DEBRE MARKOS UNIVERSITY

MANAGEMENT DEPARTMENT
POSTGRADUATE PROGRAM (MBA)
Group Assignment for the course Quantitative Analysis for Management Decisions
1. Define the following quantitative technique for management decision related concepts:
I. Decision making VII. Standard form
II. Variable/Variables VIII. Surplus
III. Objective and objective function IX. Slack
IV. Constraint/Constraints X. Payoff
V. Parameters XI. Payoff table
VI. Optimal solution
2. Give short answers for the following questions:
a. What is linear programming?
b. What are the major components and assumptions of linear programming model?
c. What is Model? What benefits and limitations Models have?
3. Describe the quantitative technique for management decision approach to problem solving
4. A retail store stocks two types of shirts A and B. These are packed in attractive cardboard boxes.
During a week the store can sell a maximum of 400 shirts of type A and a maximum of 300 shirts of
type B. The storage capacity, however, is limited to a maximum of 600 both types combined. Type A
shirt fetches a profit of $2 per unit and type B a profit of $5 per unit. How many of each type the store
should stock per week to maximize the total profit? (Use the graphic approach to solve the Problem).

5. An electronics company produces three types of parts for the automatic washing machine. It
purchases casting of the parts from a local foundry and then finishes the part of drilling,
shaping and polishing machines. The selling prices of part A, B and C respectively are given
to be $8, $10 and $14. All parts made can be sold. Castings for parts A, B and C cost $5, $6
and $10 respectively. The shop possesses only one of each type of machine. Costs per hour
to run each of the three machines are $20 for drilling, $30 for shaping and $30 for polishing.
The capacities (parts per hour) for each part on each machine are shown in the following table.

Machines 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. Formulate this problem as a Linear Programming model for the
problem.

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6. ABC private limited company is engaged in the production of power and traction transformers.
Both of these categories of transformers pass through three basic processes: core preparation,
core to coil assembly, and vapor phase drying. A power transformer yields a contribution of Birr
50,000 and traction transformer contributes Birr 10,000. The time required in the production of
these two products in terms of hours for each of the processes is as follows.
Power transformer Traction Transformer
Core preparation 75 15
Core to Coil Assembly 160 30
Vapor Phase Drying 45 10
If the capacities available are 1000, 1500, and 750 machine hours in each processes
respectively, formulate the problem as LP, and find the number of both types of products to
be produced in order to maximize the company’s profit.? [Solve the problem using both
graphic approach and the Simplex method].
7. The doctor advises a patient visited him that the patient is weak in his health due to shortage of two
vitamins, i.e., vitamin A and vitamin D. He advises him to take at least 40 units of vitamin A and 50 units
of Vitamin D every day. He also advises that these vitamins are available in two tonics X and Y. Each
unit of tonic X consists of two units of vitamin A and three units of vitamin D. Each unit of tonic Y
consists of four units of vitamin A and two units of vitamin D. Tonic X and Y are available in the medical
shop at a cost of Birr three per unit of X and Birr 2.50 per unit of Y. The patient has to fulfill the need of
vitamin by consuming X and Y at a minimum cost.
a) Formulate the appropriate linear programming model for the patient’s problem and solve the
problem using the simplex method
b) Formulate the dual model for the medical shop man’s problem, solve the problem using the
simplex method and write its economic interpretation.
8. A Company has plants in three locations and is currently working on three major construction projects,
each located at a different site. The shipping cost per truckload of concrete, daily plant capacities, and
daily project requirements are given below.

To Plant
Project A Project B Project C
From capacities
Plant 1 $10 $4 $11 70
Plant 2 12 5 8 50
Plant 3 9 7 6 30
Project Requirements 40 50 60
a) Formulate the Company’s transportation problem as a linear program
b) Find an initial feasible solution to the problem using the northwest corner method
c) Evaluate the solution using the MODI method, and find the optimal solution. Once again, use
the stepping-stone method to find the optimal solution.
d) Is there an alternative solution to this problem? Why?

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9. A dispatcher for a City’s Taxi Association has five taxi cabs at different locations and four
customers who have called for transportation service. The distance (in km) from each taxi’s
present location to each customer is shown in the following table.

Customer
Cab I II III IV
A 7 2 4 10
B 5 1 5 6
C 8 7 6 5
D 2 5 2 4
E 3 3 5 8

a. Determine the optimal assignment that will minimize the total distance travelled.
b. Compute the total minimum distance of the optimal assignment.

10. A computer center has three programmers. The center wants three applications programs to be
developed. The head of the computer center, after studying carefully the programs to be developed, estimate
the computer time in minutes required by the experts for the applications programs as follows:
Programs
(Estimated time in minute)
A B C

1 120 100 80
Programmers 2 80 90 110
3 110 140 120

Based on the information given above:

a. Assign the programmers to the programs in such a way that the total computer time is
minimum.
b. Compute the total time.

11. The city post office has five major counters namely, Registration (R), Savings (S), Money –
Order (M), Postal stationary (P) and Insurance / license (I). The postmaster has to assign five
counters to five clerks A, B, C, D and E one for each counter. Considering the experience and
ability of these clerks he rates their suitability on a certain 10 - point scale of effectiveness of
performance for accomplishing different counter duties, as listed below. Assign the counters to
the clerks for maximum effective performance.
Clerks (effective performance)
Jobs
A B C D E
R 6 6 4 6 7
S 5 4 3 6 8
T 7 6 3 5 5
U 7 5 6 8 8
V 4 3 6 7 6
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 12. An investor is considering investing in stock, real estate, or bonds under uncertain economic
conditions. The payoff table of returns for the investor’s decision situation is shown below.

Investment Economic conditions

Good Stable Poor
Stocks Birr 5,000 Birr 7,000 Birr 3,000
Real state -2,000 10,000 6,000
Bonds 4,000 4,000 4,000

• Determine the best investment using the following decision criteria.

a) Maximin
b) Maximax
c) Minimax regret
d) Equally likelihood

13. Consider the decision analysis problem having the following profit payoff table
State of Nature
Probability 0.2 0.3 0.5
Alternatives S1 S2 S3
A1 -100 10 100
A2 -10 20 50
A3 10 10 60
Which alternative would be chosen for each of the following decision criterion?
a. Maximin
b. Minimax regret
c. Expected monetary value
d. Expected opportunity loss.
e. You are offered the opportunity to obtain information which will tell you with
certainty which state of nature will occur. What is the maximum amount you should
pay for the information?
14. Assume a certain Company has been presented with a new product development proposal.
The cost of the development project is $500,000. The probability of successful development is
projected to be 70%. If the development is unsuccessful, the project will be terminated. If it is
successful, the manufacturer must then decide whether to begin manufacturing the product on a
new production line or a modified production line. If the demand for the new product is high, the
incremental revenue for a new production line is $1,200,000, and the incremental revenue for the
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modified production line is $850,000. If the demand is low, the incremental revenue for the new
production line is $700,000, and the incremental revenue for the modified production line is
$150,000. Consider that the cost of developing a new product line is $300,000 and for the
modified product line is birr $100,000. The probability of high demand is estimated as 40%, and
of low demand as 60%.
a) Draw up an appropriate decision tree for the given project.
b) What strategy maximizes the project’s expected profit?
c) How much will be the optimum expected value of the corporation?
15. An established company has decided to add a new product to its line. It will buy the product
from a manufacturing concern, package it, and sell it to a number of distributors selected on a
geographical basis. Market research has indicated the volume expected and the size of sales force
required. List of activities involved in the new product introduction and their immediate
predecessors are shown in the following table.
Activit Preceding Activity duration ( in
y Actives Days)
A --- 4
B --- 7
C --- 6
D A, B 5
E A, B 7
F C, D, E 6
G C, D, E 5

Required:
a) Draw the project network using the Activity on Arrow (A-O-A) convention.
b) Compute the float time of each activity.
c) Determine the critical path and calculate the project duration (Completion time)
16. Find the saddle point for the game having the following payoff table.

Use the minimax criterion to find the best strategy for each player. Does this
game have asaddle point? Is it a stable game?