable measure of benefit of the various alternative.
 When there are events beyond control of the decision maker
 Uncertainty concerning which outcome will actually happen

Q.4.Explain different types of inventory. Discuss ABC Analysis in detail.

 The two types of inventory
1. Direct inventory includes raw materials, components, and subassemblies that are
used in the manufacture of final products. This production inventory is further
classified as either raw materials, work in progress, or finished goods.
Direct inventory includes the following
 Raw material inventory these are the main inventory used in production
of final product like if cake is the final product then Maida egg to be used
in making that products are the raw material of it
 Work in progress these are the inventories used in completing the goods
and transforming the raw material into finish goods
 Finished goods these are the final inventory that is sold to the buyers to
consume/buyers use it and the sellers can earn profit form it

2. Indirect inventory refers to materials that are not directly used in a final product.
This class of inventory can include office supplies, furniture, and other goods used
by a company’s employees. Indirect materials can also include supplies called
maintenance, repair, and operations supplies that are used to maintain and repair a
company’s plant and equipment such as those used to manufacture a company’s
products. For example, spare parts and maintenance supplies such as lubricants for
a manufacturing line are considered indirect inventory. Hospitals also maintain
stocks of indirect inventory that include disposable items such as operating room
supplies

The different types of indirect inventory are;

 Lot Size it means the no. of goods which are order by the person from
manufacturer.
 Pipeline
 Safety(buffer): These are the extra finished goods made by manufacturer
in extra such that if there is some extra demand, he can fulfil that and not
fell short of.
 Seasonal the goods which are available only in season and rest are sell less
or is not available like raincoat that is only sold when the monsoon season
is there.
 Decoupling These are the extra finished good as well as work in finish
goods made by manufacturer in extra such that if there is some extra
demand, he can fulfil that and not fell short of.
ABC analysis is an approach for classifying inventory items based on the items’ consumption
values. Consumption value is the total value of an item consumed over a specified time
period, for example a year. The approach is based on the Pareto principle to help manage
what matters and is applied in this context:

A items are goods where annual consumption value is the highest. Applying the Pareto
principle (also referred to as the 80/20 rule where 80 percent of the output is determined by
20 percent of the input), they comprise a relatively small number of items but have a
 relatively high consumption value. So it’s logical that analysis and control of this class is
relatively intense, since there is the greatest potential to reduce costs or losses.

B items are interclass items. Their consumption values are lower than A items but higher than
C items. A key point of having this interclass group is to watch items close to A item and C
item classes that would alter their stock management policies if they drift closer to class A or
class C. Stock management is itself a cost. So there needs to be a balance between controls to
protect the asset class and the value at risk of loss, or the cost of analysis and the potential
value returned by reducing class costs. So, the scope of this class and the inventory
management policies are determined by the estimated cost-benefit of class cost reduction, and
loss control systems and processes.

C items have the lowest consumption value. This class has a relatively high proportion of the
total number of lines but with relatively low consumption values. Logically, it’s not usually
cost-effective to deploy tight inventory controls, as the value at risk of significant loss is
relatively low and the cost of analysis would typically yield relatively low returns.

Since businesses are not all the same, the thresholds that define the upper and lower limits of
each class are not definable. Nor will they necessarily be fixed over time or across all
locations. A business may have different risk appetites between different locations. For
example, a location in a high-crime area may have a higher proportion of A items or, where a
facility is less secure, more items may be classed as A. The management accountant should
carry out risk and stock management cost-benefit analyses by location to deliver the optimal
overall cost-benefit balance and to set the ABC ranges.

To illustrate the concept, a business may set the following class limits:

Class Items Cumulative Consumption Cumulative

value

A 20% 20% 70% 70%

B 30% 50% >20% 90%

C 50% 100% 10% 100%

Determine the optimal inventory policy at each of the manufacturing units in Capital Foods.
Q.10.Determine the optimal inventory policy at each of the manufacturing units in
Capital Foods.

EOQ = Sq root((2* D* Co)Ch))

Vapi Nashik Gandhidham
Demand (D) = 25000 20000 18000
Ordering (C0)= 50 35 30
Holding cost(Ch)
 =20*25% 15*20% 12*25%

5 3 3

EOQ = Sq. root ((2*25000*50)/5)

707.106 units

EOQ = Sq. root ((2*20000*35)/3)

683.13 units

EOQ= Sq. root ((2*18000*30)/3)

600 unitss