Take Home Final Exam Answer Sheet

Professor: Dr. Erman COSKUN Name:

Class: EMB 2020 Student ID:

Class: QM 511 Date:

Instructions:

1. ALL WORK MUST BE YOUR OWN. I DO NOT WANT COPY-PASTE ANSWERS OR BOOK
DEFINITIONS. FOR QUESTION-4 and WHERE APPROPRIATE YOU MUST PROVIDE
REFERENCES YOU ARE USING. FOR DEFINITIONS YOU CAN USE SOURCES BUT FINAL ONE
YOU ARE USING SHOULD BE YOUR OWN.
2. I DO NOT want any Excel file. You must copy-paste screen shots of your Excel solutions
to this document.
3. Once you are done upload this answer sheet on Black Board.
4. Deadline Nov 2 (Tuesday) 23:59 PM.
5. Maximum temps to upload: 2 (In case you encounter some technical issues)
6. You have to complete this exam answer sheet by yourself. Academic honesty is very
important and all kind of checks related to academic integrity and plagiarism will be
made by the instructor.
7. No late submission will be accepted under any circumstance. So please do not wait until
last minute to avoid from technical problems and difficulties.
8. Submit ONLY your Word file. For Excel solutions put SCREEN SHOTS as pictures.

Question 1:
This should be about two or three paragraphs or no more than a one-sided page in length. You
should use your own words and comments and not those of the text or anyone else. In your own
words briefly discuss the essentials and importance of Linear Programming models and how they
are used in the business world. What are the pros and cons of linear programming. Give an
example of their use in functional business areas like Marketing, Production, Finance, Human
Resources. (20 POINTS)

Answer-1
Question 2:
A corporation plans on building a maximum of 11 new stores in a large city. They will build
these stores in one of three sizes for each location – a convenience store (open 24 hours),
standard store, and an expanded services store. The convenience store requires $4.125 million to
build and 30 employees to operate. The standard store requires $8.25 million to build and 15
employees to operate. The expanded-services store requires $12.375 million to build and 45
employees to operate. The corporation can dedicate $82.5 million in construction capital, and
300 employees to staff the stores. On the average, the convenience store nets $1.2 million
annually, the standard store nets $2 million annually, and the expanded services store nets $2.6
million annually. How many of each should they build to maximize revenue? Please put screen
shots of Excel Model and Solver and interpret the results. (20 POINTS)
Answer-2
Question 3:
Please go over BLENDING AT CHANDLER OIL from our textbook. Pg 639. I know that the
solution is already there. I want you to look at the question, understand it. Look at the book
design and solution of problem provided in the book and understand it. Then close the book and
design it by yourself and develop your own MODEL. If you have difficulty you can revisit the
book solution and comeback to your own design. So, only copy and pasting will not help, I want
to see your design. Of course the results will be same as book but your design will be different.
(20 POINTS)

Answer-3

Question 4:
Please tell me your understanding of what is sensitivity analysis in linear programming
problems? What is the definition of shadow price? What is the managerial use of sensitivity
analysis and shadow prices? Find an example (from any source) and clearly explain sensitivity
analysis and shadow prices on it by using managerial approach. Your example must be
meaningful for explaining sensitivity analysis. (20 POINTS)

Answer-4

Question 5
You are high level decision maker for a production company. You produce and export your
products. You are aware of uncertainty in the market and trying to predict your end of 2020
profit.
* From analysis of past contracts and documents you found out that average price for the past was
SAR 37.5, and that prices of individual sales is uniformly distributed between SAR 35 and 40
* Your marketing and sales manager forecasts that your sales number would be 1.1 million units for
2021 with standard deviation of 180000 units. Sales quantity is normally distributed.
* Raw material and transportation are variable costs. Based on past data, these costs are equal to an
average of 50% of sales price.
* There are fixed cost items such as managerial costs and salaries. They are calculated based on
SAR and they are uniformly distributed between 25.000.000 - 35.000.000 SAR (20 POINTS)
Please use Monte Carlo Simulation and answer below questions.

A) What is the simulated chance of making a profit in 2021?

B) What is the expected profit?

C) A business partner offers to take over the business for one year for 20 million SAR. Should you take
the deal? Why /why not?

Please put screen shot of Excel file with simulated results

Answer-5