Table of Contents

QUESTION ONE......................................................................................................................................2
QUESTION TWO.....................................................................................................................................4
QUESTION THREE.................................................................................................................................8
QUESTION SIX......................................................................................................................................11
QUESTION SEVEN................................................................................................................................14

pg. 1
QUESTION ONE
PART A
I) A decision tree for Mr. Sakala indicating all choices and events

ii. What decision Mr. Sakala should take regarding the investment of 100,000?

The present value for the Option 1 , success 

 ={0.60 [(0.1 x 500,000) + (0.6 x 220,000) + (0.3 x 80,000)]} + (0.40 x 0)

= (0.60x206000)

=123600

 
Now the net present value = Net present value of success - Net cash outflow(given)
 
 
= 123,600 - 100,000
 
= 23,600
 
The present value for the Option 2 
 
Now the net present value = Net present value of success - Net cash outflow(given)
 
= 120,000 - 100,000
 

pg. 2
= 20,000
 
 Hence comparing both the options the investment in the development and marketing of the drug
is more feasible decision as the net present value is 23,600

iii. If Mr. Sakala is a risk averter, should he change the decision given by you?

As Mr.Sakala is a risk averter - The one who prefers a more certain return to an alternative with
an equal return but which is more risky. He should invest in the option 2 which is the alternate
proposal as it is evident that there is no possibility of failure totally, But for the option one even
though the profits may be high when successful compared to option 1, there is a failure chances
of 40 % which is very high. Yes, he should change the decision and invest in the alternate option
to avoid any chances of failure.

PART B

The average no. of customers arrive at the system, i.e., arrival rate = 75 per 8 hour in a day

No. of servers c =5

Average time spent on a customer = 25 minutes.

i) The probability of there being no customer in the system

λ=75/8 Per hour
p= λ/µ
average service rate =(480 minutes x 5 servers)/25
=96
P= λ/µ
=75/96
=0.78125
P0=1-0.78125
=0.21875
ii) The average number of customers in the system
= λ/(µ-λ)

pg. 3
=p/(1-p)
=3.5
Which is 4 customers

iii) Average number of customers waiting to be served

=λp/(µ-λ)
=(0.78125*75)/(96-75)
=2.79
=3 customers.

iv) Average time a customer spends in the system

=E(m)/ λ +1/ µ
=1.8561/9.375 +1/2.4
=36.882 Minutes
v) Average waiting time for a customer

Thus, the average waiting time for a customer is 31.182 minutes.

QUESTION TWO
PART A
Basic ratio
V. X1 X2 X3 S1 S2 S3 RHS s
2.66
S1 2 3 0 1 0 0 8 7
S2 0 2 5 0 1 0 10 5
S3 3 2 4 0 0 1 15 7.5
W -3 -5 -4 0 0 0 0

Pivoting column

S2 0 2 5 0 1 0 10

(1.33 (2.00 (0.67 (5.33

) ) - ) - - )

(1.33 (0.67 1.0

) - 5.00 ) 0 - 4.67

pg. 4
S3 3 2 4 0 0 1 15

(1.33 (2.00 (0.67 (5.33

) ) - ) - - )

(0.67 1.0
1.67 - 4.00 ) - 0 9.67

W -3 -5 -4 0 0 0 0

13.3
3.33 5.00 - 1.67 - - 3

(4.00 13.3
0.33 - ) 1.67 - - 3

Basic Ratio
V. X1 X2 X3 S1 S2 S3 RHS s

1.0
X2 0.67 0 - 0.33 - - 2.67

(1.33 (0.67 0.933

S2 ) - 5.00 ) 1.00 - 4.67 3

(0.67 1.0 2.416

S3 1.67 - 4.00 ) - 0 9.67 7

(4.00 13.3
W 0.33 - ) 1.67 - - 3

Pivoting column

(0.67 1.0
S3 1.67 - 4.00 ) - 0 9.67

(4.00 (0.80 (3.73

1.07 - ) 0.53 ) - )

(0.13 (0.80 1.0

2.73 - - ) ) 0 5.93

pg. 5
 (4.00 13.3
W 0.33 - ) 1.67 - - 3

(1.07 (0.53
) - 4.00 ) 0.80 - 3.73

(0.73 17.0
) - - 1.13 0.80 - 7

Basic Ratio
V. X1 X2 X3 S1 S2 S3 RHS s
0.66 0.33 2.66
X2 7 1 0 3 0 0 7 4

(0.27 (0.13 0.2

X3 ) - 1 ) 0 - 1 -
2.73 5.93
S3 3 0 0 -0.13 -0.8 1 3 2.171
1.13 17.0
W -0.73 0 0 3 0.8 0 7

Pivoting
column

0.66 0.33 2.66

X2 7 1 0 3 0 0 7
0.03 - -
-0.67 0 0 3 0.2 0.24 1.45
0.36 - 1.21
-0 1 0 6 0.2 0.24 9

(0.27 (0.13 0.2

X3 ) - 1.00 ) 0 - 0.93
-
0.0 0.09 0.58
0.27 0 0 -0.01 8 9 6

(0.15 0.1
0.00 - 1.00 ) 2 0.10 1.52

1.13 17.0
W -0.73 0 0 3 0.8 0 7

pg. 6
 -
0.2 0.26 1.58
0.73 0 0 -0.04 1 7 5
1.09 0.5 0.26 18.6
-0 0 0 8 9 7 5

Basic V. X1 X2 X3 S1 S2 S3 RHS
X2 0 1 0 3/8 1/5 - 1/4 1 2/9
X3 0 0 1 - 1/7 1/8 0 1 1/2
X1 1 0 0 -0 - 2/7 3/8 2 1/6
W -0 0 0 1 3/5 1/4 18 2/3

Therefore, X1=13/6, X2=11/9, X3=3/2, W=56/3

PART B

Lpp is 

Maximize.  Z= 20x+50y

Subjected to

0.2x+0.4y≤160

X≤400

Y≤300

X,Y≥0

 SIMPLEX ALGORITHM

Basic S
V. X Y S1 S2 3 RHS Ratios
S1 2 4 1 0 0 1600 400

S2 1 0 0 1 0 400 -
S3 0 1 0 0 1 300 300
-
Z -20 50 0 0 0 0  

Pivoting
column
pg. 7
S1 2 4 1 0 0 1600
0 -4 0 0 -4 -1200
2 0 1 0 -4 400

-
Z -20 50 0 0 0 0
0 50 0 0 50 15000
-20 0 0 0 50 15000

S
Basic V. X Y S1 S2 3 RHS Ratios
S1 2 0 1 0 -4 400 200
S2 1 0 0 1 0 400 400

Y 0 1 0 0 1 300 -
-
Z 20 0 0 0 50 15000

Pivoting
column

S2 1 0 0 1 0 400
-
-1 0 1/2 0 2 -200
-
0 0 1/2 1 2 200

-
Z 20 0 0 0 50 15000
-
20 0 10 0 40 4000
0 0 10 0 10 19000

Basic S
V. X Y S1 S2 3 RHS
X 1 0 1/2 0 -2 200

pg. 8
 S2 0 0 - 1/2 1 2 200
Y 0 1 0 0 1 300
Z 0 0 10 0 10 19000

The optimum product mix is given by: X=200, Y=300 and Z =19,000

QUESTION THREE
PART A
MINIMIZE W=8Y1+10Y2+15Y3
Subject to:
2y1+3y3≥3
3y1+2y2+2y3≥5
5y2+Y3≥4
Y1,y2,y3≥0
PART B

Basic ratio
V. X1 X2 X3 S1 S2 S3 RHS s
2.66
S1 2 3 0 1 0 0 8 7
S2 0 2 5 0 1 0 10 5
S3 3 2 4 0 0 1 15 7.5
W -3 -5 -4 0 0 0 0

Pivoting column

S2 0 2 5 0 1 0 10

(1.33 (2.00 (0.67 (5.33

) ) - ) - - )

(1.33 (0.67 1.0

) - 5.00 ) 0 - 4.67

S3 3 2 4 0 0 1 15

(1.33 (2.00 (0.67 (5.33

) ) - ) - - )

pg. 9
 (0.67 1.0
1.67 - 4.00 ) - 0 9.67

W -3 -5 -4 0 0 0 0

13.3
3.33 5.00 - 1.67 - - 3

(4.00 13.3
0.33 - ) 1.67 - - 3

Basic Ratio
V. X1 X2 X3 S1 S2 S3 RHS s

1.0
X2 0.67 0 - 0.33 - - 2.67

(1.33 (0.67 0.933

S2 ) - 5.00 ) 1.00 - 4.67 3

(0.67 1.0 2.416

S3 1.67 - 4.00 ) - 0 9.67 7

(4.00 13.3
W 0.33 - ) 1.67 - - 3

Pivoting column

(0.67 1.0
S3 1.67 - 4.00 ) - 0 9.67

(4.00 (0.80 (3.73

1.07 - ) 0.53 ) - )

(0.13 (0.80 1.0

2.73 - - ) ) 0 5.93

(4.00 13.3
W 0.33 - ) 1.67 - - 3

pg. 10
 (1.07 (0.53
) - 4.00 ) 0.80 - 3.73

(0.73 17.0
) - - 1.13 0.80 - 7

Basic Ratio
V. X1 X2 X3 S1 S2 S3 RHS s
0.66 0.33 2.66
X2 7 1 0 3 0 0 7 4

(0.27 (0.13 0.2

X3 ) - 1 ) 0 - 1 -
2.73 5.93
S3 3 0 0 -0.13 -0.8 1 3 2.171
1.13 17.0
W -0.73 0 0 3 0.8 0 7

Pivoting
column

0.66 0.33 2.66

X2 7 1 0 3 0 0 7
0.03 - -
-0.67 0 0 3 0.2 0.24 1.45
0.36 - 1.21
-0 1 0 6 0.2 0.24 9

(0.27 (0.13 0.2

X3 ) - 1.00 ) 0 - 0.93
-
0.0 0.09 0.58
0.27 0 0 -0.01 8 9 6

(0.15 0.1
0.00 - 1.00 ) 2 0.10 1.52

1.13 17.0
W -0.73 0 0 3 0.8 0 7
-
0.2 0.26 1.58
0.73 0 0 -0.04 1 7 5
-0 0 0 1.09 0.5 0.26 18.6

pg. 11
 8 9 7 5

Basic V. X1 X2 X3 S1 S2 S3 RHS
X2 0 1 0 3/8 1/5 - 1/4 1 2/9
X3 0 0 1 - 1/7 1/8 0 1 1/2
X1 1 0 0 -0 - 2/7 3/8 2 1/6
W -0 0 0 1 3/5 1/4 18 2/3

Therefore, X1=13/6, X2=11/9, X3=3/2, X8=56/3

PART C
For the dual problem, Y1=1, Y2=3/5 and Y3=1/4
W=17.75
PART D
The optimum points for both the original and the dual problems are almost the same.

QUESTION SIX
PART A

Arrival rate, λ = 10 units 

Service rate,μ  = 3 minutes per unit = 20 units per hour.

i) The average number of units in the waiting line Lq

Lq=[λ2/(µx(µ- λ)]

=102/[20x(20-10)]

=0.5

Thus the average number of units in the system, L can be calculated as:

Lq+(λ/µ)

=0.5+(10/20)

=1

The average number of units in the system is 1.

ii) The average waiting time, Wq

pg. 12
 =Lq/λ

=0.5/10

=10.5 minutes

iii) Average length of the queue is equal to the average number of units in the waiting
line, Lq

=0.5 units

iv) Probability that a customer arriving at the pump will have to wait, Pw

Pw=λ/µ

=0.5

v) The utilization factor

P= λ/µ

=10/20

=0.5

vi) The probability that the number of customers in the system is 2

P2=(0.52)xPo

Where P0 is the probability that no units are in the system and λ/µ =0.5

Now P0=1- (λ/µ)

=0.5

Substituting the above values in Equation 1, we have,

P2=0.52x0.5

=0.125

Which means that 12.5% of the time, 2 customers are in the system.

PART B

pg. 13
Basic
V. X1 X2 X3 X4 S1 S2 S3 RHS Ratios
6.571
S1 1 7 3 7 1 0 0 46 4
S2 3 -1 1 2 0 1 0 8 4
S3 2 3 -1 1 0 0 1 10 10

W -2 -1 3 -5 0 0 0 0

Pivoting column

S1 1 7 3 7 1 0 0 46
-10 3 -3
1/2 1/2 -3 1/2 -7 0 1/2 0 -28
-9 10 -3
1/2 1/2 - 1/2 0 1 1/2 0 18

S3 2 3 -1 1 0 0 1 10
-1
1/2 1/2 - 1/2 -1 0 - 1/2 0 -4
3
1/2 1/2 -1 1/2 0 0 - 1/2 1 6

W -2 -1 3 -5 0 0 0 0
-2 2
7 1/2 1/2 2 1/2 5 0 1/2 0 20
-3 2
5 1/2 1/2 5 1/2 0 0 1/2 0 20

Basic V. X1 X2 X3 X4 S1 S2 S3 RHS Ratios

S1 -9 1/2 10 1/2 - 1/2 0 1 -3 1/2 0 18 1 5/7
X4 1 1/2 - 1/2 1/2 1 0 1/2 0 4 -
-1
S3 1/2 3 1/2 1/2 0 0 - 1/2 1 6 1 5/7

W 5 1/2 -3 1/2 5 1/2 0 0 2 1/2 0 20

Pivoting column

pg. 14
 S1 -9 1/2 10 1/2 - 1/2 0 1 -3 1/2 0 18
-10
-1 1/2 1/2 4 1/2 0 0 1 1/2 -3 -18
-11 0 4 0 1 -2 -3 0

X4 1 1/2 - 1/2 1/2 1 0 1/2 0 4

0 1/2 - 1/5 0 0 -0 1/7 6/7
1 4/7 0 2/7 1 0 3/7 1/7 4 6/7

W 5 1/2 -3 1/2 5 1/2 0 0 2 1/2 0 20

-1
1/2 3 1/2 1/2 0 0 - 1/2 1 6
6 0 4 0 0 2 1 26

Basic V. X1 X2 X3 X4 S1 S2 S3 RHS
S1 -11 0 4 0 1 -2 -3 0
X4 1 4/7 0 2/7 1 0 3/7 1/7 4 6/7
X2 1/7 1 - 3/7 0 0 - 1/7 2/7 1 5/7
W 6 0 4 0 0 2 1 26

Therefore, X1=X3=0, X2=34/7, X4=12/7 and Z=26

QUESTION SEVEN
PART A
Let product A be x and product B be y. Therefore we have:
x + y ≤9
x≥2,y≥3
Each ton of A requires 20 machine hours of production time and each ton of B requires 50
machine hours of production time. The daily maximum possible number of machine hours is
360, thus:
20x+50y≤360
All the firm's output can be sold and the profit made is $80 per ton of A and $120 per ton of B.
Thus:
Maximize Z=80x+120y

pg. 15
x + y≤9
20x+50y≤360
X,y≥0

PART B
i)

Some activities are irrelevant in that they do not have a duration nor do they have any crew
working them. Secondly there are some sequences that are crossing like activity 4-6 and 3-5.
ii)

Activity Duration 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

1-2 3 5 5 5                              

2-4 2       3 3                          

2-3 3       7 7 7                        

3-4 0                                    

3-5 3             2 2 2                  

4-5 7           2 2 2 2 2 2 2            

3-6 2             1 1                    

5-6 6                         6 6 6 6 6 6

pg. 16
4-6 5           5 5 5 5 5                

Total   5 5 5 10 10 14 10 10 9 7 2 2 6 6 6 6 6 6
Maximum crew size is 14
iii)

Activity Duration 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

1-2 3 5 5 5                              

2-4 2       3 3                          

2-3 3         7 7 7                      

3-4 0                                    

3-5 3                   2 2 2            

4-5 7           2 2 2 2 2 2 2            

3-6 2                                 1 1

5-6 6                         6 6 6 6 6 6

4-6 5               5 5 5 5 5            

Total   5 5 5 3 10 9 9 7 7 9 9 9 6 6 6 6 7 7

pg. 17
Maximum crew size is 10.
iv)

pg. 18