26.

Run a one-way sensitivity analysis on the optimal solution to the unit selling price of drug A
in the Repco model. If this price is high enough, will Repco start selling drug A in addition to
producing it? Then run a similar one-way sensitivity analysis on the optimal solution to the price
of drug B. If this price gets low enough, what happens to the optimal solution?

28. We claimed that the Repco model could either constrain the units produced to be greater than
or equal to the units used by production or constrain the units sold to be nonnegative. Modify the
model to implement the latter (deleting the former), and verify that you get the same optimal
solution.

29. In a production process model such as Repco’s, certain inputs make no sense in the
usage table (the range B7:D9 of the model). For example, suppose that, in addition to
current usages, each unit of drug A requires one unit of drug C. Why does this result in a
nonsensical problem? What happens if you run Solver on it anyway? What happens if you
run Solver on it after adding a constraint that the sum of the units produced (over all three
drugs) must be at least 1?

30. In the Barney-Jones investment model, increase the maximum amount allowed in any
investment to $150,000. Then run a one-way sensitivity analysis to the money market rate
on cash. Capture one output variable: the maximum amount of cash ever put in the money
market. You can choose any reasonable range for varying the money market rate.
32. We claimed that our model for Barney-Jones is generalizable. Try generalizing it to the case
where there are two more potential investments, F and G. Investment
F requires a cash outlay in year 2 and returns $0.50 in each of the next four years for every dollar
invested. Investment G requires a cash outlay in year 3 and returns $0.75 in each of years 5, 6, and
7 for every dollar invested. Modify the model as necessary, making the objective the final cash after
year 7.
34. In the pension fund model, suppose there is an upper limit of 60 on the number of
bonds of any particular type that can be purchased. Modify the model to incorporate this
extra constraint and then reoptimize. How much more money does James need to allocate
initially?
36. In the pension fund model, suppose James has been asked to see how the optimal
solution changes if the required payments in years 6 to 15 all increase by the same
percentage, where this percentage could be anywhere from 5% to 25%. Use an appropriate
one-way SolverTable to help him out, and write a memo describing the results.

38. Suppose the investments in the Barney-Jones model sometimes require cash outlays in
more than one year. For example, a $1 investment in investment B
might require $0.25 to be spent in year 1 and $0.75 to be spent in year 2. Does the current
model easily accommodate such investments? Try it with some cash outlay data you make
up, run Solver, and interpret the results.

39. In the pension fund model, if the amount of money initially is less than the amount
found by Solver, then James will not be able to meet all of the pension fund payments. Use
the current model to demonstrate that this is true. To do so, enter a value less than the
optimal value into cell B16. Then run Solver, but remove the Money_allocated cell as a
decision variable cell and as the objective cell. (If no objective cell is designated, Solver
simply tries to find a solution that satisfies all of the constraints.) What do you find?

40. Continuing the previous problem in a slightly different direction, continue to use the
Money_allocated cell as a decision variable cell, and add a constraint that it must be less
than or equal to any value, such as $195,000, that is less than its current optimal value.
With this constraint, James will not be able to meet all of the pension fund payments.
Create a new objective cell to minimize the total amount of payments not met. The easiest
way to do this is with IF functions. Unfortunately, this makes the model nonsmooth, and
Solver might have trouble finding the optimal solution. Try it and see.

42. The Salem Board of Education wants to evaluate the efficiency of the town’s four
elementary schools. The three outputs of the schools are
■ output 1 5 average reading score
■ output 2 5 average mathematics score
■ output 3 5 average self-esteem score

The three inputs to the schools are

■ input 1 = average educational level of mothers (defined by highest grade completed: 12 =
high school graduate; 16 = college graduate, and so on)
■ input 2 = number of parent visits to school (per child)
■ input 3 = teacher-to-student ratio

The relevant information for the four schools is given in the file P04_42.xlsx. Determine
which (if any) schools are inefficient.

44. You have been commissioned by Indiana University to evaluate the relative efficiency of
four degree-granting units: Business, Education, Arts and Sciences, and Health, Physical
Education, and Recreation (HPER). You are given the information in the file P04_44.xlsx.
Use DEA to identify all inefficient units.