PBA2201

APPLIED
OPERATIONS
RESEARCH

PROBLEM SET

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 UNIT I
LINEAR PROGRAMMING
CLASS WORK

PROBLEM IDENTIFICATION AND FORMULATION

1. Product Mix

The Indian Electric company manufactures two popular brand of ceiling fans, Cool Home
and AL Bahar. Each fan is processed through two main departments: machine shop,
assembly and testing shop which have respectively 1200 machine hours and 1600 man-
hours on available capacity per day. Each Cool Home fan requires 3 hours of capacity of
machine shop and one hour capacity of assembly and testing shop. Similarly, each AL
Bahar fan requires 2 hours each of machine shop and assembly shop capacity. The market
for the two models has been surveyed recently which suggests that a maximum of 250
Nos. of Cool Home and 200 Nos. of AL Bahar can be sold per day.

If the profit of fans is Rs.60/- on a Cool Home and 80/- on a AL Bahar, what quantity of
each fan should be produced to maximize profit.

2. Media Selection

An advertising company is planning a media campaign for a client, willing to spend

Rs.20,00,000 to promote a new fuel economy mode of a pressure cooker. The client
wishes to limit his campaign media to a daily newspaper, radio and prime time television.
The agency’s own research data on cost effectiveness of advertising media suggests the
following”

Advertising Media Cost per unit (Rs.) Estimated number of

housewives exposed to
each advertising unit
Newspaper 20,000 1,00,000
Radio 40,000 5,00,000
Television 1,00,000 10,00,000

The client wishes that at least 50, 00,000 housewives should be exposed to T.V.
advertising. Also the expense on newspaper advertising must not exceed Rs. 5,00,000.
Formulate the problem as a linear programming problem.

3. Gasoline Mix

The manager of an oil refinery must decide on optimum mixing of two possible blending
processes of which inputs-outputs are as follows:

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For process I, an input of one barrel of crude oil A and three barrels of crude oil B gives
an output of 50 gallons of gasoline X and 20 gallons of gasoline Y. For process II, an
input of four barrels of crude oil A and two barrels of crude oil B yield an output of 30
gallons of gasoline X and 80 gallons of gasoline Y. The maximum amounts of available
crude oil A and B are 120 barrels and 180 barrels respectively.

Sales commitments require at least 2800 gallons of gasoline X and 2200 gallons of
gasoline Y are produced. The profit per production run from process I and process II are
Rs. 4000 and Rs. 5000 respectively. Formulate the above blending problem as LP model.

4. Fertilizer Mix

A manufacturer intends to market a new fertilizer produced from a mixture of two

ingredients A and B.

The compositions of the two ingredients are as follows:

Ingredients Composition
Bone metal Nitrogen Lime Phosphate
A 20% 30% 40% 10%
B 40% 15% 40% 5%

The management decision is that the fertilizer

i must be sold in bags of 20 kgs
ii must contain at least 25% bone metal
iii must contain at least 15% nitrogen
iv must contain at least 10% phosphate

The cost of ingredients is Rs.20 per kg. for A and Rs.16 per kg for B

Write the LP formulation for the quantities of the ingredients to be mixed to minimize
material cost.

5. Investment decisions

Demo Engg. Works is contemplating an investment of Rs.100 lakhs in additional

machinery to increase the capacity of its gear shop. The management decision is to divide
the expenditure among gear shaping, gear hobbing and gear shaving machines in a way
that it maximizes the return on the investment and limit the expenditure on gear shaping,
gear hobbing and gear shaving machines to Rs.40 lakhs, Rs.60 lakhs and Rs.30 lakhs
respectively.

Machines are expected to have landed cost of Rs.4 lakhs per gear shaping machine, Rs.8
lakhs per gear hobbing machine and Rs.6 lakhs per gear shaving machine. The expected
return on investment are 8%, 15% and 20% on gear shaping, gear hobbing and gear
shaving machines respectively.

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Formulate the above investment decision as LP problem.

6. Manpower Requirement

The daily requirement of nurses in a private nursing home is given in the table below:

Time of the day Requirement

8 am – 12 noon 12
12 noon – 4 pm 15
4pm – 8 pm 10
8 pm – 12 midnight 8
12 midnight – 4 am 6
4 am – 8 am 10

The nurses start work at the beginning of the shift (8 am, 12 noon, 4 pm, 8 pm, 12
midnight and 4 am) and work for 8 continuous hours. What is the minimum number of
nurses required to meet the daily demand?

7. FarmMix

A farmer has 100 acre farm. He can sell all tomatoes, lettuce or radishes he can raise.
The price he can obtain is Rs. 10 per kg for tomatoes, Rs. 15 a head for lettuce and Rs.
20 per kg for radishes. The average yield per acre is 2000 kg of tomatoes, 3000 heads of
lettuce and 1000 kg of radishes. Fertilizer is available at Rs. 50 per kg and the amount
required per acre is 100 kgs each for tomatoes and lettuce and 50 kgs for radishes. Labour
required for sowing, cultivating and harvesting per acre is 5 man-days for tomatoes and
radishes, and 6 man-days for lettuce. A total of 400 man-days of labor are available at
Rs. 200 per man day.

Formulate this problem as a LP model to maximize the farmer’s total profit.

SOLUTION BY GRAPHICAL METHOD

8. Graphical Analysis of two Constraints - Maximization

A company manufactures two products A and B. Both products pass through two
machines M1 and M2. The time required to process each unit of product A and B on each
machine center and the available capacity of each machine center is given below:

Product Machine center

M1 M2
Processing time per unit (Hrs)
A 6 2

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 B 4 4
Available Hrs per week 3600 2000

Each unit of product A gives a profit of Rs.25 while each unit of product B gives a profit
of Rs.20.

How much quantity of each product should be manufactured to maximize profit?

9. Graphical Analysis of more than two Constraints

Let us add further two constraints to the above problem:

The availability of material is sufficient only to produce 500 nos. of product of type A
and 400 nos. of product of type B.

10. Minimization Objective

Minimize Z = 2x1 + 3x2

Subject to
x1 + 2x2 ≥ 40

2x1 + x2 ≥ 50

x1 , x 2 ≥ 0

11. Graphical Analysis when Constraints are specified directly

A company manufacturers two products A and B. Each product undergoes two

operations. The time required to perform the operations are given below:

Products
Operation A B
Time Required
I 2 4
II 3 2

The company has an available capacity of 200 hours for operation I and 180 hours for
operation II. The profit per unit is Rs.30 per unit of Product A and Rs.40 per unit of
Product B.

Formulate the above problem as an LPP and determine the quantities of two products to
be manufactured to maximize profit.

12. Graphical Analysis when one or more constraints are indirectly specified

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A company manufactures two kinds of industrial batteries, Super and Excel. The
respective profits are Rs.40 and Rs.30 per battery respectively. Super battery requires
twice as much time as required for Excel and if all batteries were of Excel make, the
company could make 1000 batteries per day. The raw material for both batteries is
common and is sufficient to produce 800 batteries per day (both Super and Excel
combined). The outer casings for the batteries are procured from two different local
suppliers. The suppliers of Super model can deliver one 400 casings per day while the
supplier of Excel model can supply 700 casings per day.

What quantity of each battery should be produced to maximize profit?

13. Minimization Objective

A research laboratory has two melts of copper nickel alloys to make up a new alloy. The
compositions of the alloys are:

Melt Composition (parts)

Copper Nickel
I 2 1
II 1 1

To make up the new alloy, at least 10 kg of copper and 6 kg of nickel is needed. Melt I
cost Rs.25 per kg while Melt II costs Rs.30 per kg. What quantity of each melt is used to
minimize cost?

14. Negative Values for Decision Variables

Use graphical method to solve the following LPP.

Max Z = 2 x1 + x2
Subject to
x1 + 2x2 ≤ 10
x1 + x2 ≤ 6
x1 - x2 ≤ - 2
x1 - 2x2 ≤ 1
x1 , x2 ≥ 0

15. Redundant constraints

A company manufactures two types of chairs, type A and type B. Both type of chairs
pass through three processes, shaping, setting and finishing. The standard man-hours for
each process per unit and available man-hours for each process per unit and available
man-hours for each department are given in the table

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 Chairs Departments
Shaping Setting Finishing
Processing time per unit (hrs)
A 6 2 3.6
B 4 4 4
Available man- 3600 2000 3600
hours

The availability of wood is sufficient to produce 500 nos. of chairs of type A and 400
nos. of chairs of type B.

Each chair of type A gives a profit of Rs.25 while each chair of type B gives a profit of
Rs.20.

a) Identify feasible solution region defined by the constraints

b) Is there any redundant constraint? If yes, identify it.
c) Find the quantity of each type of chair to be produced to maximize profit.

16. Alternative optimal solution

Maximize Z = 100 x1 + 150 x2

Subject to
0.80 x1 + 1.20 x2 ≤ 720

x1 ≤ 600

x2 ≤ 400

x1, x2 ≥ 0

17. Unbounded solution

Maximize Z = 10 x1 + 20 x2

Subject to
2 x1 + 3 x2 ≥ 6

4 x1 + x2 ≥ 4

x1, x2 ≥ 0

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18. Infeasible solution

Maximize Z = 3 x1 + 2 x2

Subject to
3 x1 + 5 x2 ≥ 15

2 x1+ 3x2 ≤ 6

x1, x2 ≥ 0

SOLUTION BY SIMPLEX METHOD

19. Maximization problems with all constraints ≤ type

A manufacturer specializing in the manufacture of gears intends to add two more gears
to his existing product line. Both the types of gears will be worked in the blanking shape
and in the gear shop.

Each gear of type A requires 20 minutes in the blanking shop and 40 minutes in the gear
shop. Similarly, each gear of type B requires 10 minutes in the blanking shop and 10
minutes in the gear shop. The blanking shop and the gear shop have respectively 1200
minutes and 1600 minutes available per week.

The marginal profit of each gear of type A is Rs.10 and for each gear of type B is Rs.4.
The manufacturer is in the market upswing and can sell as he can produce. How many
units of each gear be produced to maximize profit?

20. Max Z = 3x1+2x2

Subject to -2x1 + x2 ≤ 1
x1 ≤ 2
x1+x2 ≤ 3
x1, x2 ≥ 0

21. Minimization problems with all constraints ≥ type

Min Z = 2x1+3x2

Subject to 3x1 + 5x2 ≥ 30

5x1 + 3x2 ≥ 60
x1, x2 ≥ 0

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22. Min Z = 2x1+3x2

Subject to x1 + x2 ≥ 5
x1+ 2x2 ≥ 6
x1, x2 ≥ 0

23. Maximization problems with any constraints ≥ type and = type

Max Z = 30x1+20x2

Subject to -x1 - x2 ≥ -8
-6x1 - 4x2 ≤ -12
5x1+8x2 = 20
x1, x2 ≥ 0

24. Minimization problems with any constraints ≤ type and = type

Min Z = 3x1+8x2

Subject to x1 + x2 = 200
x1≤ 80
x2≥ 60
x1, x2 ≥ 0

25. Problems with degeneracy

Max Z = 2x1+x2

Subject to 4x1 + 3x2 ≤ 12

4x1 + x2 ≤ 8
4x1 - x2 ≤ 8
x1, x2 ≥ 0

26. Multiple Optimal solutions

Max Z = 6x1+4x2

Subject to 2x1 + 3x2 ≤ 30

3x1 + 2x2 ≤ 24
x1 + x2 ≥ 3
x1, x2 ≥ 0

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27. Unbounded Solution

Max Z = 3x1+5x2

Subject to x1 - 2x2 ≤ 6
x1≤ 10
x2 ≥ 1
x1, x2 ≥ 0

28. Infeasible Solution

Max Z = 6x1+4x2

Subject to x1 + x2 ≤ 5
x2 ≥ 8
x1, x2 ≥ 0

PRINCIPLES OF DUALITY

29. Find the dual of the given problem

Max Z = 2x1+x2

Subject to x1 + 2x2 ≤ 10
x1+x2 ≤ 6
x1+x2 ≤ 2
x1 -2x2 ≤ 1
x1, x2 ≥ 0

30. Find the dual of the given problem

Min Z = 2x1+5x2+x3

Subject to 9x1-3x2+5x3≥ 7
6x1-4x2-3x3 ≤ 2
x1, x2 , x3 ≥ 0
SENSITIVITY ANALYSIS

31. Changes in the Right-hand Side Constants of Constraints

Max Z= 6x1 + 8x2

Subject to 5x1 + 10x2 ≤ 60

4x1 + 4x2 ≤ 40
x1, x2 ≥ 0

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 Find the optimum solution. Solve the problem,

a) If the right-hand side constants of constraint 1 and constraint 2 are changed

from 60 and 40 to 40 and 20, respectively.
b) If the right-hand side constants of the constraints are changed from 60 and 40
to 20 and 40 respectively.

32. Changes in the Objective Function Coefficients

Max Z = 10x1 + 15x2 + 20x3

Subject to 2x1 + 4x2 + 6x3≤ 24

3x1 + 9x2 + 6x3≤ 30
x1, x2, x3 ≥ 0

Find the optimum solution.

a) Find the range of the objective function coefficient C 1 of the variable X1
such that the optimality is unaffected.
b) Find the range of the objective function coefficient C 2 of the variable X2
such that the optimality is unaffected.
c) Check whether the optimality is affected, if the profit coefficients are
changed from (10, 15, 20) to (7, 14, 15). If so, find the revised optimum
solution

33. Adding a New Constraint

Max Z= 6x1 + 8x2

Subject to 5x1 + 10x2 ≤ 60

4x1 + 4x2 ≤ 40
x1, x2 ≥ 0

Find the optimum solution.

a) Check whether the addition of the constraint 7x1 + 2x2 ≤ 65 affects the
optimality. If it does, find the new optimum solution.
b) Check whether the addition of the constraint 6x1 + 3x2 ≤ 48 affects the
optimality. If it does, find the new optimum solution.

34. Adding a New Variable

Max Z= 6x1 + 8x2

Subject to 5x1 + 10x2 ≤ 60

4x1 + 4x2 ≤ 40
x1, x2 ≥ 0

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 Find the optimum solution.

A new product is P3 is included in the existing product mix. The profit per unit of
the new product is Rs.20. The processing requirements of the new product on the
lathe and milling machines are 6 hours per unit and 5 hours per unit, respectively.

a) Check whether the inclusion of the product P 3 changes the optimality.

If it changes the optimality, find the revised optimal solution.

LAB EXERCISES

35. Flair Furniture Company

Flair Furniture Company produces inexpensive tables and chairs. The production process
for each is similar in that both require certain number of labor hours in the carpentry
department and a certain number of labor hours in the painting department. Each table
takes 3 hours of carpentry work and 2 hours of painting work. Each chair requires 4 hours
of carpentry and 1 hour of painting. During the current month, 2400 hours of carpentry
time and 1000 hours of painting time are available. The marketing department wants
Flair to make no more than 450 new chairs this month because there is a sizable existing
inventory of chairs. However, because the existing inventory of tables is low, the
marketing department wants Flair to make at least 100 tables this month. Each table sold
results in a profit contribution of $7 and each chair sold yields a profit contribution of $5.

Questions

a) Formulate the LPP to maximize the profit of product mix.

b) Identify and discuss the answer report using MS Excel Solver
c) Identify and discuss the sensitivity report on the impact of changes in a
constraint’s RHS value of
i. binding variables
ii. nonbinding variables
d) Identify and discuss the sensitivity report on the impact of changes in a
constraint’s Objective Function Coefficient
e) Discuss on the impact of shadow price using principles of duality.

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36. Anderson Electronics

Anderson Electronics is considering the production of four potential products: VCRs,

Stereos, TVs and DVD players. The input for all products can be viewed in terms of
just three resources – electronic components, nonelectronic components and
assembly time. The composition of the four products in terms of these three inputs is
shown in the table below along with the unit selling prices of the products.

Electronic components can be obtained at Rs.7 per unit; nonelectronic components

can be obtained at Rs. 5 per unit and assembly time costs Rs.10 per hour. Each
resource is available in limited quantities as shown in the table.

VCR STEREO TV DVD SUPPLY

PLAYER
Electronic 3 4 4 3 4700
components
Nonelectronic 2 2 4 3 4500
components
Assembly 1 1 3 2 2500
time(hours)
Selling price Rs.70 Rs.80 Rs.150 Rs.110
(per unit)

Questions

a) Formulate the LPP to maximize the profit

b) Discuss on the Answer Report using MS Excel Solver
c) From the Sensitivity Report answer the following questions
i. What is the impact on profit of a change in the supply of nonelectronic
components?
ii. What is the impact on profit if we could increase the supply of
electronic components by 400 units (to a total of 5100 units)? What
would happen if the supplier of these 400 units wanted Rs. 8 per unit
rather than the current cost of Rs. 7 per unit?

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 iii. What would happen if we could increase the supply of electronic
components by 4000 units (to a total of 8700 units)?
iv. Assume that we have an opportunity to get 250 additional hours of
assembly time. However, this time will cost us time and a half (i.e. Rs.
15 per hour rather than the current Rs. 10 per hour). Should we take
it?
v. Assume that there is some uncertainty in the price for DVD players.
For what range of prices will the current production be optimal? If
DVD players sold at Rs.106, what would be Anderson’s new total
profit?

37. Burn-Off Diet Drink

Burn-Off, a manufacturer of diet drinks, is planning to introduce a miracle drink

that will magically burn away fat. The drink is a bit expensive, but Burn-Off
guarantees that a person using this diet plan will lose up to 50 kg in just 3 weeks.
The drink is made up of four “mystery” ingredients (which we will call
ingredients A, B, C and D). The plan calls for a person to consume at least three
12 –ounce doses per day (at least 36 ounces per day).

Each of the four ingredients contains different levels of three chemical

compounds (which we will call chemicals X, Y and Z). Health regulations
mandate that the dosage consumed per day should contain minimum prescribed
levels of chemicals X and Y and should not exceed maximum prescribed levels
for the third chemical Z.

The composition of the four ingredients in terms of the chemical compounds

(units per ounce) is shown in the table below along with the unit cost prices of
the ingredients. Burn-Off wants to find the optimal way to mix the ingredients to
create the drink, at minimum cost per daily dose.

INGREDIENT A INGREDIENT B INGREDIENT C INGREDIENT D REQUIREMENT

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Chemical 3 4 8 10 At least 280
X units

Chemical 5 3 6 6 At least 200

Y units

Chemical 10 25 20 40 At most1050
Z units

Cost per $0.40 $0.20 $0.60 $0.30

ounce

Questions

a) Formulate the LPP

b) Discuss on the Answer Report using MS Excel Solver
c) From the Sensitivity Report answer the following questions
i. What is the impact on cost if Burn-Off insists on using 1 ounce of
ingredient B to make the drink?
ii. There is some uncertainty in the cost of ingredient C. How sensitive
is the current optimal solution to this cost?
iii. What do the shadow prices of chemical X and chemical Z imply in
this problem?
iv. Burn-Off can decrease the minimum requirement for chemical X by 5
units(from 280 to 275), provided that the maximum limit allowed for
chemical Z is reduced to 1000 units (that is, reduced by 50 units). Is
this trade-off cost effective for Burn-Off to implement?

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 UNIT II
TRANSPORTATION MODELS
CLASS WORK

BALANCED TRANSPORTATION PROBLEMS – INITIAL BASIC

FEASIBLE SOLUTION
1. A company has three plants A, B and C with capacity of 30, 40 and 30 units of a
single product per month. It markets its product through three warehouses P, Q
and R with requirements of 45, 35 and 20 units per month respectively.

The cost of transporting one unit of the product from any plant A, B and C to any
warehouse P, Q and R is given in the following table:

Warehouse
Plants P Q R
Cost per unit (Rs.)
A 13 11 8
B 14 16 13
C 12 10 12

How should the units be transported to minimize cost?

2. Use (i) North West Corner Method (ii) Least Cost Method and (iii) Vogel
Approximation Method to obtain the initial feasible solution for the following
transportation problem where the unit costs of transportation are given in the table
below:

Warehouse
Plants X Y Z Supply
A 10 3 9 400
B 12 10 5 300
C 8 11 12 300
Demand 200 300 500

BALANCED TRANSPORTATION PROBLEMS – TEST FOR OPTIMALITY

–MODI METHOD

3. Solve problem 1 using MODI Method

4. Solve problem 2 using MODI Method

UNBALANCED TRANSPORTATION PROBLEMS

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 5. A company has three warehouses W1, W2 and W3 and four consumption centers
C1, C2, C3 and C4. The warehouses have altogether 2200 units of a given
commodity in stock and the consumption centers have a total need of 1800 units
as under:

Warehouse Units in stock ConsumptionCenter Requirements

W1 700 C1 600
W2 600 C2 400
W3 900 C3 600
C4 200

The cost of shipping one unit of the commodity from each warehouse to each
consumption center is given in the matrix below:

Warehouses Consumption Centers

C1 C2 C3 C4
W1 100 120 80 60
W2 70 30 70 70
W3 60 60 90 120

How should the units be transported to minimize the transport cost?

DEGENERACY

6. A firm has three plants P1, P2 and P3 and three warehouses W1, W2 and W3. The
transportation cost per unit dispatched along each route with capacity of each
plant and requirement of each warehouse is given in the table below:

Plant Warehouse
W1 W2 W3 Capacity of the
plant
Transportation Cost (Rs.)
P1 40 70 90 300
P2 12 80 30 400
P3 60 90 45 200
Requirement of 300 300 300 900
warehouse

How should the units be transported to minimize transportation cost?

TRANSPORTATION PROBLEM INVOLVING MAXIMIZATION OBJECTIVE

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 7. A company manufacturing air coolers has plants at Bombay, Calcutta and
Kanpur. Supplies are made to three showrooms situated at Ranchi, Delhi and
Lucknow. Each manufacturing plant has capacity of 200 units per month. The
monthly requirements of showrooms are 150, 300 and 150 nos. respectively.

Due to difference in raw material cost and transportation cost, the profit per unit
is different for each showroom as given below:

Ranchi Delhi Lucknow

Bombay 290 280 300

Calcutta 250 270 230

Kanpur 350 370 380

Decide the shipping schedule to maximize profit.

ALTERNATE OPTIMAL SOLUTION

8. A two-factory-three-warehouses balanced transportation problem of a company

is given below:

Warehouse
P Q R Supply
F1 12 18 14 250
Factory
F2 13 14 13 100
Demand 150 80 120

a) Find the optimal distribution schedule and cost to the company.

b) Whether the problem has an alternate optimal solution?
If yes, identify.

TRANSSHIPMENT PROBLEM

9. Consider the following transshipment problem involving 4 sources and 2

destinations. The supply values of the sources S 1, S2, S3 and S4 are 100 units, 200
units, 150 units and 350 units respectively. The demand values of destinations
D1and D2 are 350 units and 450 units respectively. The transportation cost per
unit between different sources and destinations are summarized in the table
below. Solve the transshipment problem.

S1 S2 S3 S4 D1 D2
S1 0 4 20 5 25 12

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 S2 10 0 6 10 5 20
S3 15 20 0 8 45 7
S4 20 25 10 0 30 6
D1 20 18 60 15 0 10
D2 10 25 30 23 4 0

PRACTICE PROBLEMS & LAB EXERCISES

10. The following table provides all the necessary information on the availability of
supply to each warehouse, the requirement of each market, and the unit
transportation cost (in Rs.) from each warehouse to each market.

Market
P Q R S Supply
A 6 3 5 4 22
Warehouse
B 5 9 2 7 15
C 5 7 8 6 8
Demand 7 12 17 9 45

The shipping clerk of the shipping agency has worked out the following schedule
based on his own experience:

12 units from A to Q,
1 unit from A to R,
9 units from A to S,
15 units from B to R,
7 units from C to P and
1 unit from C to R

i. Check if the clerk has the optimal schedules.

ii. Find the optimal schedule and minimum total transportation cost
iii. If the clerk is approached by a carrier of route C to Q, who offers to reduce
his rate in the hope of getting some business, by how much should the rate
be reduced before the clerk would offer him the business.

11. ABC limited three production shops that supply a product to five warehouses.
The cost of production varies from shop to shop and cost of transportation from
one shop to a warehouse also varies. Each shop has a specific production capacity
and each warehouse has certain amount of requirement. The costs of
transportation are given below.

Warehouse Supply
Shop
I II II IV V

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 A 6 4 4 7 5 100
B 5 6 7 4 8 125
C 3 4 6 3 4 175
Demand 60 80 85 105 70 400

The cost of manufacturing the product at different production shops is

Shop Variable Fixed

Cost Cost
A 14 7000
B 16 4000
C 15 5000

Find the optimum quantity to be supplied from each shop to different

warehouses at the minimum total cost.

12. A company has four manufacturing plants and five warehouses. Each plant
manufactures the same product, which is sold at different prices in each
warehouse area. The cost of manufacturing and cost of raw materials are different
in each plant due to various factors. The capacities of the plants are also different.
The relevant data are given in the table below.

Plant
Item 1 2 3 4
Manufacturing cost/unit
12 10 8 8
in Rs.
Raw Material cost/unit 8 7 7 5
Capacity per unit time 100 200 120 80

The company has five warehouses. The sale price, transportation costs and
demands are given in the table below.

Warehouse Transportation Cost/unit Sale Price Demand

1 2 3 4
A 4 7 4 3 30 80
B 8 9 7 8 32 120
C 2 7 6 10 28 150
D 10 7 5 8 34 70
E 2 5 8 9 30 90

a) Formulate this problem as a transportation problem in order to maximize

profit.
b) Find the solution using VAM
c) Test the optimality and find the optimal solution.

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 Assignment Models

CLASS WORK

BALANCED ASSIGNMENT PROBLEM – TYPE I

1. A departmental head has 4 subordinates and 4 tasks for submission / completion.

The subordinates differ in their capabilities and the tasks differ in their work
contents and intrinsic difficulties. The estimate of time for each subordinate and
each task is given in the matrix below.How should the transaction be assigned to
minimize the requirement of man hours?

Subordinates
I II III IV
A 17 25 26 20
Jobs
B 28 27 23 25
C 20 18 17 14
D 28 25 23 19

BALANCED ASSIGNMENT PROBLEM – TYPE II

2. A workshop has 4 machines and 4 tasks for completion. Each of the machines
can perform each of the 4 tasks. The time taken at each of the machines to
complete each task is given in the matrix below. How should the tasks be assigned
to machines to minimize requirement of machine hours?

Machines
A B C D
I 51 77 49 55
Jobs
II 32 34 59 68
III 37 44 70 54
IV 55 55 58 55

3. Suggest optimal assignment for the following cost matrix

Machines
I II III IV
A 1000 1200 400 900
Jobs
B 600 500 300 800
C 200 300 400 500
D 600 700 300 1000

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MAXIMIZATION OBJECTIVE

4. A pharmaceutical company has 4 branches at cities A, B, C and D. A branch

manager is to be appointed at each city out of 4 candidates P,Q,R and S. The
monthly business depends upon the city and the effectiveness of the branch
manager in the city. From the table given below determine which manager should
be appointed to which city so as to get maximum total monthly business.

City
A B C D
Branch P 11 11 9 9
Manager Q 13 16 11 10
R 12 17 13 8
S 16 14 16 12

UNBALANCED ASSIGNMENT PROBLEM

5. A department head has 3 subordinates and 4 tasks for completion. The employees
differ in their capabilities and the task differ in their work content. With the
performance matrix given below, which 3 of the 4 tasks should be assigned to the
subordinates.

Subordinates
I II III
A 9 12 11
Tasks
B 8 13 17
C 30 12 13
D 21 15 17

MULTIPLE OPTIMAL SOLUTION

6. A company has 4 jobs and 4 machines. The following matrix shows the cost of
assigning each job to each machine. How should the tasks be assigned to the
machines to minimize total cost.

Machines
M1 M2 M3 M4
W1 40 50 60 65
Jobs
W2 30 38 46 48
W3 25 33 41 43
W4 39 45 51 59

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TRAVELLING SALESMAN PROBLEM

Problem 7

Problem 8

BRANCH & BOUND ALGORITHM

Problem 9

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Problem 10

CREW ASSIGNMENT PROBLEM

11. A trip from Chandigarh to Delhi takes six hours by bus. A typical time table of the
bus service in both directions is given below:

Departure Route Arrival at Arrival at Route Departure

from Number Delhi Chandigarh Number from Delhi
Chandigarh
6.00 a 12.00 11.30 1 5.30
7.30 b 13.30 15.00 2 9.00
11.30 c 17.30 21.00 3 15.00
19.00 d 01.00 00.30 4 18.30
00.30 e 6.30 06.00 5 00.00

The cost of providing this service by the transport company depends upon the time spent
by the bus crew (driver and conductor) away from their places in addition to service time.
There are five crews.

There is a constraint that every crew should be provided with more than 4 hours of rest
before the return trip again and should not wait for more than 24 hours for the return trip.

24
The company has residential facilities for the crew at Chandigarh as well as Delhi. Find
the optimal service line connections.

PRACTICE PROBLEMS & LAB EXERCISES

12. A company operates in four territories, and four salesmen available for an
assignment. The territories are not equally rich in their sales potential. It is estimated that
a typical salesman operating in each territory would bring in the following annual sales:

Territory: I II III IV
Annual Sales (Rs.) 126000 105000 84000 63000

The four salesmen also differ in their ability. It is estimated that working under the same
conditions, their yearly sales would be proportionately as follows:

Salesman: A B C D
Proportion: 7 5 5 4

If the criterion is maximum expected total sales, the intuitive answer is to assign the
best salesman to the richest territory, the next best salesman to the second richest and so
on. Verify this answer by the assignment technique.

13. A city corporation has decided to carry out repairs on four main dispensaries of the
city. The government has agreed to make a special grant of Rs. 50 lakh towards the costs,
with a condition that the repairs must be done at the lowest cost and quickest time. If
conditions warrant, then a supplementary token grant will also be considered favorably.
The corporation has floated tenders and five contractors have sent in their bids. In order
to expedite work, one dispensary will be awarded to only one contractor.

Cost of Repairs (Rs. In lakh)

Contractor Dispensary
D1 D2 D3 D4
C1 9 14 19 15
C2 7 17 20 19
C3 9 18 21 18
C4 10 12 18 19
C5 10 15 21 16

You as a consultant suggest to the corporate the best way of assigning the repair work to
the contractors. Also
(a) If it is necessary to seek supplementary grants, then what would be the
amount sought?
(b) Which of the five contractors will be unsuccessful in the bid?

25
 UNIT III
GAME THEORY
TWO-PERSON ZERO SUM GAME (WITH SADDLE POINT)

1. The payoff matrix of a 2 person –zero sum game is given below. Find the best
strategy of each player and the value of the game.

Player B
Player B1 B2
A A1 3 5
A2 5 7

2. Solve the following game to determine optimal strategies for M and N. Also
obtain the value of the game

N
3 1 2 0
6 7 4 6
M
4 5 4 6
6 2 2 1

3. Solve the game and state its value.

Player Y
I II III IV V
I -1 3 2 7 4
Player
II 3 -4 1 5 6
X
III 6 5 7 6 5
IV 2 0 6 3 1

TWO-PERSON ZERO SUM GAME (WITHOUT SADDLE POINT)

4. Solve the game

Player B
Player B1 B2
A A1 6 3
A2 4 5

26
 5. Solve the game

Player Q
Player Q1 Q2
P P1 10 5
P2 7 8

RULE OF DOMINANCE

6. The payoff matrix for a particular competitive situation is given below.

a. Reduce the size of the game to a 2 x 2 matrix
b. Determine the optimal strategies and calculate the value of the game.

B
I II III
I 6 5 2
A
II -1 1 -2
III 4 9 6

7. Solve the game.

B
B1 B2 B3
A1 9 8 -7
A2 3 -6 4
A
A3 6 7 -7
A4 2 -7 3

METHOD OF MATRICES

8. Solve the game

B
I II III
I 3 -1 -3
A
II -3 3 -1
III -4 -3 3

GRAPHICAL METHOD

27
9. For the game below, find the optimal strategy using graphical method

B
I II III
A I 1 3 11
II 8 5 2

10. Solve the following game graphically

B
I II III IV V VI
A I 2 -2 3 4 3 7
II -4 6 5 1 4 6

11. Solve the following game graphically

B

I II

I -2 4
A
II 8 3

III 9 0

12. Solve the following game graphically

I II

I 3 -5

II 1 -1
A
III 2 -3

IV -1 3

V 0 1

28
13. Consider the following payoff matrix of Player A. Solve the game using graphical
method though it has a saddle point.

B
I II III IV V
A I 7 8 4 6 8
II -8 -6 1 9 6

LPP METHOD
14. Solve the game using LPP

B
9 1 4
A 0 6 3
5 2 8

15. Players A and B play a game in which each has three coins, Rs. 5, Rs. 10 and Rs.
20. Each selects a coin with the knowledge of the others choice. If the sum of the
coin is an odd amount, A wins B’s coin and if the sum of the coin is even, B wins
A’s coin. Find the best strategy for each player and the value of the game.

PRACTICE PROBLEMS & LAB EXERCISES

16. Two leading firms, Nirmala Textiles Ltd. And Swati Rayons Ltd., for years have
been selling shirting, which is but a small part of both firms’ total sales. The
Marketing Director of Nirmala Textiles raised the question, “What should the
firm’s strategies be in terms of advertising for the product in question?” The
systems group of Nirmala Textiles developed the following data for varying
degrees of advertising:
a) No advertising, medium advertising and heavy advertising for both firms
will result in equal market share.
b) Nirmala Textiles with no advertising: 40 percent of the market with
medium by Swati Rayons and 28 percent of the market with heavy
advertising by Swati Rayons.
c) Nirmala Textiles using medium advertising: 70 percent of the market with
no advertising by Swati Rayons and 45 percent of the market with heavy
advertising by Swati Rayons.
d) Nirmala Textiles using heavy advertising: 75 percent of the market with
no advertising by Swati Rayons and 52.5percent of the market with
medium advertising by Swati Rayons.

29
 Based upon the above information, answer the marketing director’s
question.

17. In an election of MLA, two political parties A and B are thinking of nominating
a candidate in a closed session, whose results are to be announced simultaneously.
The following odds are offered for the various possible combination of
candidates:

Party A Odds Party B

Sharma 3:1 Singh
Sharma 4:1 Gill
Sharma 1:3 Bajwa
Goel 3:7 Singh
Goel 3:2 Gill
Goel 1:4 Bajwa
Kapoor 4:1 Singh
Kapoor 1:4 Gill
Kapoor 1:3 Bajwa

The parties want to select candidates in accordance with standard minimax criterion.
What are the optimal strategies for party A and B?

30
 UNIT IV

SIMULATION AND DECISION THEORY

CLASS WORK

SIMULATION

1. A tourist car operator finds that during the past few months the car’s use has
varied so much that the cost of maintaining the car varied considerably. During
the past 200 days the demand for the car fluctuated as below:

Trips Frequency
per
week
0 16
1 24
2 30
3 60
4 40
5 30

Using random numbers simulate the demand for a ten week period.

2. An automobile production line turns out about 100 cars a day, but deviations
occur owing to many causes. The production is more accurately described by the
probability distribution given below:

Production/day Probability
95 0.03
96 0.05
97 0.07
98 0.10
99 0.15
100 0.20
101 0.15
102 0.10
103 0.07
104 0.05
105 0.03

31
 Finished cars are transported across the bay at the end of each day by ferry. If the
ferry has space for only 101 cars, what will be the average number of cars waiting
to be shipped and what will be the average number of empty spaces on the ship?

3. An air-conditioner manufacturing and servicing company collected data on

service request done on past 100 days and the date are given below:

No. of Air- Frequency No of Air- Frequency

conditioners conditioners
requesting serviced
service
0 5 0 8
1 10 1 2
2 15 2 30
3 20 3 20
4 25 4 15
5 15 5 20
6 10 6 5

Simulate a 10 day arrival and service pattern and

1. Find the average arrival rate
2. Find the average service rate
3. Find the average back log per day

DECISION THEORY
Decision Making under Uncertainty
4. Consider the following payoff in terms of yearly net profits for each decision
alternatives

N1 N2 N3
D1 150 250 350
D2 450 250 200
D3 100 180 290

Which decision is to be chosen on the basis of

a) Maximin criterion
b) Maximax criterion
c) Regret criteria
d) Laplace criterion
5. For the following cost matrix, suggest the best decision according to

N1 N2

32
 D1 30 35

D3 -20 10

a) Maximin criterion
b) Hurwitz criterion with α =0.2

Decision Making under Risk

6. A departmental store purchases sprays which can be ordered only in lots of 10.
Each spray costs Rs.75 and sells at Rs. 90. Unsold sprays however have no
salvage value. The probability distribution obtained from analysis of past sales
data is given below.

Demand 10 20 30 40 50
Probability 0.2 0.35 0.25 0.15 0.05
a. Formulate payoff table
b. How much quantity should the departmental store buy to maximize its
profit?

7. A newspaper boy has the following probabilities of selling a magazine.

No. of copies sold 10 11 12 13 14

Probability 0.10 0.15 0.20 0.25 0.30
Cost per copy is Rs. 30 and the selling price is Rs.50. He cannot return unsold
copies.
a) Construct the expected opportunity loss table
b) How many copies should he order?

Decision Tree

8. A company is launching a new product in the market. Three alternative decisions

are available for the management – D1, D2 and D3.
D1 – Publicity need to create the demand. Publicity cost is Rs. 200 per day.
D2- Appointing marketing people which costs Rs. 1250 per day.
D3 – Conducting exhibitions which cost Rs.600 per day.
The costs of the units associated with respective decision alternatives are Rs. 8, 6
and 7. The price per unit product is fixed at Rs. 20. The expected demands for the
item are as follows:

Demand 100 200 300

Probability 0.5 0.3 0.2

33
 The company has to decide whether the new item can be manufactured or not? If
yes, which decision variable should be chosen?

PRACTICE PROBLEMS & LAB EXERCISES

9. A company manufactures 30 items per day. The sale of these items depends upon
demand, which has the following distribution:

Sales (units) 27 28 29 30 21 32
Probability 0.10 0.15 0.20 0.35 0.15 0.05

The production cost and sale price of each units are Rs.40 and Rs. 50,
respectively. Any unsold product is to disposed off at a loss of Rs. 15 per unit.
There is a penalty of Rs. 5 per unit if the demand is not met.

Using the following random numbers estimate total profit / loss to the company
for the next 10 days – 10,99,65,99,95,01,79,11,16,20.

If the company decides to produce 29 items per day, what is the advantage and
disadvantage to the company?

10. The director of finance for farming cooperative is concerned about the yield per
acre she can expect from this year’s corn crop. The probability distribution of the
yield for the current weather conditions is given below:

Yield (kg per

120 140 160 180
acre)
Probability 0.18 0.26 0.44 0.12

She would like to see a simulation of yields she might expect over next 10 years
for weather conditions similar to those she is now experiencing.

Simulate the average yield she might expect per acre using the following
random numbers: 20,72,34,54,30,22,28,48,74,76,02.

She is also in the effect of market-price fluctuations on the cooperative’s farm

revenue. She makes this estimate of the per kilogram prices of corn.

Price per kg
2.00 2.10 2.20 2.30 2.50
(Rs.)
Probability 0.05 0.15 0.30 0.25 0.10

34
 Simulate the price she might expect to observe over the next 10 years using the
following random numbers – 82,95,18,96,20,84,56,11,52,03.

Assuming that prices are independent of yield, combine these two into the
revenue per acre and also find out the average revenue per acre she might
expect every year.

11. Dr. Strong is a dentist who schedules all her patients all her patients for 30-
minutes appointments. Some of the patients take more or less than 30 minutes
depending on the type of dental work to be done. The following summary shows
the various categories of work, their probabilities and the time actually needed to
complete the work.

Category Time Probability of

Required Category
Filling 45 mins 0.40
Crown 60 mins 0.15
Cleaning 15 mins 0.15
Extraction 45 mins 0.10
Check-up 15 mins 0.20

Simulate the dentist’s clinic for four hours and determine average waiting time
for the patients as well as the idleness of the doctor. Assume that all the patients
show up at the clinic at exactly their scheduled arrival time starting at 8 am. Use
the following random numbers for handling the above problem –
40,82,11,34,25,66,17,79.

12. The investment staff of TNC Bank is considering four investment proposals for
a client: shares, bonds, real estate and savings certificate. These investments will
be held for one year. The past data regarding the four proposals are given below:

Shares: There is 25 percent chance that shares will decline by 10 percent, a 30

percent chance that they will remain stable and a 45 percent chance that they
will increase in value by 15 percent. Also, the shares under consideration do not
pay any dividends.

Bonds: These bonds stand a 40 percent chance of increase in value by 5 percent

and 60 percent chance of remaining stable and they yield 12 percent.

Real Estate: This proposal has a 20 percent chance of increasing 30 percent in

value, a 25 percent chance of increasing in 20 percent value, a 40 percent
chance of increasing in 10 percent value, a 10 percent chance of remaining
stable and 5 percent chance of losing 5 percent of its value.

35
 Savings Certificate: These certificates yield 8.5 percent with certainty.

Use a decision tree to structure the alternatives available to the investment staff,
and using the expected value criterion, choose the alternative with the highest
expected value.

13. A company has developed a new product in its R & D laboratory. The company
has the option of setting up production facility to market this product straight
away. If the product is successful, then over the three years expected product life,
the returns will be Rs 120 lakh with a probability of 0.70. If the market does not
respond favourable, then the returns will be only Rs. 15 lakh with probability of
0.30.

The company is considering whether it should test market this product building
a small pilot plant. The chance that the test market will yield favourable
response is 0.80. If the test market gives favourable response, then the chance of
successful total market improves to 0.85.

If the test market gives poor response then the chance of success in the total
market is only 0.30.

As mentioned before, the returns from the successful market will be Rs. 120
lakh and from an unsuccessful market will be only Rs. 15 lakh. The installation
cost to produce for the total market is Rs.40 lakh and the cost of test marketing
pilot plant is Rs. 5 lakh. Using decision-tree analysis, draw a decision-tree
diagram and carry out necessary analysis to determine the optimal decisions.

36
 UNIT V

QUEUEING THEORY AND REPLACEMENT MODELS

CLASS WORK

QUEUEING THEORY

MODEL I – SINGLE SERVER MODEL

1. The tools in a factory are issued to the workmen at a centrally located window
called tool crib. Workers who need tools or who wish to return tools approach the
window when the crib clerk issues or accepts tools on the basis of First-Come-
First-Served. The service time for the receipt and issue of the tools is distributed
negative exponentially with the mean of 4 minutes per workman. If the workers
arrive simply at random at an average of 20 workers per 100 minutes, determine
a. average number of workers waiting at the tool crib for service
b. average waiting time in the queue
c. % of time that the crib clerk is idle.

2. In a railway reservation counter the number of customers arrives at 32 persons

per hour and the clerk can handle and provide assistance using a computer
terminal to 40 persons per hour. If the arrival and service follows Poisson process
calculate,
a. average number of customers waiting for service
b. average waiting time for a customer before getting the service
c. Probability that there will be 10 or more customers in the queue.

3. ABC Company has a hob shaping machine. The hobs requiring regrinding are
sent from the company’s tool crib which at present is operated one shift per day
of 8 hours. Arrival of the hob at the tool crib is random with an average time of
80 minutes between one arrival and the next. The regrinding time of the hob is
distributed negative exponentially with a mean of 40 minutes.
a. For what fraction of time the machine is busy?
b. What is the average length of the queue that is formed from time to time?
c. How long does a hob wait in the queue?
d. The management is prepared to recruit another grinder and thereby start
another shift on this machine when the utilization of the machine on single
shift basis increases to 75%. What should the arrival rate be?

37
 4. Customers arrive at a window drive-in bank according to the Poisson distribution
with a mean of 10 per hour. Service time per customer is exponential with mean
of 5 minutes. There are 3 spaces in front of the window including one for the car
being serviced. Other arriving cars wait outside these 3 spaces.
a. What is the probability that an arriving customer can enter one of the three
spaces in front of the window?
b. What is the probability that an arriving customer will have to wait outside
the 3 spaces?
c. How long is the arriving customer expected to wait before starting
service?
d. How many car spaces should be provided in front of the window so that
an arriving customer can wait in front of the window
i. at least 20% of the time.
ii. at least 40% of the time.

MODEL IV – MULTI SERVER MODEL

5. An insurance company has 3 claim adjusters in their main office. The customers
are found to arrive according to Poisson process at an average rate of 40 per 8
hours to settle claims against the company. The time spent by the adjuster with
the claimant is found to have a negative exponential distribution with a mean
service time of 24 minutes. The claimants are served on First-Come-First-Served
basis. Calculate
a. average number of claimants waiting to see the claim adjuster
b. average number of claimants in the insurance office
c. average waiting time for the claimant
d. average time the claimant spends in the office
e. Number of hours spent by the adjuster in working on the claims.

6. There are 3 clerks in the loan section of the bank to process the initial queries of
the customer. The arrival rate of the customers follows a Poisson distribution and
it is 20 per hour. The service rate also follows Poisson distribution and it is 9
customers per hour. Find
a. average number of customers in queue and in the system
b. average waiting per customer in the queue and in the system.

REPLACEMENT MODELS

MODEL I – REPLACEMENT OF ITEMS THAT DETERIORATE WITH TIME

ANDNOT CONSIDERING TIME VALUE OF MONEY

7. The machine costs Rs. 12,200 and the scrap value is Rs 200. The maintenance cost of
the machine is given below:

38
 Year (n) Maintenance Cost (Rs)
1 200
2 500
3 800
4 1200
5 1800
6 2500
7 3200
8 4000
When should the machine be replaced?

8. There are 2 types of auto rickshaws Type A and Type B. The purchase prices of these 2
types are Rs.7000 and Rs.9000 respectively. The resale value and the running cost for
the 2 types are given below:

Type A Type B

Year Running Resale Year Running Resale

Cost Price Cost Price

1 1100 3100 1 1300 4100

2 1300 1600 2 1600 2100

3 1500 850 3 1900 1100

4 1900 475 4 2500 600

5 2400 300 5 3200 400

6 2900 300 6 4100 400

7 3500 300 7 5100 400

8 4100 300 8 6200 400

Determine which type auto rickshaw is to be purchased.

MODEL II – REPLACEMENT OF ITEMS THAT DETERIORATE WITH TIME -

CONSIDERING TIME VALUE OF MONEY

9. The cost of a new inkjet printer is Rs.5500. The running cost of the nth year is
given by Rn = 550(n-1) where n=1, 2, 3... If the discount rate is 0.4 per year,
determine after how many years it will be economical to replace the printer with
new one.

39
 10. A small workshop is involved in sheet metal work is on the look for the purchase
of a small sheet welding machine. A manufacturer offers 2 choices namely
Machine A and Machine B. The following details are supplied by the
manufacturer.

Machine A Machine B
Initial Cost 12000 6000
Running Cost 1920 for first 5 2880 for first 6 years
years and increase and increase by 480 per
by 480 per year year thereafter
thereafter
Worth of Capital 10% per year 10% per year

As a consultant in a workshop, you are required to suggest which machine is to

be purchased and why?

MODEL III – REPLACEMENT OF ITEMS THAT FAIL SUDDENLY

11. The following failure rates are for the resistor in an electrical system. The number
of resistors in an electrical system is 1000 at the beginning.

End of 1 2 3 4 5 6 7 8
week
Cumulative 0.03 0.15 0.24 0.44 0.67 0.85 0.95 1.00
Probability
of failure

The cost of replacing an individually failed resistor is Rs. 1.30. If all the resistors are
replaced in a group, the cost per resistor is 32 paise.
If a decision is made to replace all the resistors at a time at fixed intervals and replace the
individual resistors as and when they fail. What will be the optimal group replacement
period? At what group replacement price per resistor will a policy of strictly individual
replacement become preferable for the adopted group replacement policy?

12. It has been suggested by data processing firm that they adopt a policy and
periodically replace all the tubes in a certain piece of experiment equipments. The
tube is known to have the normal distribution as given below.

Tube 1 2 3 4 5
Failure/week
Probability 03 0.1 0.1 0.2 0.3
of failure

40
There are approximately 1000 tubes in the equipment. The cost of replacing the tube on
an individual basis is estimated to be Rs.100 per tube and the cost of group replacement
policy is Rs. 3 per tube. Compare the cost of preventive replacement with that of remedial
replacements.

PRACTICE PROBLEMS & LAB EXERCISES

13. A road transport company has one reservation clerk on duty at a time. He handles
information on bus schedules and makes reservations. Customers arrive at a rate
of 8 per hour and the clerk can, on an average, service 12 customers per hour.
After stating your assumptions, answer the following:
a) What is the average number of customers waiting for the service of the
clerk?
b) What is the average time a customer has to wait before being served?
c) The management is contemplating to install a computer system for
handling information and reservations. This is expected to reduce the
service time from 5 to 3 minutes. The additional cost of having the new
system works out to Rs. 50 per day. If the cost of goodwill of having to
wait is estimated to 12 paise, per minute spent waiting, before being
served, should the company install the computer system? Assume an 8
hours working day.

14. A tax consulting firm has 4 service counters in its office for receiving people who
have problems and complaints about their income, wealth and sales taxes.
Arrivals average 80 persons in an 8-hour service day. Each tax adviser spends an
irregular amount of time servicing the arrivals, which have been found to have an
exponential distribution. The average service time is 20 minutes. Calculate the
average number of customers in the system, average number of customers waiting
to be serviced, average time a customer spends in the system, and average waiting
time for a customer. Calculate how many hours each week does a tax adviser
spend performing his job.

41