NATIONAL INSTITUTE OF TECHNOLOGY CALICUT

Department of Mechanical Engineering

Monsoon Semester 2021 - 2022
ME3104D PRINCIPLES OF MANAGEMENT
Common for S5 MCA/S5 BT/S5 EP/S5 CH/S5 SMSE
Test II
Duration: 2 Hours Maximum Marks: 20
Date: 05-10-2021 Time: 8:30 to 10:30
Answer ALL questions

Students are directed to upload the scanned copy of the answer paper in a single pdf file.
Please ensure that all the pages have your Name, Roll number, and Signature.
File Name: Branch_Batch_First name_RollNo
Consider the last two digits of your register number as XY (e.g.,B1900XYME)

1. A research team of “Nanma food Products” has found that the potential for dairy products
is very high in the current market. The firm decided to manufacture any one of the dairy
products based on the forecasted demand data. The unit manufacturing cost of curd, milk
and peda is 3Y, 2Y and 2X, and the unit selling price is 4Y, 3Y and 3X, respectively. The
table shows forecasted demand data for these dairy products. Suggest the best decision to
become a venture in the market.

Moderate
High Demand Low Demand
Demand

Curd 9Y0 3X0 1Y0

Milk 8X0 4Y0 2Y0

Peda 6Y0 5X0 2X0

Probabilities 0.55 0.25 0.2

a) Formulate a pay-off matrix [1 Mark]

b) Calculate Expected monetary value? [1 Mark]
c) Calculate Expected Value of Perfect Information? [1.5 Mark]
d) Calculate Expected opportunity loss value? [1.5 Mark]

2. Company TechWire is planning to launch a new product of Optical-Fibre-cables (OFC)

with HD setup box which can be introduced initially either in northern Kerala or in the
entire state of Kerala. If the product is introduced only in northern Kerala, the investment
outlay will be Rs 10 Crore for 5 years. After one year, the company can evaluate the
project to determine whether it should cover the entire state of Kerala or stop the project.
For such an expansion, it will have to incur an additional investment of Rs 6 Crore for 4
 years. To introduce the product in the entire state of Kerala right at the beginning would
involve an outlay of Rs 18 Crore for five years. The product, in any case, will have a life of
5 years after which it will have zero net value.
If the product is introduced only in northern Kerala, demand would be high, moderate or
low with the probabilities of 0.5, 0.3 and 0.2, respectively, with annual cash inflow of Rs 3
Crore, Rs 2.5 Crore and Rs 2 Crore, respectively.
If the product is introduced in the entire state of Kerala right in the beginning, the demand
would be high, moderate or low with the probabilities of 0.4, 0.5 and 0.1, respectively, with
annual cash inflows of Rs 5 Core, 4 Crore and Rs 3 Crore, respectively.
The decision to expand the network in the entire Kerala will be based on the observed
demand in northern Kerala after the initial implementation. If the product is introduced in
the entire state of Kerala, the following probabilities would exist for high, moderate and
low demands, with annual cash inflow of Rs 4 Crore, Rs 3 Crore and Rs 2.5 Crore,
respectively. Assume that all amounts are calculated in terms of the present value.
Probabilities for high, moderate and low demands if the product is introduced in the entire
state of Kerala as per observed demand in northern Kerala:

Entire Kerala High Moderate Low

Demand Demand Demand
Northern Kerala

High Demand 0.7 0.2 0.1

Moderate Demand 0.6 0.2 0.2

Low Demand 0.3 0.2 0.5

On the basis of this information:

a) Construct the decision tree [3 Marks]
b) Calculate the EMV value for all decision nodes [3 Marks]
c) What decision will be the most favourable for TechWire company [1 Marks]

3. RJL Industries is compiling the monthly productivity report for its Board of Directors from
the following data, calculate
a) Labor productivity [1 Mark]
b) Machine productivity [1 Mark]
c) Multifactor productivity of dollars spent on labor, machine, materials, and
energy. [1 Mark]
The average labor rate is $15 an hour, and the average machine usage rate is $10 an
hour.
 Units produced 100,000

Labor hours 10,000

Machine hours 5000

Cost of materials $35,000

Cost of energy $15,000

4. The table provides the cost matrix of decision problem. Answer the following questions.

States of Natures

N1 N2 N3 N4 N5

S1 300 250 650 900 760

Decision Alternatives

S2 200 150 560 700 180

S3 830 760 290 600 490

S4 570 180 300 820 900

S5 100 490 150 450 700

a) Formulate the regret matrix. [1 Mark]

b) What will be your optimum choices based on the Hurwicz criterion (α = 0.3) of
decision making under uncertainty? When will it become identical to
MAXIMAX and MAXIMIN principles? [1.5 Mark]
c) What will be your decision based on savage principle? [1 Mark]
d) What decision alternatives would you choose with the help of Laplace
Criterion, Optimism Criterion, and Pesimism Criterion? [1.5 Mark]