GAGE UNVERSITY COLLEGE

DEPARTMENT OF MASTERS BUSINESS ADMINSTRATION

COURSE NAME : QUANTITATIVE ANALYSIS FOR MANAGEMENT
DECISIONS
GROUP ASSIGNMENT - SECTION 1 ( REGULAR)

NAME ID

Shiferaw Melese………………….MMBA/0009/15
Estifanos Desalegn……………….MMBA/0218/15
Melkam Tseganew……………….MMBA/0008/15
Masresha Emwey………………….MMBA/O160/15
Sultane Mohammed………………MMBA/0002/15
Birke Wubshet…………………MMBA/0029/15
Meleyo Besfat……………………MMBA/0044/15
Almaz Semegnew………………..MMBA/0048/15

Submitted to :Dr.Moges Adisu

Addis Ababa, Ethiopia

February , 2015 E.C

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QUANTITATIVE ANALYSIS FOR MANAGEMENT DECISIONS /2015

Give Answers to the Following Questions

1. A company has three production facilities P1, P2, and P3 with production capacities of
700, 800, and 1800 units per week of a product respectively. These units are to be shipped
to four warehouses W1, W2, W3, and W4 with requirement of 500, 600, 700, and 1500
units per week respectively.
The transportation cost (in birr) per unit between productions facilities to warehouses are
given below:

To W1 W2 W3 W4
From
P1 19 30 50 10
P2 70 30 40 60
P3 40 8 70 20

Required: find the optimal solution using the final table of VAM?
2. Each jobs can be assigned to only one worker. The cost of each job on each worker is
given below:

Job (cost in ’00 Br.)

Worker I II III IV V
A 25 18 32 20 21
B 34 25 21 12 17
C 20 17 20 32 16
D 20 28 20 16 27

Required: i. Find the least cost allocation of the company?

ii. What is the total assignment cost of the company for this problem?
Apply Hungarian method

3. A 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 he/she
works for a fraction of an hour. Find the least cost allocation and the total assignment cost
of the company using both Enumeration and Hungarian method for the following data:

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Typist Rate per hour (Br.) Number of pages

typed/hour
A 5 12
B 6 14
C 3 8
D 4 10
E 4 11

Job Number of pages

P 199
Q 175
R 145
S 298
T 178

4. This is a payoff table for players on the political campaign. Player A is politician 1 and
Player B is politician 2.

Player B strategies
I II III IV V
I -4 -2 -2 3 1
II 1 0 -1 0 0
Player A strategies III -6 -5 -2 -4 4
IV 3 1 -6 0 -8

Required:
a) What are the optimal strategies for each player in this game?
b) What is the value of the game?
c) Interpret the value of the game?

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Solution for quotation number one

Introduction about Transportation Model

 addresses the concept of moving a thing from one place to another without
change. 
 The structure of transportation problem involves a large number of shipping
routes from several supply origins to several demand destinations.

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 The sources of supply are production facilities, characterized by available

capacities.
 Destinations are consumption facilities, which characterized by required levels of
demand.
Assumptions of Transportation Model
i. Total supply from sources and total demand at destinations are equal.
ii. Transportation cost per unit of goods is certainly known and proportional to
the number of units shipped on a given route.
iii. Goods are transported only from sources to destinations. This means
shipments between/among the sources or destinations themselves are not
allowed.
iv. The objective of the model is to minimize the total cost of transportation while
satisfying demand and supply conditions.

Types Transportation Problem (TP)

There are two types of transportation problems. These are
1. Balanced TP
2. Unbalanced TP
Methods for Finding Initial Solution in TP
The methods that are used to obtain an initial basic feasible solution are:
i. North-west corner method (NWCM)
ii. Least cost method (LCM)
iii. Vogel's approximation method (VAM)
But in our group assignment we use Vogel's approximation method (VAM)

Vogel's approximation method (VAM)

 Vogel's approximation (penalty) method is a heuristic method
 The advantage of this method is that it gives an initial solution which is nearer to
an optimal solution or is the optimal solution itself.
The steps in VAM are as follows:
Step 1:- calculate penalties for each row (column) by taking the d/ce b/n the smallest & next
smallest unit transportation cost in the same row (column). This d/ce indicates the penalty or
extra cost which has to be paid if one fails to allocate to the cell with the minimum unit
transportation cost.

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Step 2: select the row or column with the largest penalty and allocate as much as possible in
cell having the least cost in the selected row or column satisfying the rim conditions. If there
is a tie in the values of penalties, it can be broken by selecting the cell where maximum
allocation can be made.
Step 3: adjust the supply & demand and crossout the satisfied row or column. If a row & a
column are satisfied simultaneously, only one of them is crossed out and the remaining row
(column) is assigned a zero supply (demand). Any row or column with zero supply or
demand should not be used in comptuting future penalties.
Step 4: repeat step 1 to 3 until the entire available supply at various sources & demand at
various destinations are satisfied.

Given data

To W1 W2 W3 W4 SS penalties

From
P1 19 30 50 10 700 (9)
P2 70 30 40 60 800 (10)
P3 40 600, 8 70 20 1800 (12)

DD 500 600 700 1500 3300

penalties (21) (22) (10) (10)

Penalties =next small number -small number

There fore
Row 1 = 19- 10 = 9
Row 2 = 40-30 = 10
Row 3 = 20-8 =12
Column 1 = 40-19 =21
Column 2 = 30- 8 =22
Column 3= 50-40 =10
Column 4= 20-10 =10

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In the above penalties 22 (column) and penalties 12 (row) are selected and also the minimum
cost (600) selected.
column two is remove
Table 2

To W1 W3 W4 SS penalties

From
P1 500,19 50 10 700 (9)

P2 70 40 60 800 (20)
P3 40 70 20 1200 (20)
DD 500 700 1500
penalties (21) (10) (10)

In second table
Row 1 = 19- 10 = 9
Row 2 = 60-40 = 20
Row 3 = 40-20 =20
Column 1 = 40-19 =21
Column 2= 50-40 =10
Column 3= 20-10 =10
In second table, 500 is selected and column one is canceled.because 500 is least cost
relative to 700 costs.there for the minimum cost is selected.

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Table 3

To W3 W4 SS penalties

From
P1 50 10 200 (40)
P2 40 60 800 (20)
P3 70 1200, 20 1200 (50)
DD 700 1500
penalties (10) (10)

In third table
Row 1 = 50- 10 = 40
Row 2 = 60-40 = 20
Row 3 = 70-20 =50
Column 1= 50-40 =10
Column 2= 20-10 =10
In third table
if column penalties are similar ,then compare the cost of two of penalties and select the
maximum cost.there fore column 2 is selected,

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Table four

To W3 W4 SS penalties

From
P1 50 200,10 200 (40)

P2 40 60 800 (20)
DD 700 300
penalties (10) (50)

Row 1 = 50- 10 = 40
Row 2 = 60-40 = 20
Column 1= 50-40 =10
Column 2= 60-10 =50
In table four
200 is selected because 200 is less than 300.
Row 1 is canceled.
Table five

To W3 W4 SS

From
P2 700,40 60 800
DD 700 100

According table five

700 is selected.
Column one is canceled.

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Table six

To W4 SS

From
P2 60 100
DD 100

Therefore

T W1 W2 W3 W4 SS
o

From
P1 500 19 30 50 200 10 700
P2 70 30 700 40 100 60 800
P3 40 600 8 70 1200 20 1800
DD 500 600 700 1500 3300

Initial total transportation cost =

9500 + 2000+ 28000 + 6000 + 4800 + 24000
= 74, 300 Birr
When you calculate optimum solution ,we can U-V method or MODI method
Steps of U-V method or MODI method
Step 1
for an initial basic feasible solution with m+n-1 occupied cells, calculate Ui & Vj for rows
& columns.
Cij = Ui + Vj ……… ……………. for all occupied cells
Where :- Ui= represents row
Vj =represents column

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T W1 W2 W3 W4 SS
o

From
P1 500 19 30 50 200 10 700 U1=10
P2 70 30 700 40 100 60 800 U2=60
P3 40 600 8 70 1200 20 1800 U3=20
DD 500 600 700 1500 3300
V1= 9 V2= -12 V3= -20 V4=0

Let V4 = 0
C14 = U1 + V4 C34 = U3 + V4 C32 = U3 + V2
U1 + 0 = 10 U3+0 = 20 V2 = 8 - 20
U1 = 10 U3 = 20 V2 = -12
C24=U2 + V4 C23 = U2 + V3 C11=U1 + V1
U2 + 0 = 60 V3 =40 - 60 V1=19 -10
U2 = 60 V3 = -20 V1 = 9
Step 2:
For unoccupied cells, calculate opportunity cost by using the r/ship
dij = Cij - (Ui + Vj) ……………………………For unoccupied cells
d12 = 30 - (10+-12) = 32
d13 = 50 - (10 + -20) = 60
d21 = 70 - (60 + 9) = 1
d22 = 30 - (60 + -12) = -18
d31 = 40 - (20 + 9) = 11
D33 =70 - (20+ -20) = 70

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Step 3:
Examine sign of each dij.
a) if all dij ≥ 0, the solution is optimal. So, the procedure will be terminated.
b) if dij = 0, an alternative solution exists.
c) if one or more dij < 0, the solution is not optimal. Thus, the procedure will continue.
In our example, since some values of dij < 0, then it needs some improvement.
Note: unoccupied cell having the largest negative value of dij is chosen for entering into the
new transportation table.
Step 4:
Construct a closed path (or loop) for the unoccupied cell with the largest (most) negative
opportunity cost.

T W1 W2 W3 W4 SS
o

From
P1 500 19 (32) (60) 200 10 700 U1=10
30 50

P2 (1) (-18) 700 40 100 60 800 U2=60

70 30 +θ -θ
P3 (11) 600 8 (70) 1200 20 1800 U3=20
40 -θ 70 +θ
DD 500 600 700 1500 3300
V1= 9 V2= -12 V3= -20 V4=0

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Step 5:
Select the smallest quantity amongst the cells marked with minus sign on the corners of
closed loop. i.e.
θ = Min. (- θ allocations)
θ = Min. (100, 600)
θ = 100
Step 6:
Fill the allocations in the new table by repeating the procedures and also by using the
formula Xij = allocated unit ± θ.
X22 = 0 + 100 = 100
X24 = 100 - 100 = 0
X34 = 1200 + 100 = 1300
X32 = 600 - 100 = 500

T W1 W2 W3 W4 SS
o

From
P1 500 19 30 50 200 10 700 U1=10
P2 70 100 30 700 40 60 800 U2=52
P3 40 500 8 70 1300 20 1800 U3=20
DD 500 600 700 1500 3300
V1= 9 V2= -12 V3= -12 V4=0

Let V4 = 0
C14 = U1 + V4 C34 = U3 + V4 C32 = U3 + V2
U1 + 0 = 10 U3+0 = 20 V2 = 8 - 20
U1 = 10 U3 = 20 V2 = -12
C22=U2 + V2 C23 = U2 + V3 C11=U1 + V1
U2 = 30 + 12 V3 =40 - 52 V1=19 -10

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U2 = 52 V3 = -12 V1 = 9
For unoccupied cells, calculate opportunity cost by using the r/ship
dij = Cij - (Ui + Vj) ……………………………For unoccupied cells
d12 = 30 - (10+-12) = 32
d13 = 50 - (10 + -12) = 52
d21 = 70 - (52 + 9) = 9
d24 = 60 - (52 + 0) = 8
d31 = 40 - (20 + 9) = 11
D33 =70 - (20+ -12) = 62
If dij ≥ 0 ,then
Optimal solution = 9500 + 2000 + 3000 + 28000 + 4000 +26000
= 72500 Birr

Solution for quotation number two

Introduction about Assignment Model
 Assignment models are used to estimate the traffic flows on a network. Traffic
Assignment Models estimate the flow on a street or highway network using an input
matrix of flows that indicate the volume of traffic between origin and destination (O-D)
pairs.
 The objective of an Assignment Problem is to assign a number of resources to an equal
number of activities so as to minimize to total assignment cost of allocation.
 we are assigning n machines or persons to n jobs with the aim of minimizing the total
assignment cost assuming that one machine or person is assigned to one job.

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General Assignment Problem Structure

Solution Methods of Assignment Problem

An assignment problem can be solved by using:
a) Enumeration method
b) Hungarian method
a) Enumeration method
Enumerate() method adds a counter to an iterable and returns it in a form of
enumerating object. This enumerated object can then be used directly for loops or converted
into a list of tuples using the list() method. Syntax: enumerate(iterable, start=0)
b) Hungarian method
The Hungarian method of assignment provides us with an efficient method of finding the
optimal solution without having to make a direct comparison of every solution.
Given data

Job (cost in ’00 Br.)

Worker I II III IV V
A 25 18 32 20 21
B 34 25 21 12 17
C 20 17 20 32 16
D 20 28 20 16 27
By using Hungarian method solve the above tables

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Steps of Hungarian methods

Step 1: develop the cost table from the given problem/data.
If the number of rows are not equal to the number of columns and vice versa, a dummy row
or dummy column must be added. The assignment costs for dummy cells are always zero.

Job (cost in ’00 Br.)

Worker I II III IV V MIN.ROW
A 25 18 32 20 21 18
B 34 25 21 12 17 12
C 20 17 20 32 16 16
D 20 28 20 16 27 16
E 0 0 0 0 0 0
MIN.COL 0 0 0 0 0

Step 2: Row reduction:- take the minimum cost in the row & subtract it from others in that
row.

7 0 14 2 3
22 13 9 0 5
4 1 4 16 0
4 12 4 0 11
0 0 0 0 0
Step 3: Column reduction

7 0 14 2 3
22 13 9 0 5
4 1 4 16 0
4 12 4 0 11
0 0 0 0 0

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Step 4: Allocation:- make allocation/assignment/encircle the column reduction (step 3)

7 0r 14 2 3
22 13 9 0r 5
4 1 4 16 0r
4 12 4 0x 11
0c 0x 0x 0x 0x

Step 5: Optimality criterion

If the number of assigned cells (encircled cells) is equal to the number of rows/columns, then
it is an optimal solution.
number of assigned cells ≠ number of rows/columns
4 ≠ 5
therefore, the solution is not optimal.
Step 6: Drawing lines
Step 7: Choose the minimum value
a) choose the minimum value from the uncovered elements.
b) subtract this element from all uncovered elements.
c) add this element to every element in the cell covered by the two lines, i.e. add this
element in the intersection of two lines.
d) elements in the cells covered by one line remain unchanged.
so, the minimum value from the uncovered elements is 4.

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3 0r 10 2 3
18 13 5 0r 5
0 1 0 16 0c
0r 12 0 0 11
0 4 0r 4 4

no of assigned cell = no of rows/columns

5 = 5
therefore, the solution is optimal.
The total cost associated with this solution is obtained by adding original cost figures in the
occupied cells.
i. Job assignment schedule and its cost
Worker Jobs Cost (in Birr)
A J2 18
B J4 12
C J5 16
D J1 20
E J3 0
= 66 Birr
ii. the total assignment cost of the company is Birr 66. And also the company has incurred
zero cost in worker E and job J3.

Solution for quotation number three

To solve assignment problem to use two methods
1. Hungarian method
2.Enumeration method

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Given data

Typist Rate per hour (Br.) Number of pages

typed/hour
A 5 12
B 6 14
C 3 8
D 4 10
E 4 11

Job Number of pages

P 199
Q 175
R 145
S 298
T 178

Job (cost in ’00 Br.)

Typist P Q R S T
A C11 C12 C13 C14 C15
B C21 C22 C23 C24 C25
C C31 C32 C33 C34 C35
D C41 C42 C43 C44 C45
E C51 C52 C53 C54 C55

Number of hour = number of page /hour

Number of pages
Cost ( Birr) = Number of hour × Rate per hour (Br.)
C11 = (199 /12)× 5 = 17 × 5 = 85 C12 = (175 /12)× 5 = 15 × 5 = 75
C21 = (199 /14)× 6 = 15 × 6 = 90 C22 = (175 /14)× 6 = 13 × 6 = 78
C31 = (199 /8)× 3 = 25 × 3 = 75 C32 = (175/8)× 3 = 22 × 3 = 66
C41 = (199 /10)× 4 = 20 × 4 = 80 C42 = (175 /10)× 4 = 18 × 4 = 72
C51 = (199 /11)× 4 = 19 × 4 = 76 C52 = (175 /11)× 4 = 16 × 5 = 80

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C13 = (145 /12)× 5 = 13 × 5 = 65 C14 = (298 /12)× 5 = 25 × 5 = 125

C23 = (145 /14)× 6 = 11 × 6 = 66 C24 = (298 /14)× 6 = 22 × 6 = 132
C33 = (145 /8 )× 3 = 19 × 3 = 57 C34 = (298 /8)× 3 = 38 × 3 = 114
C43 = (145 /10)× 4 = 15 × 4 = 60 C44 = (298 /10)× 4 = 30 × 4 = 120
C53 = (145 /11)× 4 = 14 × 4 = 56 C54 = (298 /11)× 4 = 28 × 4 = 112
C15 = (178 /12)× 5 = 15 × 5 = 75 C45 = (178 /10)× 4 = 18 × 4 = 72
C25 = (178 /14)× 6 = 13 × 6 = 78 C55 = (178 /11)× 4 = 17 × 4 = 68
C35 = (178 /8 )× 3 = 23 × 3 = 69

Job (cost in ’00 Br.)

Typist P Q R S T
A 85 75 65 125 75
B 90 78 66 132 78
C 75 66 57 114 69
D 80 72 60 120 72
E 76 80 56 112 68

A. Enumeration method
an assignment involving the minimum cost is selected. Starting from the mnimum cost in the
whole table cost & then continuously goes on.

Job (cost in ’00 Br.)

Typis P Q R S T
t
A 85 75 65 125 75
B 90 78 66 132 78
C 75 66 57 114 69
D 80 72 60 120 72
E 76 80 56 112 68

i) Assignment schedule and Solution

Typist Jobs Cost (in Birr)
A P 85
B S 132
C Q 66

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D T 72
E R 56
= 411 Birr
ii) the total assignment cost of the company is birr 411.
B.Hungarian method
Step 1: develop the cost table from the given problem/data.
If the number of rows are not equal to the number of columns and vice versa, a dummy row
or dummy column must be added. The assignment costs for dummy cells are always zero.
But the given data has equal row and column. There fore we can not add dummy column and
row.

Job (cost in ’00 Br.) Min row

Typist P Q R S T
A 85 75 65 125 75 65
B 90 78 66 132 78 66
C 75 66 57 114 69 57
D 80 72 60 120 72 60
E 76 80 56 112 68 56

Step 2: Row reduction:- take the minimum cost in the row & subtract it from others in that
row.

20 10 0 60 10
24 2 0 66 12
18 9 0 57 12
20 12 0 60 12
20 8 0 56 12

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Step 3: Column reduction

2 2 2 4 0
4 2 0 8 0
0 1 2 1 2
0 2 0 2 0
2 0 2 0 2

Since the minimum no. Lines required to covers all zeros is 4 (<5) optimal assignment can
not be made at this stage also. The minimum uncovered element is 1. Repeating the usual
process again.

2 1 2 3 0
4 1 0 7 0
0 0 2 0 2
0 1 0 1 0
3 0 3 0 0

the minimum no. Lines required to covers all zeros is equal to 5 , the matrix will give optimal
solution.

Job (cost in ’00 Br.)

Typist P Q R S T
A 2 1 2 3 0
B 4 1 0 7 0
C 0 0 2 0 2

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D 0 1 0 1 0
E 3 0 3 0 0

Cost RS
Thus typist A given job T 75
Thus typist B given job R 66
Thus typist C given job Q 66
Thus typist D given job P 80
Thus typist E given job S 112
Rs.399
In this case the above optimal is not unique. Alternative solution is exist.

Q4 .This is a payoff table for players on the political campaign. Player A is politician 1 and
Player B is politician 2.

Player B strategies
I II III IV V
I -4 -2 -2 3 1
II 1 0 -1 0 0
Player A strategies III -6 -5 -2 -4 4
IV 3 1 -6 0 -8
Required:
d) What are the optimal strategies for each player in this game?
e) What is the value of the game?
f) Interpret the value of the game?

Solution for quotation 4 (game theory)

Introduction about Game Theory
 Game theory is a decision theory useful in competitive situations/business games.
 Game theory is also a body of knowledge that deals with making decisions when two or
more intelligent & rational opponents are involved under conditions of competition.
 The competitors in the game are called players.
 In theory of game, decision making is done to maximize the benefits and minimize the
losses.

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 The players are independent in decision making & they make the decision rationally.

Types of Games
There are four types of game these are :-
1. Two-person game
2. zero-sum game
3. n-person game
4. non-zero sum game
Steps in Solving the Game
Step 1: find the saddle point. If the game has saddle point, the game is solved. write the
optimal strategies & the value of the game.
Step 2: if no saddle point, try to reduce the size of the matrix given (mxn) to a 2x2 matrix,
which has formula for optimal strategies & the value of the game.
Solution
Player B strategies
I II III IV V Row min
I -4 -2 -2 3 1 -4
II 1 0 -1 0 0 -1 maxmin
Player A strategies III -6 -5 -2 -4 4 -6
IV 3 1 -6 0 -8 -8
Column max 3 1 -1 3 4

called saddle point

In general Minimax
Player A selects strategy II
Player B selects strategy III
So, A (0, 1,0,0); B (0, 0, 1,0,0)
The players in the game uses pure strategies.
the element a23 = -1, is the saddle point.
That is, Maximin aij = Minimax aij is called a game with saddle point.
the value of the game is V = -1
This means player A will loss 1 units of money and player B will gains 1 units

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of money and the sum of the outcome is zero.

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