WOLLO UNIVERSITY

KOMBOLCHA INSTITUTE OF TECHNOLOGY

Production Engineering and Management – M.Sc Program

Operations Research – Assignment

1. A manufacturing company is engaged in producing three types of products: A, B, and C.

The production department produces, each day, components sufficient to make 50 units of
A, 25 units of B, and 30 units of C. The management is confronted with the problem of
optimizing the daily production of products in assembly department where only 100man-
hours are available daily to assemble the products. The following additional information is
available.

Type of Profit contribution Assembly time

Product per unit of products (Birr) time per product
A 12 0.8
B 20 1.7
C 45 2.5

The company has a daily order commitment for 20 units of product A and a total of 15
units of products B and C. formulate this problem as an LP model so as to maximize the
total profit.

2. A company has two grades of inspectors 1 and 2, who are to be assigned for a quality
control inspection. It is required that at least 2000 pieces be inspected per 8 hour day.
Grade 1 inspector cab check pieces at the rate of 40 per hour, with an accuracy of 97
percent. Grade 2 inspector checks at the rate of 30 pieces per hour with an accuracy of 95
percent.
The wage rate of a grade 1 inspector is birr 5 per hour while that of a grade 2 inspector is
birr 4 per hour. An error made by an inspector costs birr 3 to the company. There are only

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 nine grade 1 inspectors and eleven grade 2 inspectors available in the company. The
company wishes to assign work to the available inspectors so as to minimize the total cost
of the inspection. Formulate this problem as an LP models so as to minimize daily
inspection cost.
3. An electronic company is engaged in the production of two components C1 and C2 used in
radio sets. Each unit of C1 costs the company Birr 5 in wages and Birr 5 in material, while
each of C2 costs the company Birr 25 in wages and Birr 15 in material. The company sells
both products on one-period credit terms, but the company's labour and material expenses
must be paid in cash. The selling price of C1 is Birr 30 per unit and of C2 it is Birr 70 per
unit. Because of the strong monopoly of the company for these components, it is assumed
that the company can sell at the prevailing prices as many units as it produces. The
company's production capacity is, however, limited by two considerations. First, at the
beginning of period 1, the company has an initial balance of Birr 4,000 (cash plus bank
credit plus collections from past credit sales). Second, the company has available in each
period 2,000 hours of machine time and 1,400 hours of assembly time. The production of
each C1 requires 3 hours of machine time and 2 hours of assembly time, whereas the
production of each C2 requires 2 hours of machine time and 3 hours of assembly time.
Formulate this problem as an LP model so as to maximize the total profit to the company.
4. A firm makes two products X and Y, and has a total production capacity of 9 tones per
day, X and Y requiring the same production capacity. The firm has a permanent contract to
supply at least 2 tones of X and at least 3 tones of Y per day to another company. Each
tone of X requires 20 machine hours of production time and each tone of Y requires 50
machine hours of production time. The daily maximum possible number of machine hours
is 360. All the firm's output can be sold, and the profit made is Birr 80 per tone of X and
Birr 120 per tone of Y. It is required to determine the production schedule for maximum
profit and to calculate this profit. (Hint: Use graphical method)
5. An electronic company produces-three types of parts for automatic washing machines. It
purchases casting of the parts from a local foundry and then finishes the part on drilling,
shaping and polishing machines. The selling prices of parts A, B and C, are Birr 8, Birr 10
and Birr 14 respectively. All parts made can be sold. Castings for parts A, B and C, cost
Birr 5, Birr 6 and Birr 10 respectively. The shop possesses only one of each type of
machine. The costs per hour to run each of the three machines are Birr 20 for drilling, Birr

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 30 for shaping and Birr 30 for polishing. The capacities (parts per hour) for each part on
each machine are shown in the following table:

Machine Capacity per hour

Part A Part B Part C
Drilling 25 40 25
Shaping 25 20 20
Polishing 40 30 40

The management of the shop wants to know how many parts of each type it should
produce per hour in order to maximize profit for an hour's run. Formulate this problem as
an LP model so as to maximize total profit to the company.

6. A pharmaceutical company produces two pharmaceutical products: A and B. Production of

both products requires the same process, I and II. The production of B results also in a by-
product C at no extra cost. The product A can be sold at a profit of Birr 3 per unit and B at
a profit of Birr 8 per unit. Some of this by-product can be sold at a unit profit of Birr 2; the
remainder has to be destroyed and the destruction cost is Birr 1 per unit. Forecasts show
that only up to 5 units of C can be sold. The company gets 3 units of C for each unit of B
produced. The manufacturing times are 3 hours per unit for A on process I and II,
respectively, and 4 hours and 5 hours per unit for B on process I and II, respectively.
Because the product C results from producing B, no time is used in producing C. The
available times are 18 and 21 hours of process I and II, respectively. Formulate this
problem as an LP model to determine the quantity of A and B which should be produced,
keeping C in mind, to make the highest total profit to the company.

7. An investor has three investment opportunities available at the beginning of each for the
next 5 years, and also has a total of Birr 500,000 available for investment at the beginning
of the first year. A summary of the financial characteristics of the three investment
alternatives is presented in the following table.

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 Investment Allowable size of Return Timing of Immediate
Alternative initial investment (%) Return Reinvestment possible?
1 100,000 13 1 Year later Yes
2 unlimited 20 2 Year later Yes
3 50,000 25 3 Year later Yes

The investor wishes to determine the investment plan that will maximize the amount of
money can be accumulated by the beginning of the 6th year in the future. Formulate this
problem as an LP model to maximize total return.

8. Use the graphical method to solve the following LP problem.

Maximize Z = 15x1 + l0x2
Subject to the constraints:
4x1 + 6x2 ≤ 360
3x1 + 0x2 ≤ 180
0x1 + 5x2 ≤ 200
x1, x2 ≥ 0.
9. Use the graphical method to solve the following LP problem.
Maximize Z = 2x1 + x2
Subject to the constraints:
x1 + 2x2 ≤ 10
x1 + x2 ≤ 6
x1 - x2 ≤ 2
x1 - 2x2 ≤ 1
x1, x2 ≥ O.
10. Use the graphical method to solve the following LP problem.
Maximize Z = -x1 + 2x2
Subject to the constraints:
-x1 + 3x2 ≤ 10
x1 + x2 ≤ 6
x1 - x2 ≤ 2
x1, x2 ≥ O.

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11. A manufacturer produces two different models: X and Y, of the same product. Model X
makes a contribution of Birr 50 per unit and model Y, Birr 30 per unit towards total profit.
Raw materials R1 and R2 are required for production. At least 18 kg of R 1 and 12 kg of R2
must be used daily. Also at most 34 hours of labor are to be utilized. A quantity of 2 kg of
R1 is needed for model X and 1 Kg of R1 for model Y. For each of X and Y, 1 kg of R2 is
required. It takes 3 hours to manufacture model X and 2 hours to manufacture model Y.
How many units of each model should be produced to maximize the profit? (Hint: use
graphical method).
12. An advertising agency wishes to reach two types of audiences: customers with annual
income greater than one 1000 Birr (target audience A) and customers with annual income
of less than 1000 Birr (target audience B). The total advertising budget is Birr 200,000.
One program of TV advertising costs Birr 50,000; one program of radio advertising costs
Birr 20,000. For contract reasons, at least three programs ought to be on TV and the
number of radio programs must be limited to 5. Surveys indicate that a single TV program
reaches 450,000 prospective customers in target audience A and 50,000 in target audience
B. One radio program reaches 20,000 prospective customers in target audience A and
80,000 in target audience B. Determine the media mix to maximize the total reach. (Hint:
use Graphical method).
13. A company makes two kinds of leather belts. Belt A is a high quality belt and belt B is of
lower quality. The respective profits are 4 USD and 3 USD per belt. The production of
each of type A requires twice as much time as a belt of type B, and if all belts were of type
B, the company could make 1000 per day. The supply of leather is sufficient for only 800
belts per day (both A and B combined). Belt A requires a fancy buckle and only 400 per
day are available. There are only 700 buckles a day available for belt B. What should be
the daily production of each type of belt? Formulate this problem as an LP model and
solve it by simplex method.
14. A pharmaceutical company has 100 kg of A, 180 kg of B and 120 kg of C ingredients
available per month. Company can use these materials to make three basic pharmaceutical
products namely 5-10-5, 5-5-10 and 20-5-10, where the numbers in each case represent the
percentage of weight of A, B and C, respectively in each of the products. The cost of these
raw materials is as follows.

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 Ingredient Cost per kg (Birr)
A 80
B 20
C 50
Inert Ingredients 20

The selling prices of these products are Birr 40.5, Birr 43 and 45 per kg, respectively.
There is a capacity restriction of the company for product 5-10-5, so that company cannot
produce more than 30 kg per month. Determine how much of each of the products
company should produce in order to maximize its monthly profit.

15. Write the dual to the following LP problems

a) Maximize Z = x1 - x2 + 3x3
Subject to the constraints:
x1 + 2x2 + x3 ≤ 10
2x1 -0x2 - x3 ≤ 2
2x1 -2 x2 -3 x3 ≤ 6
x1, x2, x3 ≥ O.
b) Maximize Z = 3x1 - 2x2 + 4x3
Subject to the constraints:
3x1 + 5x2 + 4x3 ≥7
6x1 + x2 +3x3 ≥ 4
7x1 -2x2 - x3 ≤ 10
x1 -2x2 +5x3 ≥ 3
4x1 + 7x2 - 2x3 ≥2
x1, x2, x3 ≥ O.

c) Maximize Z = x1 +2 x2
Subject to the constraints:
2x1 +4x2 ≤ 160
x1 -x2 = 30
x1 ≥10
x1, x2 ≥ O.
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16. Solve the following all-integer programming problem using the branch and bound
method.
Minimize Z = 3x1 + 2.5x2
Subject to the constraints:
x1 +2x2 ≥ 20
3 x1 +2x2 ≥ 50
x1, x2 ≥ 0 and integers.

17. A department has five employees with five jobs to be performed. The time (in hours) each
men will take to perform each job is given in the effectiveness matrix. How should the jobs
be allocated, one per employee, so as to minimize the total man-hours?

Employees
I II III IV V
A 10 5 13 15 16
B 3 9 18 13 6
Jobs C 10 7 2 2 2
D 7 11 9 7 12
E 7 9 10 4 12

18. A corporation is considering four possible investment opportunities. The following table
presents information about the investment (in Birr thousand) profits:

Project Present value of Capital Required Year-wise by Projects

Expected return Year 1 Year 2 Year 3
1 650 700 550 400
2 700 850 550 350
3 225 300 150 100
4 250 350 200 -
Capital available
for investment 1,200 700 400

In addition, projects 1 and 2 are mutually exclusive and project 4 is contingent on the prior
acceptance of project 3. Formulate an integer programming model to determine which

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 projects should be accepted and which should be rejected to maximize the present value
from accepted projects. (Hint: use zero-one integer programming approach).

19. A dairy firm has three plants located in a state. The daily milk production at each plant is
as follows:
Plant 1: 6 million liters,
Plant 2: 1 million liters, and
Plant 3: 10 million liters
Each day, the firm must fulfill the needs of its four distribution centers. Minimum
requirement at each centre is as follows:
Distribution centre 1: 7 million liters,
Distribution centre 2: 5 million liters,
Distribution centre 3: 3 million liters, and
Distribution centre 4: 2 million liters
Cost in hundreds of rupees of shipping one million liter from each plant to each
distribution centre is given in the following table:

Distribution Center
D1 D2 D3 D4
P1 2 3 11 7
Plant

P2 1 0 6 1
P3 5 8 15 9

Find initial basic feasible solution for given problem by using:

a) North-west comer method
b) Least cost method
if the object is to minimize the total transportation cost.

20. A computer centre has three expert programmers. The centre wants three application
programs to be developed. The head of the computer centre, after studying carefully the
programs to be developed, estimates the computer time in minutes required by the experts
for the application programs as follows.

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 Programmers
A B C
1 120 100 80

Programs
2 80 90 110
3 110 140 120

Assign the programmers to the programs in such a way that the total computer time is
minimum. (Hint: Use Hungarian Method).

21. A Shoe manufacturing firm employs typists on hourly piece-rate basis for their daily work.
There are five typists and their charges and speed are different. According to an earlier
understanding, only one job is given to one typist and the typist is paid for a full hour even
if she works for a fraction of an hour. Find the least cost allocation based on the following
data.

Typist Rate per Number of pages Jobs Number of

hour typed/hour pages
A 5 12 P 199
B 6 14 Q 175
C 3 8 R 145
D 4 10 S 298
E 4 11 T 178

22. A firm manufactures three types of products. The fixed and variable costs are given
below:

Fixed Cost (Birr) Variable Cost per Unit (Birr)

Product A: 25,000 12
Product B: 35,000 9
Product C: 53,000 7
The likely demand (units) of the products is given below:
Poor demand: 3,000
Moderate demand: 7,000
High demand: 11,000
If the sale price of each type of product is Birr 25, then, prepare the payoff matrix.

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23. A food products company is contemplating the introduction of a revolutionary new product
with new packaging or replace the existing product at much higher price (S1) or a moderate
change in the composition of the existing product with a new packaging at a small increase
in price (S2) or a small change in the composition of the existing product except the word
'New' with a negligible increase in price (S3). The three possible states of nature or events
are: (i) high increase in sales (N1), (ii) no change in sales (N2) and (iii) decrease. in sales
(N3). The marketing department of the company worked out the payoffs in terms of yearly
net profits for each of the strategies of three events (expected sales). This is represented in
the following table:

Strategies States of nature

N1 N2 N3
S1 700,000 300,000 150,000
S2 500,000 450,000 0
S3 300,000 300,000 300,000

Which strategy should the concerned executive choose on the basis of:
i) Maximin criterion ii) Maximax criterion
iii) Minimax regret criterion iv) Laplace criterion?

24. A company manufactures goods for a market in which the technology of the product is
changing rapidly. The research and development department has produced a new product
which appears to have potential for commercial exploitation. A further Birr 60,000 is
required for development testing. The company has 100 customers and each customer
might purchase at the most one unit of the product. Market research suggests that a selling
price of Birr 6000 for each unit with total variable costs of manufacturing and selling
estimate are Birr 2,000 for each unit. From previous experience, it has been possible to
derive a probability distribution relating to the proportion of customers who will buy the
product as follows:

Proportion of customers: 0.04 0.08 0.12 0.16 0.20

Probability: 0.10 0.10 0.20 0.40 0.20

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 Determine the expected opportunity losses, given no other information than that stated
above, and state whether or not the company should develop the product.
25. A company is considering the introduction of a new product to its existing product range.
It has defined two levels, of sales as 'high' and ' low' on which to base its decision and has
estimated the changes that each market level will occur, together with their costs and
consequent profits or losses. The information is summarized below.

State of nature Probability Course of Action

Market the product Do not market the product
(Birr ‘000) (Birr ‘000)
High sales 0.3 150 0
Low sales 0.7 -40 0
The company's marketing manager suggests that a market resea.rch survey may be
undertaken to provide further information on which to base the decision. On past
experience with a certain market research organization, the marketing manager assesses its
ability to give good information in the light of subsequent actual sales achievements as
follows:

Market research Actual Sales

(survey customer)
Market ‘high’ Market ‘low’
‘High’ sales forecast 0.5 0.1
Indecisive survey report 0.3 0.4
‘Low’ sales forecast 0.2 0.5

The market research survey will cost Birr 20,000, state whether or not there is a case for
employing the market research organization.

26. A glass factory specializing in crystal is developing a substantial backlog and the firm's
management is considering three courses of action: Arrange for sub-contracting (S1), begin
overtime production (S2), and construct new facilities (S3). The correct choice depends
largely upon future demand which may be low, medium, or high. By consensus,
management ranks the respective probabilities as 0.10, 0.50 and 0.40. A cost analysis
reveals effect upon the profits that is shown in the table below:

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 Demand Probability Course of Action
S1 S2 S3
(subcontracting) (Begin Overtime) (Construct Facilities)
Low (L) 0.10 10 -20 -150
Medium (M) 0.50 50 60 20
High (H) 0.40 50 100 200

Show this decision situation in the form of a decision tree and indicate the most preferred
decision and corresponding expected value.

27. A business man has two independent investment portfolios A and B available to him, but
he lacks the capital to undertake both of them simultaneously. He can choose A first and
then stop, or if A is not successful, then take B or vice-versa. The probability of success of
A is 0.6, while for B it is 0.4. Both investment schemes require an initial capital outlay of
Birr 10,000 and both return nothing if the venture is unsuccessful. Successful completion
of A will return Birr 20,000 (over cost) and successful completion of B will return Birr
24,000 (over cost). Draw decision tree and determine the best strategy.

28. [CA, May 1988; Delhi Univ., MBA, 1997]For the game with payoff matrix:

Player A Player B
B1 B2 B3
A1 -1 2 -2
A2 6 4 -6

determine the best strategies for players A and B. Also determine the value of game. Is this
game: i) Fair?
ii) Strictly determinable?

29. A company management and the labor union are negotiating a new three year settlement.
Each of these has 4 strategies:

I - Hard and aggressive bargaining II - Reasoning and logical approach

III - Legalistic strategy IV - Conciliatory approach
The costs to the company are given for every pair of strategy choice.
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 Union Company Strategies
Strategies I II III IV
I 20 15 12 35
II 25 14 8 10
III 40 2 10 5
IV -5 4 11 0

What strategy will the two sides adopt? Also determine the value of the game.

30. A television repairman finds that the time spent on his jobs has an exponential distribution
with a mean of 30 minutes. If he repairs sets in the order in which they came in, and if the
arrival of sets follows a Poisson distribution approximately with an average rate of 10 per
8-hour day, what is the repairman's expected idle time each day? How many jobs are ahead
of the average set just brought in?
31. In a railway marshalling yard, goods trains arrive at a rate of 30 trains per day. Assuming
that the inter-arrival time follows an exponential distribution and the service time (the time
taken to hump a train) distribution is also exponential with an average of 36 minutes.
Calculate
a) Expected queue size (line length)
b) Probability that the queue size exceeds 10.
If the input of trains increases to an average of 33 per day, what will be the change in ‘a’
and ‘b’?

32. A warehouse has only one loading dock manned by a three person crew. Trucks arrive at
the loading dock at an average rate of 4 trucks per hour and the arrival rate is Poisson
distributed. The loading of a truck takes 10 minutes on an average and can be assumed to
be exponentially distributed. The operating cost of a truck is Birr 20 per hour and the
members of the loading crew are paid at Birr 6 each per hour. Would you advise the truck
owner to add another crew of three persons?

33. Two manufacturers A and B are competing with each other in a restricted market. Over
the year, A's customers have exhibited a high degree of loyalty as measured by the fact that
customers are using A's product 80 per cent of the time. Also former customers purchasing
the product from B have switched back to A's product 60 per cent of the time.
a) Construct and interpret the state transition matrix in terms of: i) Retention and loss, and
ii) Retention and gain.
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 b) Calculate the probability of a customer purchasing A's product at the end of the second
period.
34. A manufacturing company has a certain piece of equipment that is inspected at the end of
each day and classified as just overhauled, good, fair or inoperative. If the item is
inoperative it is overhauled, a procedure that takes one day. Let us denote the four
classifications as states 1, 2, 3, and 4, respectively. Assume that the working condition of
the equipment follows a Markov chain with the following transition matrix:

Tomorrow
1 2 3 4
1 0 ¾ ¼ 0
P = Today 2 0 ½ ½ 0
3 0 0 ½ ½
4 1 0 0 0

If it costs Birr 125 to overhaul a machine (including lost time) on the average and Birr 75
as production lost if a machine is found inoperative. Using the steady-state probabilities,
compute the expected cost of maintenance per day.

35. A bakery keeps stock of a popular brand of cake. Previous experience shows the daily
demand pattern for the item with associated probabilities, as given below:
Daily demand (number) 0 10 20 30 40 50
Probability 0.01 020 0.15 0.50 0.12 0.02
Use the following sequence of random numbers to simulate the demand for next 10 days.
Random numbers: 25, 39, 65, 76, 12, O5, 73, 89, 19, 49.
Also estimate the daily average demand for the cakes on the basis of simulated data.

36. Salesman located in a city A decided to travel to city B. He knew the distances of
alternative routes from city A to city B. He then drew a highway network map as shown in
the figure below. The city of origin, A is city 1. The destination city B, is city 10. Other
cities through which the salesman will have to pass through are numbered 2 to 9. The
arrow representing routes between cities and distances in kilometers are indicated on each

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route. The salesman’s problem is to find the shortest route that covers all the selected cities
from A to B.

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