Wollo University

Kombolcha Institute of Technology, School of Mechanical and Chemical

Engineering
Post Graduate Program in Production Engineering and Management
Operation Research MEng 6106 Assignments
Instruction: Attempt all questions show each necessary steps, equations
tables and graphs in solving the problems.

1. The normal cost of the spare part is $100 when the spare part is not available, the cost
of rush purchase and the cost of down time of machine is $1000,determine the
optimum number of spare part to be stocked for failure rate of spare part of a
machine shown in the table.

Number of failures Probability (P)

0 0.4
1 0.2
2 0.25
3 0.15
2. A company is trying to decide about the size of the plant to be built in a certain
region. Three alternatives are under consideration, they are the annual capacity of
10000, 15000 & 20000 units. the demand for the product is not known with certainty
but the management has estimated the probability for 5 different levels of demand, the
following table shows the relevant information.

Profit value for different plant capacity

Demand units Probability 10000 15000 20000
5000 0.2 -4.0 -6.0 -8.0
10,000 0.3 1.0 0.0 -2.0
15,000 0.2 1.0 7.0 5.0
20,000 0.2 1.0 7.0 11.0
25,000 0.1 1.0 7.0 11.0

3. Find the primal maximization and dual minimization values for the expression
Maximize Z=30 x1 + 40 x 2
S .T 60 x1 +120 x 2 ≤ 12,000
8 x 1+ 5 x 2 ≤600
3 x 1+ 4 x 2 ≤ 500

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 x 1 , x 2 ≥ 12,000

4. A farmer has 1000 acres of land on which he can grow corn, wheat and soybean. Each
acre of corn costs birr 100 for preparation, requires 7 man-days work and yields a
profit of birr 30. An acre of wheat costs birr 120 to prepare, requires 10 man-days of
work and yields a profit of birr 20. An acre of Soybeans costs birr 70 to prepare,
requires 8 man-days of work and yields a profit of birr 20. If the farmer has birr
100,000 for preparation and can count on 8000 man-days of work, how many acres
should be allocated to each crop to maximize profit.
Required:
a) Formulate the LPPM of the problem.
b) Find the optimal solution using the simplex algorithm
c) Check the sensitivity analysis
d) determining the coefficients of objective functions range (ROO) and (ROI) and
e) the RHS constraint range

5. The Primo Insurance Company is introducing two new product lines: special risk
insurance and mortgages. The expected profit is $5 per unit on special risk insurance
and $2 per unit on mortgages. Management wishes to establish sales quotas for the
new product lines to maximize total expected profit. The work requirements are as
follows:
Work-Hours per Unit Work-Hours Work-hour available
Department Special Risk Mortgage
Underwriting 3 2 2400
Administratio 0 1 800
n
Claims 2 0 1200
a) Formulate the LPPM of the problem
b) Write the standard form of the LPPM ready for simplex algorithm
c) Is this possible to solve graphically?
d) Convert the primal to dual equation

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6. Goods have to be transported from sources S1, S2, S3 to the destination (distribution
centers) D1, D2, D3. The transportation cost per unit, capacities of the source and
requirements of the destination are given in the following table.
From/To D1 D2, D3, Supply
S1 8 5 6 120
S2 15 10 12 80
S3 3 9 10 80
Deman 150 80 50 280
d
A) Determine the transportation schedule that minimizes the cost. Compare the
methods NWCM, LCM or VAM is best.
B) If this problem was assumed to be assigned S to D, how should each job be
allocated to each employee so as to minimize the total supplier days?
7. Powers has three electric power plants that supply the needs of four cities. Each power plant
can supply the following numbers of kWh of electricity: plant 1, 35 million; plant 2, 50
million; and plant 3, 40 million. The peak power demands in these cities as follows (in kWh):
city 1, 45 million; city 2, 20 million; city 3, 30 million; city 4, 30 million. The costs of
sending 1 million kWh of electricity from plant to city is given in the table below. To
minimize the cost of meeting each city’s peak power demand, formulate a balanced
transportation problem in a transportation tableau and represent the problem as a LP model.
a) Represent the TP as LPP
b) Solve using NWCM,LCM, VAM
c) Test the solution through stepping method and MODI

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 8. The local Division of Motor Vehicles (GMV) is concerned with its waiting line
system. Currently, the DMV uses a single-server, single-line, single-phase system
when processing license renewals. Based on historical evidence, the average number
of customers arriving per hour is 9 and is described by a Poisson distribution. The
service rate is 12 customers per hour with the service times following an exponential
distribution. The customers are patient and come from an infinite population. The
manager of the DMV would like you to calculate the operational characteristics of the
waiting line system.
(a) What is the average system utilization?
(b) What is the average number of customers in the system?
(c) What is the average number of customers waiting in line?
(d) What is the average time a customer spends in the system?
(e) What is the average time a customer spends waiting in line?

9. A manufacturing firm has developed a transition matrix containing the probabilities that a
particular machine will operate or break down in the following week, given its operating
condition in the present week:

Probability This week Next week

matrix Operate Break down
Operate 0.4 0.6
Break down 0.8 0.2

a) Draw a transition matrix state graphically

b) Assuming that the machine is operating in week 1, determine the probabilities
that the machine will operate or break down in week 2.
c) Determine the steady-state probabilities for this transition matrix algebraically
and indicate the percentage of future weeks in which the machine will break
down.

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10. A town has three gasoline stations, Petroco, National, and Gascorp. The residents
purchase gasoline on a monthly basis. The following transition matrix contains the
probabilities of the customers' purchasing a given brand of gasoline next month:

a) Draw transition diagram

b) Using a decision tree and mathematical analysis, determine the probabilities of a
customer's purchasing each brand of gasoline in month 3, given that the customer
purchases National in the present month.
c) Summarize the resulting probabilities in a table.

11. Two major soft drink companies are located in the A and B. Cola is the market leader,
and Pepsi has developed several marketing strategies to gain a larger percentage of the
market now belonging to Cola. The following payoff table shows the gains for Pepsi and
the losses for Cola, given the strategies of each company:
Cola
Peps A B C
i
X 10 9 3
Y 4 7 5
Z 6 8 4
a) Determine the type of strategy
b) Solve the percentage share of the strategy for each company and
c) The expected market share gains for Pepsi and losses for Cola.
12. T. Bone Puckett, a corporate raider, has acquired a textile company and is contemplating
the future of one of its major plants, located in South Carolina. Three alternative decisions
are being considered: (1) expand the plant and produce lightweight, durable materials for
possible sales to the military, a market with little foreign competition; (2) maintain the
status quo at the plant, continuing production of textile goods that are subject to heavy
foreign competition; or (3) sell the plant now. If one of the first two alternatives is chosen,
the plant will still be sold at the end of a year. The amount of profit that could be earned
by selling the plant in a year depends on foreign market conditions, including the status of

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 a trade embargo bill in Congress. The following payoff table describes this decision
situation:

A) Determine the best decision by using the following decision criteria:

a) Maximax
b) Maximin
c) Minimax regret
d) Hurwicz (α=0 .3)
e) Equal likelihood
B) Assume that it is now possible to estimate a probability of .70 that good foreign
competitive conditions will exist and a probability of .30 that poor conditions will exist.
Determine the best decision by using expected value and expected opportunity loss.
C) Compute the expected value of perfect information.
D) Develop a decision tree, with expected values at the probability nodes.
E) T. Bone Puckett has hired a consulting firm to provide a report on future political and
market situations. The report will be positive (P) or negative (N), indicating either a good
(g) or poor (p) future foreign competitive situation. The conditional probability of each
report outcome, given each state of nature, is
P(P|g) = 0.70
P(N|g) = 0.30
P(P|p) = 0.20
P(N|p) = 0.80
Determine the posterior probabilities by using Bayes's rule.
F) Perform a decision tree analysis by using the posterior probability obtained in (e).

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