Addis Ababa University Department of Management Master of Business Administration Program Statistical Decision Theory (MGMT 611) Final Exam Exercise Questions 4. Quick-Screen is a clothing manufacturing company that specializes in producing commemor: shirts immediately following major sporting events such as the World Series, Super Bowl, and Final Four. The company has been contracted to produce a standard set of shirts for the winning team, either State University or Tech, following a college football bowl game on New Year's Day. The items produced include two sweatshirts, one with silk-screen printing on the front and one with print on both sides, and two T-shirts of the same configuration. The company has to complete all production within 72 hours after the game, at which time a trailer truck will pick up the shirts. The company will work around the clock. The truck has enough capacity to accommodate 1,200 standard-size boxes. A standard-size box holds 12 T-shirts, and a box of 12 sweatshirts is three times the size of a standard box. The company has budgeted $25,000 for the Production run. it has 500 dozen blank sweatshirts and Tshirts each in stock, ready for production. The resource requirements, unit costs, and profit per dozen for each type of shirt are shown in the following table: Processing Time (hr.) per Dozen Cost per Dozen Profit per Dozen ‘Sweatshirt? 0.10 $36 $90 SweatshirtB/F 0.25 48 125 T-shirt 0.08 25 45 T-shirtB/F 0.21 35 65 The company wants to know how many dozen (boxes) of each type of. to maximize profit. Required ‘a. Formulate the linear programming problem b. Solve the problem using LINDO or LINGO Identify the basic and non-basic variables d._ Identify the allowable increase and decrease for both the coefficients of the objective function and the RHS What will be the effect on the value of the objective function if we increase the production of T-shirts, back and front printing by three units? f. What will be the new solution if the available time is 60 hours and 90 hours? What technique do you apply to find the new solution when the available time is 60 hours and 90 hours? to produce in orderAddis Ababa University Department of Management Master of Business Administration Program Statistical Decision Theory (MGMT 611) Final Exam Exercise Questions 4. Quick-Screen is a clothing manufacturing company that specializes in producing commemor: shirts immediately following major sporting events such as the World Series, Super Bowl, and Final Four. The company has been contracted to produce a standard set of shirts for the winning team, either State University or Tech, following a college football bowl game on New Year's Day. The items produced include two sweatshirts, one with silk-screen printing on the front and one with print on both sides, and two T-shirts of the same configuration. The company has to complete all production within 72 hours after the game, at which time a trailer truck will pick up the shirts. The company will work around the clock. The truck has enough capacity to accommodate 1,200 standard-size boxes. A standard-size box holds 12 T-shirts, and a box of 12 sweatshirts is three times the size of a standard box. The company has budgeted $25,000 for the Production run. It has 500 dozen blank sweatshirts and Tshirts each in stock, ready for produiction. The resource requirements, unit costs, and profit per dozen for each type of shirt are shown in the following table: Processing Time (hr.) per Dozen Cost per Dozen Profit per Dozen ‘Sweatshirt? 0.10 $36 $90 SweatshirtB/F 0.25 48 125 T-shirt 0.08 25 45 T-shirtB/F 0.21 35 65 The company wants to know how many dozen (boxes) of each type of to maximize profit. Required 2. Formulate the linear programming problem 'b. Solve the problem using LINDO or LINGO ¢. Identify the basic and non-basic variables d. Identify the allowable increase and decrease for both the coefficients of the objective function and the RHS . What will be the effect on the value of the objective function if we increase the production of T-shirts, back and front printing by three units? What will be the new solution if the available time is 60 hours and go hours? What technique do you apply to find the new solution when the available time is 60 hours and 90 hours? to produce in order2. Machinco produces four products, requiring time on two machines and two types (skilled and unskilled) of labor. The amount of machine time and labor (in hours) used by each Product and the sales prices are given in Table below. Each month, 700 hours are available ‘on machine 1 and 500 hours on machine 2. Each month, Machinco can purchase up to 600 hours of skilled labor (SL) at $8 per hour and up to 650 hours of unskilled labor (UL) at $6 per hour. Formulate an LP that will enable Machinco to maximize its monthly profit. Solve this LP and use the output to answer the following questions: 3. By how much does the price of product 3 have to increase before it becomes optimal to produce it? b. If product sold for $290, then what would be the new optimal solution to the problem? © What is the most Machinco would be willing to pay for an extra hour of time on each machine? 4. What is the most Machinco would be willing to pay for an extra hour of each type of labor? ‘elf up to 700 hours of skilled labor could be purchased each month, then what would be ‘Machinco’s monthly profits? f. Calculate the allowable range for each coefficient and for each RHS value. 8 Determine the optimal z-value and shadow price change as the amount of skilled labour changes between 0 and 8,000 hours. Products mi Ma, UL st ‘Sales (8) 1 nt 4 8 7 300 2 7 6 5 & 260 3 6 5 4 7 220 4 5 4 6 4 180 3. There are three categories of income tax filers in Ethiopia: those who never evade taxes, those who sometimes do it, and those who always do it. An examination of audited tax returns from one year to the next shows that of those who did not evade taxes last year, 95% continue in the same category this year, 4% move to the “sometimes” category, and the remainder move to “always” category. For those who sometimes evade taxes, 6% move to “never,” 90% sty the same, and 4% move to “always.” As for the “always” evaders the respective percentages are o%, 10%, and 90x. Express the problem as a Markov chain, . Inthe long run, what would be the percentage of “never,” “sometimes,” and “always” tax categories? © Statistics show that a taxpayer in the “sometimes” category evade taxes on about Br. 20,000 per return and in the “always” category on about Br. 48, 000. Assuming an average income tax of 20% and a filers population of 1o milion, determine the annual reduction in collected taxes due to evasion.4. The following is an interpretation of the rivalry between the United States and the Soviet Union for geopolitical influence in the 1970s and 1980s. Each side has the choice of two strategies: Aggressive and Restrained. The following payoff matrix prevails: Soviet Union] Restrained ‘Aggressive Restrained (4,3) () ‘Aggressive Ga) (2) For each player, 4 is best and 1 is worst. Does either country have a dominant strategy: b. Suppose the countries move simultaneously. Find the Nash equilibrium. Next consider three different and alternative ways in which the game could be played with sequential moves: i. The U.S. moves first and the Soviet Union moves second The Soviet Union moves first and the U.S. moves second The Soviet Union moves first, the U.S. moves second, but the Soviet Union has a further move where they can change their first move, For each case, draw the game tree and find the sub-game perfect equllibrium. d. What are the key strategic issues (e.g. commitment, credibility etc.) for the two countries? 5. Ephrem is working in a call center while pursuing his MBA. In order to use his time effectively, he is contemplating to buy a new bike. Currently he is considering to buy one of the three ‘ brands: x, Y, Z. In doing so he decides to use price, gear action and durability as a selection criteria. Given the following alternative comparison matrix and criterion comparison matrix Alternative Comparison Matrix ee) es Criteria F : Criterion Comparison Matrixoer er rs a. Which brand does he need to buy? b._Ishis analytical analysis consistent? Support your answer with appropriate statistics