1|Page

1. A retired person wants to invest up to an amount of birr 30000 in fixed income securities.
His broker recommends investing in two bonds. Bond A yielding 7% and bond B
yielding 10%. After some confederation, he decides to invest at most birr 12,000 in bond
B and at least birr 6000 in bond A. he also wants the amount invested in bond A to be at
least equal to the amount invested in bond B.

a. Formulate the above problem as a linear programing model

b. Obtain optimal solution to the problem.

Let X amount in bond A and Y amount in bond B
Then A.T.P
Z=0.07X + 0.1Y
Subject to Constraint
X + Y < 30,000……….…. (a)
X > 12,000………………. (b)
Y > 6,000…………………(c)
And X>Y or X-Y>0 and X>0, Y>0
Now change inequality into equations
X+Y=30,000 X=12,000 Y=6,000 X=Y
30,000 Y

20,000
X+Y=30,000

10,000 X=12,000Y=18000
Y=6,000 Y=24,000
X
10,000 20,000 30,000

What should the broker recommended if the investor wants to maximize his return on investment?
the rate of return on bonds A is 7% and the rate of return on bonds B is 10%. it makes sense to buy as many bond B as you
can and as few bond A as you can.
The most you can invest in the bond B is 12,000 .
2|Page
The least you can invest in the bond A is 6,000 .
Since you have to invest 30,000 , then you must invest 18,000 in bond A because the most you can invest in bond B is
12,000
Your maximum profit will be 12,000 * .1 + 18,000 * .07 = 2,460 . the requirements of the problem are met.
Those are:
No more than 12,000 invested bond B.
No less than 6,000 rm invested in bond A.
amount invested in bond A and bond B must be equal to 30,000.
The solution is that the broker should recommend 12,000 be placed bond B and 18,000 be placed in bond A.
2. A cement company has three factories which manufacture cement which is then
transported to four distribution centers. The quantity of monthly production of each
factory, the demand of each distribution center and the associated transportation
cost per quintal are given bellow.

Factories Distribution centers

W X Y Z Monthly production
A 10 8 5 4 7000
B 7 9 15 8 8000
C 6 10 14 8 10000
Monthly demand 6000 6000 8000 5000
a. Formulate the above as a transportation problem, and find the initial solution
using VAM.
Solution
Factories Distribution centers The VAM
W X Y Z Monthly penalty cost
production
A 10 8 5 4 7000 1
B 7 9 15 8 8000 1
C 6 10 14 8 10000 2
Monthly demand 6000 6000 8000 5000
The VAM 1 1 9 4
penalty cost

3|Page
 Factories Distribution centers The VAM
penalty cost
W X Y Z Monthly
production
A 10 8 5 4 7000
Initial VAM 7000
Allocation B 7 9 15 8 8000 1
C 6 10 14 8 10000 2
Monthly demand 6000 6000 8000 5000
The VAM 1 1 1 0
penalty cost
After each cell allocation, all row and column penalty costs are recomputed
Factories Distribution centers The VAM
penalty cost
W X Y Z Monthly
production
A 10 8 5 4 7000
7000
Second VAM
Allocation B 7 9 15 8 8000 1
C 6 10 14 8 10000 2
6000
Monthly demand 6000 6000 8000 5000
The VAM 1 1 1 0
penalty cost

Recomputed penalty costs after the third allocation

Factories Distribution centers The VAM
penalty cost
W X Y Z Monthly
production
A 10 8 5 4 7000
Third VAM 7000
Allocation B 7 9 15 8 8000 1
600 1000 1000
C 6 10 14 8 10000 2
6000 4000
Monthly demand 6000 6000 8000 5000
The VAM 1 1 0
penalty cost

4|Page
 Factories Distribution centers

W X Y Z Monthly
production
A 10 8 5 4 7000
7000
B 7 9 15 8 8000
6000 1000 1000
The Initial C 6 10 14 8 10000
VAM Solution 6000 4000
Monthly demand 6000 6000 8000 5000

Z= 10*0+8*0+5*7000+7*0+9*6000+15*1000+8*1000+6*6000+10*0+14*0+8*4000
Z = 35,000+54,000+15,000+8,000+36,000+32,000
Z=180,000
3. A firm produces four products. There are four operators who are capable of
producing any of these four products. The film records 8 hours a day and allows 30
minutes for lunch. The processing time in minutes and the profit for each of the
products are given bellow.
Operator Products

A B C D
1 15 9 10 6
2 10 6 9 6
3 25 15 15 9
4 15 9 10 10
Profit ($)/unit 8 6 5 4
Find the optimal assignment of products to operators.
Solution

The firm records 8 hours a day and allows 30 minutes for lunch, hence the networking time available per day is 7 hours
and 30 minutes i.e., 450 minutes. The number of units of each product which could be produced in 450 minutes by the
four operators is calculated in the table given below:
Operator Products

5|Page
 A B C D
1 30 50 45 75
2 45 75 50 75
3 18 30 30 50
4 30 50 45 45
Profit ($)/unit 8 6 5 4

Since we are given the profit per unit of each product, the profit matrix is computed as given below

Operator Profit Matrix in $ of

products
A B C D
1 240 300 225 300
2 360 450 250 300
3 144 180 150 200
4 240 300 225 180

The above profit matrix is converted into a loss matrix by subtracting all the elements of the profit matrix from its highest pay off $.
450. The loss matrix so obtained is given below
Operator Loss Matrix - products

A B C D
1 210 150 225 150
2 90 0 200 150
3 306 270 300 250
4 210 150 225 270

Let us now apply the assignment algorithm that is 'Hungarian Rule' to the above loss matrix. Accordingly, subtract the
minimum element of each row from all its elements in turn, the above matrix thus reduces to

Operator Loss Matrix - products

A B C D

6|Page
 1 60 0 75 0
2 90 0 200 150
3 56 20 50 0
4 60 0 75 120

Subtract the minimum element of each column from all the elements of the column in turn. Draw the minimum number
of lines in the resultant matrix so as to cover all zeros, we get

Operator Loss Matrix - products

A B C D
1 4 0 25 0
2 34 0 150 150
3 0 20 0 0
4 4 0 25 120

Since the minimum number of lines to cover all zeros is three which is one less than the order of the matrix, we subtract
the minimum uncovered element (= 4) from all uncovered elements and add it to the elements lying at the intersection of
two lines. The matrix so obtained is given below:

Operator Loss Matrix - products

A B C D
1 0 0 21 0
2 30 0 146 15
3 0 24 0 4
4 0 0 21 120

Since the minimum number of lines to cover all zeros is 4 which is equal to the order of the matrix, the above matrix will
give optimal solution. The optimal assignments are given below:

Operator Loss Matrix - products

A B C D

7|Page
 1 0 0 21 0
2 30 0 146 150
3 0 24 0 4
4 0 0 21 120

The optimal assignment is as shown below:

Operators Products Profit ($)

1 D 300
2 B 450
3 C 150
4 A 240
Rs. 1140

4. A publisher has a contract with an author to publish a textbook. The (simplifies

activities associated with the production of the textbook are given below. The
author is required to submit to the publisher a hard copy and a computer file of the
manuscript.
Activity Predecessors Duration (weeks)
A: manuscript proofreading by editor - 3
B: sample pages preparation - 2
C: Book cover design - 4
D: Artwork preparation - 3
E: Author’s approval of edited manuscript and sample pages A,B 2
F: Book formatting E 4
G: Author’s review of formatted pages F 2
H: Author’s review of artwork D 1
I: Production of printing plates G,H 2
J: Book production and binding C,I 4
Required:

A. Develop the associated network for the project.

B. Find the critical path.

a. Calculate earliest start time and finish time

8|Page
 b. Calculate latest start time and finish time

c. Identify the slack time in the

(3,3) (5,5) (9,9)

(3,3) E=2 F=4
3 4 6
2
G=2

A=3 H=1
5 77 (11,11)
B=2

I=2
D=3
(13,13) (17,17)
1 J=4
C=4 8 9

A, E, F, G, I, J is the critical path

Activity ES LS EF LF Slack Critical
Path
A 0 0 3 3 0 Yes

B 0 1 2 3 1

C 0 7 4 13 9

D 0 7 3 10 7

E 3 3 5 5 0 Yes

F 5 5 9 9 0 Yes

G 7 7 11 11 0 Yes

H 2 8 4 11 7

I 11 11 13 13 0 Yes

J 13 13 17 17 0 Yes

9|Page
10 | P a g e
11 | P a g e