Decision Sciences 1 : Some problems from Sessions 7 & 8

1. An office has two clerks, and three people, A, B and C, enter

simultaneously. A and B begin service at the two clerks, while C waits for
the first available clerk. Assume that each service time is iid Exponential
with mean 10 minutes.
a. Compute the probability that A is the last to finish the service.
b. Compute the expected time before C is done (i.e., C’s combined
waiting and service time).

2. Airline passengers arrive randomly and independently at the

passenger-screening facility at a major international airport. The
mean arrival rate is 10 passengers per minute.
a. Compute the probability of no arrivals in a one-minute period.
b. Compute the probability that three or fewer passengers arrive in a
one-minute period.
c. Compute the probability of at least one arrival in a 15-second
period.

3. A car wash has two stations, 1 and 2, with Exponential(𝜆! ) and

Exponential(𝜆" ) service times. A car enters at station 1. Upon
completing the service at station 1, the car then proceeds to station 2,
provided station 2 is free; otherwise, the car has to wait at station 1,
blocking the entrance of other cars. The car exits the wash after service
at station 2 is completed. When you arrive at the wash there is a single
car at station 1. Compute your expected time before you exit.

4. There are approximately 30 meteor showers that occur every year which
can be observed on earth. The most famous meteor shower being – ‘The
Perseids’. The Perseids peak during mid-August and is active from July 17
to August 24. Assume that the expected number of meteors per hour on
any night is 62 and the number of meteors during any hour is
independent and identically distributed according to a Poisson process.
a. How many meteors, on average, you are expected to witness
during 12am to 4am?
b. What is the probability that during an hour, you would not see any
meteor at all?
 c. What is the probability that during an hour, you would observe at
most 50 meteors?
d. What is the probability that exactly 15 meteors can be witnessed
within the first 30 minutes of any hour of any night?

5. Assume that cabs arrive at rate 10 per hour. Also assume that each cab
will pick up a passenger with probability 0.7. If you are the second
passenger in a line, what is the probability that you will have to wait for
more than 30 minutes before you get a cab?

6. Over 500 million tweets are sent per day (digital Marketing ramblings
website, December 15, 2014). Assume that the number of tweets per
hour follows a Poisson distribution and that Mr Trump receives on
average 7 tweets during his lunch hour.
a. What is the probability that Mr Trump receives no tweets during
his lunch hour?
b. What is the probability that Mr Trump receives at least 4 tweets
during his lunch hour?
c. What is the expected number of tweets he will receive during the
first 30 minutes of his lunch hour?

7. McDonald’s has been one of the most prominent players in the fast food
business. They serve many customers every day at each of their outlets
in the U.S. Almost 70% of their revenue comes from their drive-
throughs. Hence it is important for them to quickly serve each of their
customers as fast as possible in order to prevent losing customers. On an
average, the waiting time at a McDonald’s drive-through is 208 seconds
for every customer. Now, McDonald’s wants to analyse this lead time
using an exponential distribution.
a. What is the probability that the service time for one customer is
going to be less than or equal to 3 minutes?
b. If the service time for every customer is independent and
identically distributed, what is the expected number of customers
to be served during an hour?
c. McDonald’s customer policy states that if the service time exceeds
5 minutes, the food will be given away to the customer for free.
What is the probability that a car coming through the drive
through will receive their order for free?
8. The Boston Fire Department receives 911 calls at a mean rate of 1.6 calls
per hour (Mass.gov website, November 2012). Suppose the number of
calls per hour follows a Poisson probability distribution.
a. What is the mean time (in minutes) between consecutive 911 calls
to the Boston Fire Department?
b. Using the mean in part (a), show the probability density function
for the time between consecutive 911 calls.
c. What is the probability that there will be less than one hour
between consecutive 911 calls?
d. What is the probability that there will be more than 5 minutes, but
less than 20 minutes between 911 calls?

9. Five observations taken for two variables are as follow.

X 6 11 15 21 27
y 6 9 6 17 12

a. Develop a scatter diagram for these data.

b. What does the scatter diagram indicate about a relationship
between x and y?
c. Compute and interpret the sample covariance.
d. Compute and interpret the sample correlation coefficient.

10. A department of transportation’s study on driving speed and miles per

gallon for midsize automobiles resulted in the following data:

Speed 30 50 40 55 30 25 60 25 50 55
Miles per Gallon 28 25 25 23 30 32 21 35 26 25

Compute and interpret the sample correlation coefficient.

11. PortaCom has developed a design for a high-quality portable printer.

The two key components of manufacturing cost are direct labour and
parts. During a testing period, the company has developed prototypes
and conducted extensive product tests with the new printer.
PortaCom’s engineers have developed the bivariate probability
 distribution shown below for the manufacturing costs. Parts cost (in
dollars) per printer is represented by the random variable x and direct
labour cost (in dollars) per printer is represented by the random
variable y. Management would like to use this probability distribution
to estimate manufacturing costs.

Parts cost Direct Labour cost (y) Total

(x) 43 45 48
85 0.05 0.2 0.2 0.45
95 0.25 0.2 0.1 0.55
Total 0.3 0.4 0.3 1.00

a. Show the marginal distribution of direct labour cost and compute

its expected value, variance, and standard deviation
b. Show the marginal distribution of parts cost and compute its
expected value, variance, and standard deviation.
c. Total manufacturing cost per unit is the sum of direct labour cost
and parts cost. Show the probability distribution for total
manufacturing cost per unit.
d. Compute the expected value, variance, and standard deviation of
total manufacturing cost per unit.
e. Are direct labour and parts costs independent? Why or why not? If
you conclude that they are not, what is the relationship between
direct labour and parts cost?
f. PortaCom produced 1500 printers for its product introduction. The
total manufacturing cost was $198,350. Is that about what you
would expect? If it is higher or lower, what do you think may have
caused it?

12. J.P. Morgan Asset Management publishes information about financial

investments. Over the past 10 years, the expected return for the S&P
500 was 5.04% with a standard deviation of 19.45% and the expected
return over that same period for a core bonds fund was 5.78% with a
standard deviation of 2.13% (J.P. Morgan asset Management, guide to
the Markets, 1st quarter, 2012). The publication also reported that the
correlation between the S&P 500 and core bonds is −0.32. You are
considering portfolio investments that are composed of an S&P 500
index fund and a core bonds fund.
a. Using the information provided, determine the covariance
between the S&P 500 and core bonds.
b. Construct a portfolio that is 50% invested in an S&P 500 index fund
and 50% in a core bonds fund. In percentage terms, what are the
expected return and standard deviation for such a portfolio?
c. Construct a portfolio that is 20% invested in an S&P 500 index fund
and 80% invested in a core bonds fund. In percentage terms, what
are the expected return and standard deviation for such a
portfolio?
d. Construct a portfolio that is 80% invested in an S&P 500 index fund
and 20% invested in a core bonds fund. In percentage terms, what
are the expected return and standard deviation for such a
portfolio?
e. Which one of the above three portfolios do you think is the best?