IESE’s Management College and Research Centre, Mumbai

(FINAL EXAMINATION)

Date : 23/04/2021 Day: Friday Time: 11.00 am to 01.30 pm Duration: 21/2 Hrs.

Course : PGDM-1st Year Term.: III Sub: Operations Research Max. Marks: 60
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Instructions:
1) Q.1. Compulsory, solve any Five questions from remaining questions.
2) All questions carry equal marks (10 each)
3) Make suitable assumptions wherever required and also indicate them clearly.
4) Students have the option of solving the problems manually or even using Microsoft excel.
5) In case of solutions worked out on Microsoft Excel sheets, please submit the same for
evaluation along with the PDF file.
6) Students are not expected to share their solved excel sheets with any other student. In case of any
similarity identified or suspicion of similarity between the submissions of two students, both the
submissions will be rejected without any reasons being indicated.
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1. National Electronics manufactures three types of Ovens: low priced Budget model, a
Regular model, and a high priced Premium model. The profits per unit are Rs 630, Rs 950,
and Rs 1350 respectively. The production requirements per unit are as follows:
Model Number of Number of Manufacturing
Control Panels Heating coils time (hours)
Budget 1 1 8
Regular 1 2 12
Premium 1 4 14
a) For the coming production period, the company has 200 Control Panels, 320 Heating coils 5 CO1
and 2400 hours of manufacturing time available. How many Budget models (B), Regular
models(R), and Premium models (P) should the company produce in order to maximize
profit? Formulate the problem as a linear programming model.
b) Solve the problem using MS-Excel Solver. 2 CO2
c) Based on the Answer report and Sensitivity Analysis report answer the following 3 CO3
questions:
a) What is the optimal solution and what is the total profit?
b) Which constraints are binding?
c) What is meant by reduced cost?
d) Which constraint shows extra capacity? How much?
e) If the profit for the deluxe model were increased to Rs1500 per unit, would the
optimal solution change?
f) If the number of fan motors available for production is increased by 50, what will be
the changed objective function value?

2. Five workers are available to work with the machine and the respective costs (in Rs.)
associated with each worker-machine assignment is given below. Note: some workers
are not trained to work on certain machines. Their combination has been marked as
------.
Workers Machines
M1 M2 M3 M4 M5
W1 12 3 6 ---- 5
W2 4 11 ----- 5 3
W3 8 2 10 9 7
W4 ----- 7 8 6 12
W5 5 8 9 4 6

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 a) Find the optimal solution to assign workers to machines. What is the total cost? 6 CO2
b) A sixth machine is available to replace one of the existing machines and the associated 4 CO3
costs are as follows:
M6
W1 0
W2 3
W3 5
W4 10
W5 -----
Determine whether the new machine can be accepted? If this machine is to be included,
then which machine should it replace?

3. The data relating to production capacities of plants, orders from warehouses and freight
costs for a company manufacturing consumer products are given below.
Production capacities of plants Warehouse Order Sizes
Unit cost Capacities Order size
Plant Warehouse
(Rs) (‘000 units) (‘000 units)
X 12 20 P 15
Y 10 16 Q 18
Z 15 25 R 12
S 14
Freight costs/unit
P Q R S
X 3 1 2 4
Y 6 4 3 2
Z 4 5 7 3
a) From the above information formulate the appropriate model to determine the optimum 4 CO1
distribution for minimizing the total costs to make and ship the product to warehouses.
b) Find the optimal distribution schedule and total cost manually or using Microsoft Excel 3 CO2
solver.
c) What if the transporter of the route ZR is ready to offer a reduced freight cost of Rs.5 per 3 CO3
unit? Should his offer be considered?

4. A company manufactures 30 units per day. The sale of these items depends upon demand
which has the following distribution:
Sales (Units) 27 28 29 30 31 32
Probability 0.1 0.15 0.2 0.35 0.15 0.05
The production cost and sale price of each unit are Rs. 40 and Rs. 50, respectively. Any
unsold product is to be disposed off at a loss of Rs. 15 per unit. There is a penalty of Rs. 5
per unit if the demand is not met.
Using the following random numbers, simulate the sales for the next ten days. 6 CO1
10, 99, 65, 99, 95, 01, 79, 11, 16, 20
Estimate the total profit/loss for the company for the next ten days. 4 CO2

5. Avon pharmaceutical is currently looking to add a new drug to add its existing products.
The company can conduct research or can buy a patent from a research agency. The
alternatives are as follows:
i. The company can pay Rs. 5,000 as fees for the patent which will bring a gross income
of Rs. 20,000.
ii. The company can conduct research R1 which is expected to cost Rs. 10,000 and
having 90% probability of success. If successful, the gross income will be Rs. 26,000.
iii. The company can conduct research R2 which is expected to cost Rs. 6,000 and having
60% probability of success. If successful, the gross income will be Rs. 18,000.

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 a) Because of limited resources, only one of the two types of research can be carried out at a 6 CO1
time. Draw a decision tree.
b) Evaluate the expected payoffs of each alternative. 2 CO2
c) Suggest the optimal strategy for the company. 2 CO3

6. The following table gives the activities in a construction project and other relevant
information.
Activity Immediate predecessor Time (months) Direct Cost (Rs.'000)
Normal Crash Normal Crash
A ………. 4 3 60 90
B ………. 6 4 150 250
C ………. 2 1 38 60
D A 5 3 150 250
E C 2 2 100 100
F A 7 5 115 175
G D, B, E 4 2 100 240
H F. G 1 1 200 200
Indirect costs vary as follows:
Months 15 14 13 12 11 10 9 8 7
Cost (Rs) 600 500 400 250 175 100 75 50 35
a) Draw the network diagram for the project. 3 CO1
b) Identify critical path and normal project duration. 2 CO2
c) Determine the project duration which will return in minimum total project cost. 5 CO3

7. In a by-election campaign, the strategies adopted by the ruling and opposition parties,
along with payoffs, (ruling party’s percent share in votes polled) are given below.
Assume zero sum game.
Strategy of Opposition Party
Campaig Spend Spend one
Campaig
n two two days day each
n one day
Strategy of Ruling Party days in in large in city and
in each
large rural in rural
city
towns sector sector
Campaign one day in each city 55 40 35 40
Campaign two days in large towns 70 70 55 65
Spend two days in large rural sector 75 55 65 70
Spend one day each in city and in
65 60 50 55
rural sector
a) Suggest the Optimal strategies for the two parties. 5 CO2
What is the probability of use of these strategies and the expected gain for ruling party and 5 CO3
b)
expected loss for opposition party (value of game)?
8. A warehouse has only one loading dock manned by a three-person crew. Trucks arrive at
the loading dock at an average rate of four trucks per hour and are Poisson distributed. The
loading of a truck takes 10 minutes on an average and the loading time can be assumed to
be exponentially distributed about this average. The operating cost of the truck is Rs 100
per hour and the members of the crew are paid at the rate of Rs 25 per hour per person.
a) What is the expected time the truck is idle? 3 CO1
b) What is the total cost? 2 CO2
c) The management wants to reduce the idle time of truck and is planning to add an additional 5 CO3
crew to load the goods. Assuming that the addition of new crew members would reduce the
loading time to 7.5 minutes, would you advise the truck owner to add another crew of three
persons?

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