Exercises Chapter 2

Exercise 0.1. We have three lottery tickets; one is a winning ticket and two are blanks. The three
individuals Joe, Kim and Mary draw a ticket each in order, (Joe first, Mary last.). What is the
probability that Joe wins?
Exercise 0.2. Assume that the probability that a born baby is a boy is 0.5, and that gender is
independent between births. A family has four children. Compute the probability that they have
two boys and two girls, conditional that the first (oldest) is a boy.
Exercise 0.3. Assume that the probability that a born baby is a boy is 0.5, and that gender is
independent between births. A family has four children. Compute the probability that they have
two boys and two girls, conditional that at least one is a boy.
Exercise 0.4. We have two urns, A and B, who contain black and white balls. A contains two
black and three white balls, whereas B contains two black and two white balls. We draw one ball
at random from A and put it in B, without noticing its colour. Next we draw at random one ball
from B, and notice that it is white. Compute the probability that the ball we moved from A to B
was black.
Exercise 0.5. If 5% of men and 0.25% of women are color blind, what is the probability that a
randomly selected person is color blind?
Exercise 0.6. You consult Joe the bookie at a horse race. He tells you that, of 16 horse runners,
the favourite has probability 0.3 of winning, two other horses each have probability 0.20 of winning,
and the remainder each have probability 0.05 of winning, excepting Desert Pansy, which has a
worse than no chance of winning. What do you think of Joe’s advice?
Exercise 0.7. An examination consists of multiple-choice questions, each having five possible
answers. Suppose you are a student taking the exam. and that you reckon you have probability
0.75 of knowing the answer to any question that may be asked and that, if you do not know, you
intend to guess an answer with probability 1/5 of being correct. What is the probability you will
give the correct answer to a question?
Exercise 0.8. From the interval (0, 1), five points are selected at random. What is the probability
that at least two of them are less than 1/3?
Exercise 0.9. An airline company sells 200 tickets for a plane with 198 seats, knowing that the
probability a passenger will not show up for the flight is 0.01. Use the Poisson distribution to
compute the probability they will have enough seats for all the passengers who show up.
Exercise 0.10. A machine produces items of which 1% at random are defective. How many items
can be packed in a box while keeping the chance of one or more defectives in the box to be no more
than 0.5? What are the expected value and standard deviation of the number of defectives in a box
of that size?
Exercise 0.11. Suppose that of 1,000,000 live births in Paris over some period, 508,000 are boys.
Suppose X is Bin(106, 0.5) and calculate approximately P[X ≥ 508,000]. Does it seem reasonable
to you that the proportion of males among Parisian babies conceived soon after the above period
will be 50%. (Laplace developed his limit theorem in the late 1700’s to deal with a question similar
to this.)
Exercise 0.12. (
cx2 0<x<6
f (x) =
0 otherwise

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1. Determine the constant c such that the function becomes a probability density function.

2. Determine the corresponding distribution function.

3. Compute the expected value and variance.
Exercise 0.13. The length X of a telephone call can often be approximated as an exp(λ ) random
variable. If λ = 2/3min−1 , compute

1. the probability P (1 < X < 10)

2. E(X) and SD(X)
Exercise 0.14. A lift in a department store has a sign “a maximum 10 persons, or at most
800 kg.” Assume that a random person’s weight is N (70, 10) kg. What is the probability that 10
customers will overload the lift?

Exercise 0.15. An airfreight company has various classes of freight. In one of these classes the
average weight of packages is 10kg and the variance of the weight distribution is 9kg2 . Assuming
that the package weights are independent (it is not the case that a single company is sending a large
number of identical packages, for instance), estimate the probability that 100 packages will have
total weight more than 1020kg.
Exercises Chapter 3

Exercise 0.16. In the Dark Ages, Harvard, Dartmouth, and Yale admitted only male students.
Assume that, at that time, 80 percent of the sons of Harvard men went to Harvard and the rest
went to Yale, 40 percent of the sons of Yale men went to Yale, and the rest split evenly between
Harvard and Dartmouth; and of the sons of Dartmouth men, 70 percent went to Dartmouth, 20
percent to Harvard, and 10 percent to Yale.
1. Find the probability that the grandson of a man from Harvard went to Harvard.
2. Modify the above by assuming that the son of a Harvard man always went to Harvard. Again,
find the probability that the grandson of a man from Harvard went to Harvard.
Exercise 0.17. A certain calculating machine uses only the digits 0 and 1. It is supposed to
transmit one of these digits through several stages. However, at every stage, there is a probability
p that the digit that enters this stage will be changed when it leaves and a probability q = 1 − p.
that it won’t. Form a Markov chain to represent the process of transmission by taking as states the
digits 0 and 1.

1. What is the matrix of transition probabilities?

2. Now draw a tree and assign probabilities assuming that the process begins in state 0 and
moves through two stages of transmission. What is the probability that the machine, after
two stages, produces the digit 0 (i.e., the correct digit)?

Exercise 0.18. I have 4 umbrellas, some at home, some in the office. I keep moving between
home and office. I take an umbrella with me only if it rains. If it does not rain I leave the umbrella
behind (at home or in the office). It may happen that all umbrellas are in one place, I am at the
other, it starts raining and must leave, so I get wet.
1. If the probability of rain is p, what is the probability that I get wet?

2. Current estimates show that p = 0.6 in Edinburgh. How many umbrellas should I have so
that, if I follow the strategy above, the probability I get wet is less than 0.1?
Exercise 0.19. Discuss the topological properties of the graphs of the following Markov chains:
 
0.5 0.5
1. P =
0.5 0.5
 
0.5 0.5
2. P =
1 0
 
1/3 0 2/3
3. P =  0 1 0 
0 1/5 4/5
 
0 1
4. P =
1 0
 
0.5 0.5 0
5. P =  0 0.5 0.5 
1/3 1/3 1/3

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Exercises Chapter 5

Exercise 0.20. Which system provides the best performance, an M/M/3/300/100 or an M/M/3/100/100?
Exercise 0.21. A PBX was installed to handle the voice traffic generated by 300 employees in
an office. Each employee on average makes 2 calls per hour with an average call duration of 4.5
minutes The PBX has 90 outgoing links.

1. What is the offered load to the PBX?

2. What is the utilization of the outgoing links? Assume that calls arriving when all the links
are busy are queued up.
Exercise 0.22. On average ten customers per hour arrive to a shoe polishing station. The polishing
of shoes takes 6 minutes on average. There are two stools, one for the person being served and the
other one for a waiting customer. If both stools are occupied, then the arriving customer leaves.
1. Draw the state diagram of the system and solve the balance equations, when the arrival process
is assumed to be Poissonian and the service times are exponentially distributed. How many
customers are served in an hour on average?

2. What happens if the shoe polisher has an assistant, i.e. when customers on both stools are
served at same time and there are no waiting places.
Exercise 0.23. A grocery shop is attended by one person. Apparently, the arrival pattern of
customers during Saturdays follows a Poisson process with an arrival rate of 10 persons/hour.
Customers are attended following a FIFO order and, due to the prestige of the shop, once they
arrive, they are willing to wait for the service. The service time is distributed exponentially, with
a mean time of 4 minutes.
1. Determine the average length of the waiting line.
2. Determine the average waiting time.

Exercise 0.24. In a factory, there is a Social Security office where the workers can go during
working hours. The Chief of Staff, who has observed the inflow of workers to the office, has asked
to perform a study of this service. A specialist has been appointed to determine the average waiting
time of the workers and the average duration of the conversation with the office employee. This
analyst reaches the conclusion that in the first and last half hours of the shift the inflow is very
reduced and fluctuating, but during the remaining seven hours of the shift the phenomenon can be
considered in steady state. From the analysis of 100 periods of 5 minutes, consecutive or not, but
in the steady state phase, it can be deduced that the mean number of workers going to the office
was 1.25 per period and the inter-arrival time followed an exponential distribution. A similar study
about the duration of the conversations concluded that its distribution was exponential with a mean
duration of 3.33 minutes.

1. Determine the average number of workers waiting

2. Determine the average waiting time
3. Compare the time spent by the workers and the time spent by the office employee. Determine
the cost for the company if an hour of the office employee is 250$ and one hour of the worker
400$. Would it be profitable to open another office?

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Exercises Chapter 6

Exercise 0.25. Leon Cardiology Centre in Mexico buys 25,000 stents each year from its suppliers
in Germany. Each stent costs $1500, and carrying cost is 26% of the value of the average inventory
of stents per year. If the ordering cost is $270 per order, determine the economic order quantity
for stents. Also, determine the number of orders and the TICs.
Exercise 0.26. Compute the economic lot size for an item that has an annual demand of 5000
units. Assume the inventory holding costs are based on an annual interest rate of 20%. Further,
the purchase cost of the item is $10 and the ordering cost is $25.20 per order. Also, compute the
cycle time if there are 250 workdays in a year.

Exercise 0.27. Consumption of a bought-out item in a manufacturing organization is 100 per

day. The supplier supplies this item to the manufacturer at the rate of 300 per day. If the carrying
cost is $0.1 per item per day and the ordering cost is $250 per order, compute the EOQ for this
item.
Exercise 0.28. You have developed the following estimates for procuring an item for your man-
ufacturing operations:
• Item demand: 3600 units yearly (10 units per day)
• Purchase price: $25 per item
• Ordering cost: $35 per order

• Inventory holding rate: 25% annually

The following two options are available to you:
• Option 1: The supplier can supply all items at once.

• Option 2: The supplier can supply 15 items per day.

Compare the following for each of the options – total ordering cost, total holding cost, cycle time,
number of orders, and the TICs.
Based on the information you have, which of the above options would you prefer?

Exercise 0.29. The annual demand for an item is 2000 units, unit cost is $5, ordering cost is $25,
and inventory holding rate is 30%. Determine the optimal time between reviews if the organization
follows a periodic review system.
Exercise 0.30. The EOQ for an item is 300 units and its annual demand is 5000 units. If the
ordering cost per order is $20 per order, compute the implied carrying cost for this item. Assume
back-orders are not allowed and orders are received in full, instantaneously.

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Exercises Chapter 7

Exercise 0.31. H&N is a high-end fashion goods retailer. They source their goods from leading
brands and sell those through their retail shops. CoolColors, a leading informal shirt brand has
just given H&N a preview of their new designer after-hours shirt for men. H&N would like to buy
the designer shirts and sell those through their retail outlets. Each shirt costs $35. H&N believes
they would be able to sell each shirt at $55 during the winter (November–February). Any unsold
shirt can be sold during the clearance sale in early March for $30 each. Compute the optimal order
quantity, assuming the demand for the shirt is normally distributed with a mean of 200 and a
standard deviation of 25.

Exercise 0.32. SpiceJet sells tickets for their Bangalore–Mumbai flight SJ516 that has a capacity
of 325 seats. SpiceJet strategists have analyzed flight load data and have found that between 20
and 35 passengers cancel their tickets. SpiceJet, therefore, overbook their flights. They make a
profit of $125 on every paid seat. But when the flight is full, an additional passenger arriving
at the check-in counter has to be awarded free flights or cash payment, which costs SpiceJet $50.
Compute the number of tickets SpiceJet may overbook for flight SJ516.

Exercise 0.33. A newspaper boy purchases newspapers from an agency every morning at $0.50
per copy. He gets a commission of $0.25 for every copy sold. Unsold newspapers can be returned
to the news agency at $0.10 per copy. If the daily demand for newspapers is normally distributed
with a mean of 15 and a standard deviation of 3, determine the number of newspapers that the
newspaper boy must procure from the agency.

Exercise 0.34. The demand for an item at a retail shop is a constant 30 per day. The procurement
lead time is normally distributed with a mean of 10 days and a standard deviation of 2 days. If
the retailer wants a service level of 95%, compute the safety stock that the retailer would need to
maintain. Also, compute the reorder level.

Exercise 0.35. Weekly demand for a certain item at a firm follows a normal distribution with
a mean of 200 units and a standard deviation of 50 units. The optimal review period is 4 weeks
while the lead time is constant at 3 weeks. If the firm wants to ensure a cycle service level of 98%,
compute the safety stock, maximum inventory, and the order quantity, if at the time of review there
are 100 units in store.

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Exercises Chapter 8

Exercise 0.36. Monthly demand for an item over 6 months is 32, 19, 12, 15, 23, and 12, units
respectively. Using Silver-Meal method, determine the total inventory cost if the holding cost is
$1.5 per unit per month and the ordering cost is $40 per order.

Exercise 0.37. Consider the situation in the previous exercise. If you were to use the Wagner-
Whitin algorithm, what would your inventory costs be?
Exercise 0.38. Consider an item whose annual demand is 120 units, the holding cost is $8 per
item per annum ($0.67 per item per month), and the ordering cost is $19.2 per order. If the
demand varies by month as shown in the table below, determine the total inventory cost if you
would use the standard Economic Order Quantity (EOQ) policy to manage your inventory. Assume
instantaneous replenishment.
Exercise 0.39. Consider the situation in the previous exercise. If you were to use a Silver-Meal
heuristic, what would your inventory costs be?

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