SCM3101 Management Science

Group Assignment 1

Due: 10 March 2023 (Fri: 6:00pm – Online Submission)

Submission Requirements:
1. Answers must be typed. Be sure to include as much details or steps as possible in your
answers.
2. Use this page as the front page of your file

Lecture: ________________

Student ID Name

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_______________________ ______________________________

_______________________ ______________________________

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Question 1
EatDuckHappy Restaurant needs to decide whether to introduce a new delivery service for
delivering Christmas party foods to the customers. They purchased a delivery van and painted
with the logo and the restaurant name for $28,000. The fixed salary for hiring a full-time
driver is $15,000. They estimate that each delivery will cost about $5.6 in gas and other
maintenance costs (including tires, oil and scheduled service). In addition, each delivery
order will have $80 for direct labour and ingredients cost, and, they expect that each order
will receive revenue of $250.
(a) Assume that every order that is prepared is delivered, write an expression for the profit in
terms of cost and revenue.
(b) With the aid of Excel spreadsheet, how many delivery orders must the restaurant make in
order to break even?
(c) In order to promote the new delivery service, the restaurant plans on spending one-time
expenditures of $8,000 toward advertising through Youtube and Instagram. By doing so,
they can increase the order volume by 50. Should they spend on advertising? What is the
profit / loss if the restaurant decided to implement this plan? Explain your answer in the
Word file and show your model in Excel?
(d) Due to the inflation, the cost for direct labour and ingredients is increased by $20 and the
restaurant plans to also increase the revenue for each order to $270. Will these changes
affect the breakeven point? Explain your answer in the Word file and show your model in
Excel.

Question 2
The Professional Television has to decide on the number of 65” and 55” sets to be produced
at one of its factories. Market research indicates that at most 280 of the 65’ sets and 70 of the
’55 sets can be sold per month. The maximum number of work-hours available is 3,500 per
month. A 65” set requires 20 work-hours and a 55” set requires 10 work-hours. Each 65” set
sold produces a profit of $270 and each 55” set produces a profit of $180. A wholesaler has
agreed to purchase all the television sets produced if the number do not exceed the maxima
indicated by the market research.
(a) Formulate a linear programming model for this problem so as to maximize total profit.
(b) Use the graphical method to solve this model.
(c) Use the Solver to solve this model and explain the answers. Decide yourself whether you
would prefer to do this by hand, by using the Graphical Linear Programming or by using
the Solver in this Management Science Modules.
Question 3
The emergency room at a hospital operates 24 hours a day. There are five shifts for doctors to
report their duty: 6 a.m., 10 a.m., 2 p.m., 6 p.m. or 10 p.m. Doctors work a 12-hour shift and
the salary of doctors is $72k. The following table shows the minimum number of doctors that
should be available during different periods.
Time Number of Doctors Time Number of Doctors
Required Required
6 a.m. – 10 a.m. 6 6 p.m. – 10 p.m. 16
10 a.m. – 2 p.m. 10 10 p.m. – 2 a.m. 8
2 p.m. – 6 p.m. 18 2 a.m. – 6 a.m. 5

The hospital administration wants to determine how many doctors should report for work at
the start of each shift so as to minimize the staffing cost.
(a) Identify the decisions to be made, the constraints on these decisions, and the overall
measure of performance for the decisions.
(b) Formulate and solve a linear programming model for this problem on a spreadsheet.
(c) Express the model in algebraic form.

Question 4
Mary is the chief financial officer for ABC Electric Co., a major public utility in Midwest.
The company has scheduled the construction of new hydroelectric plants 10, 15, and 20 years
from now to meet the needs of the growing population in the region served by the company.
To cover the construction costs, Maureen needs to invest some of the company’s money now
to meet these future cash flow needs. Maureen may purchase only three kinds of financial
assets, each of which costs $2 million per unit. Fractional units may be purchased. The assets
produce income 10, 15, and 20 years from now, and that income is needed to cover minimum
cash flow requirements in those years, as shown in the following table.
Income per Unit of Asset
Year Asset 1 Asset 2 Asset 3 Min. Cash Flow Required
($ million) ($ million) ($ million) ($ million)
10 2.0 1.0 0.5 700
15 0.5 0.5 1 400
20 1.0 1.0 1.0 300
Maureen wishes to determine the mix of investments in these assets that will cover the
cash flow requirements while minimizing the total amount invested.
(a) Formulate a linear programming model for this problem on a spreadsheet.
(b) Use the spreadsheet to check the possibility of purchasing 100 units of asset 1, 100 units
of asset 2, and 200 units of asset 3. How much cash flow would this mix of investments
generate 10, 15, and 20 years from now? What would be the total amount invested?
(c) Take a few minutes to use a trial-and-error approach with the spreadsheet to develop
your best guess for the optimal solution. What is the total amount invested for your
solution?
(d) Use the Solver to find an optimal solution.
(e) Summarize the model in algebraic form.
Question 5
David, Lily and Lydia are the sole partners and workers in a company that produces fine
clocks. David and Lily are each available to work a maximum 60 hours per week at the
company, while Lydia is available to work a maximum of 36 hours per week.
The company makes two different types of clocks: a grandfather clock and a wall clock. To
make a clock, David (a mechanical engineer) assembles the inside mechanical parts of the
clock while Lily (woodworker) produces the hand-carved wood casings. Lydia is responsible
for taking orders and shipping the clocks. The amount of time required for each of these tasks
is shown as follows:
Time Required
Task Grandfather Clock Wall Clock
Assemble clock mechanism 6 hours 4 hours
Carve wood casing 8 hours 4 hours
Shipping 3 hours 3 hours

Each grandfather clock built and shipped yields a profit of $300, while each wall clock yields
a profit of $200. The three partners now want to determine how many clocks of each type
should be produced per week to maximize the total profit. Based on the information given, a
linear programming model is formulated and the sensitivity report is shown in the following:
Variable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$B$2 Amount Grandfather Clock 3 0 300 100 100
$C$2 Amount Wall Clock 9 0 200 100 50

Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$D$6 Assemble clock mechanism 54 60
$D$7 Carve wood casing 60 25 60 12 12
$D$8 Shipping 36 33.33 36 9 13.5

(a) What is the optimal solution and total profit?

(b) Determine the allowable range for the unit profit for each type of clock.
(c) Suppose the unit profit for grandfather clocks increases by 50. Will this change the
optima production quantities? What can be said about the change in total profit?
(d) Suppose the unit profit for grandfather clocks decrease by 50 and the unit profit of wall
clock increases by 50. Will this change the optima production quantities? What can be
said about the change in total profit?
(e) If Lydia changes her maximum number of hours available to work per week from 36 to
30, how much would this affect total profit? Would it change the optimal production
quantities?
(f) Fill in all the sensitivity report information for the assemble clock mechanism constraint,
given just the optimal solution for the problem. Explain how you were able to deduce
each number.
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