Assignment (40%)

1. JOY leather, a manufacturer of leather Products, makes three types of belts A, B and C
which is processed on three machines M1, M2 and M3. Belt A requires 2 hours on machine
(M1) and 3 hours on machine (M 2) and 2 hours on machine (M 3). Belt B requires 3 hours
on machine (M1), 2 hours on machine (M2) and 2 hour on machine (M3) and Belt C requires
5 hours on machine (M2) and 4 hours on machine (M3). There are 8 hours of time per day
available on machine M1, 10 hours of time per day available on machine M 2 and 15 hours
of time per day available on machine M3. The profit gained from belt A is birr 3.00 per
unit, from Belt B is birr 5.00 per unit, from belt C is birr 4.00 per unit. What should be the
daily production of each type of belt so that the profit is maximum?
a) Formulate the problem as LPM
b) Solve the LPM using simplex algorithm.
2. A manufacturing firm has discontinued production of a certain unprofitable product line.
This has created considerable excess production capacity. Management is considering
devoting this excess capacity to one or more of three products: product 1, 2 and 3. The
available capacity on the machines which might limit output is summarized in the
following table:
Machine Type Available Time
(in Machine- hours per Week)
Milling Machine 250
Lather 150
Grinder 50
The number of machine-hour required for each unit of the respective product is as follows

Machine Type Productivity in Machine-hours per Unit)

Product 1 Product 2 Product 3
Milling Machine 8 2 3
Lathe 4 3 0
Grinder 2 - 1

The profit per unit would be Birr 20, Birr 6, and Birr 8 respectively for product 1, 2 and 3. Find
how much of each product the firm should produce in order to maximize profit.
a) Formulate the problem as LPM
b) Solve the LPM using simplex algorithm.

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 3. Determine an initial basic feasible solution to the following transportation problem by
using (a) the least cost method, and (b) Vogel’s approximation method. Based the initial
basic feasible solution that is relatively small conduct a modified distribution method to
determine the optimum solution to the problem.

Source Destinations Supply

D1 D2 D3 D4
S1 1 2 1 4 30
S2 3 3 2 1 50
S3 4 2 5 9 20
Demand 20 40 30 10

4. Determine an initial basic feasible solution to the following transportation problem by

using (a) NWCM, Based the NWCM solution, carryout a stepping stone method of post
optimality analysis to arrive at the optimum solution.
Source D1 D2 D3 D4 Supply
A 11 13 17 14 250
B 16 18 14 10 300
C 21 24 13 10 400
Demand 200 225 275 200

5. Using the following cost matrix, determine

(a) Optimal job assignment, and
(b) The cost of assignments.

Job
Machinist 1 2 3 4 5
A 10 3 3 2 8
B 9 7 8 2 7
C 7 5 6 2 4
D 3 5 8 2 4
E 9 10 9 6 10
6. A solicitor’s firm employs typists on hourly piece-rate basis for their daily work. There
are five typists and their charges and speed are different. According to an earlier
understanding, only one job is given to one typist and the typist is paid for a full hour even
when s/he works for a fraction of an hour. Find the least cost allocation for the following
data:

Typist Rate/hour (Birr) Number of Pages Typed/hour Job No.of Pages

A 5 12 P 199
B 6 14 Q 175
C 3 8 R 145
D 4 10 S 298

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 E 4 11 T 178
Assume that the typist is to be paid @ birr 5 per hour, the elements of the cost matrix are
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obtained as follows. To illustrate, if typist A is given job P, he would require 199/12 =16
12
hours and, hence, be paid for 17 hours. This results in a cost of Birr 85(17 X 5) for this
combination.

7. A farmer is attempting to decide which of three crops he should plant on his 100 acre
farm. The profit from each crop is strongly dependent on the rainfall during the growing
season. He has categorized the amount of the rainfall as substantial, moderate or light. He
estimates his profit for each crop as shown in the table below:

Rainfall Estimated Profit (Br)

Crop A Crop B Crop C
Substantial 7,000 2,500 4,000
Moderate 3,500 3,500 4,000
Light 1,000 4,000 3,000
Based on the weather in previous seasons and the current projection for the coming season, he
estimates the probability of substantial rainfall as 0.2, that of moderate rainfall as 0.3 and that of
light rainfall as 0.5.

Furthermore, services of forecasters could be employed to provide a detailed survey of current

rainfall prospects as shown in the table.

Rainfall Estimated Profit (Br)

Crop B Crop C
Substantial 0.70 0.25 0.05
Moderate 0.30 0.60 0.10
Light 0.10 0.20 0.70

(a) From the available data, determine the optimal decision as to which crop to plant under
condition of uncertainty
(b) From the available data, determine the optimal decision as to which crop to plant under
condition of risk EMV and EOL

8. Using the following cost matrix, determine

(a) Optimal job assignment, and

(b) The cost of assignments.

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 Job
Machinist 1 2 3 4 5
A 10 3 3 2 8
B 9 7 8 2 7
C 7 5 6 2 4
D 3 5 8 2 4
E 9 10 9 6 10

9. Waiting line model

A new shopping mall is considering setting up an information desk manned by one
employee. Based upon information obtained from similar information desks, it is
believed that people will arrive at the desk at a rate of 20 per hour. It takes an average of
2 minutes to answer a question. It is assumed that the arrivals follow a Poisson
distribution and answer times are exponentially distributed.
a. Find the probability that the employee is idle.
b. Find the proportion of the time that the employee is busy.
c. Find the average number of people receiving and waiting to receive some
information.
d. Find the average number of people waiting in line to get some information.
e. Find the average time person seeking information spends in the system.
f. Find the expected time a person spends just waiting in line to have a
question answered (time in the queue).

10. The owner of shop is contemplating to add a new product, which will require additional
monthly payment of $ 20,000. Variable costs would be $ 5.00 per new product, and its
selling price is planned to be $ 8.00 each.
a. How many new products must be sold in order to break-even?
b. What would the profit (loss) be if 2,000 units were sold in a month?
c. How many units must be sold to realize a profit of $ 5,000?

11. Make a decision for the type of investment to be selected on the basis of the following
data using the Savage criterion (Minimax Regret Rule).

Alternatives State of nature

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 Good economic Medium condition Poor economic
condition condition

Apartment building $50,000 $45,000 $30,000

Office building $100,000 $70,000 - $40,000
Warehouse building $30,000 $20,000 $10,000

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