1.

As the price for a particular changes, the quantity of A store wants to liquidate 200 of its shirts and 100
the product demanded changes according to the pairs of pants from last season. They have decided
following schedule: to put together two offers, A and B. Offer A is a
package of one shirt and a pair of pants which will
Total quantity demanded Price per unit sell for $30. Offer B is a package of three shirts and
100 P50 a pair of pants, which will sell for $50. The store
150 P45 does not want to sell less than 20 packages of Offer
200 P40 A and less than 10 of Offer B. How many packages
225 P35 of each do they have to sell to maximize the money
230 P30 generated from the promotion?
232 P25
The price elasticity of this product when the price
1. Choose the unknowns.
decreases from P50 to 45 is? 3.80
x = number of packages of Offer A
2. Yeager Corporation has used regression analysis to y = number of packages of Offer B
perform price elasticity analysis. In doing so
management regressed the quantity regressed the 2. Write the objective function. (2PTS)
quantity demanded (y variable) against price (x variable) f(x, y) = 30x + 50y
with the following results:

Multiple R. .86798 3. Write the constraints as a system of

Adjusted R squared .72458 inequalities. (3PTS)
Standard error 543.33
Intercept 56400.50 A B Minimal
Price Coefficient -4598.20 Shirts 1 3 200
Calculate the predicted quantity demanded if price is Pants 1 1 100
set at P7.00. 24.213
x + 3y ≤ 200
x + y ≤ 100
Items 3 and 4 are based on the following information: x ≥ 20
y ≥ 10
Units Ave. FC Ave. VC Ave. UC
6 15 25 40
7 12.86 24 36.86
8 11.25 23.50 34.75
9 10 23.75 33.75

3. The total cost of producing seven units is. 258.02

4. The marginal cost of producing the ninth unit is.

25.75
 1. Find the set of feasible solutions that A. The PERT Diagram below describes the interrelationships
graphically represent the constraints. of several activities to complete a project. The arrows
(5PTS) respresent the activities. The numbers indicate the expected
time in weeks( te) to complete each activity.

2. Calculate the coordinates of the vertices

from the compound of feasible solutions. 1. What is the slack time for path A-B-E?
(5PTS)

2. What is the slack time for path A-B-C-D-E?

B. In a PERT Network, the optimistic time (to) for a particular

3. Calculate the value of the objective activity is 3 weeks, the most likely time (tm) is 5 weeks, and
function at each of the vertices to the pessimistic time(tp) is 7 weeks.
determine which of them has the maximum 3. The expected time(te) to complete the activity is?
or minimum values. (5PTS)

f(x, y) = 30 · 20 + 50 · 10 = $1,100

f(x, y) = 30 · 90 + 50 · 10 = $3,200

f(x, y) = 30 · 20 + 50 · 60 = $3,600
4. The best estimate of the standard deviations for the
f(x, y) = 30 · 50 + 50 · 50 = $4,000 Maximum activity is?

50 packages of each offer generates a maximum

amount of $4,000 in sales.
.) In the past 30 days, Roger’s Rural Roundup has sold either 7-10.) Last year, at Northern Manufacturing Company, 200
8, 9, 10, or 11 lottery tickets. It never sold fewer than 8 or more people had colds during the year. One hundred fifty-five people
than 11. Assuming that the past is similar to the future, find the who did no exercising had colds, and the remainder of the
probabilities for the number of tickets sold if sales were 8 people with colds were involved in a weekly exercise program.
tickets on 10 days, 9 tickets on 12 days, 10 tickets on 6 days, Half of the 1,000 employees were involved in some type of
and 11 tickets on 2 days. exercise.
Solution:
SALES NO. DAYS PROBABILITY (a) What is the probability that an employee will have a cold
8 10 0.333 next year?
9 12 0.400 = (Number of employees get cold last year) / (Total number of
10 6 0.200 employs) = 200/1000 = .20
11 2 0.067
Total 30 1.000 (b) Given that an employee is involved in an exercise program,
what is the probability that he or she will get a cold next year?
2.) A class contains 30 students. Ten are female (F) and U.S.
= 45 out of the 500 people who exercised had cold; therefore,
citizens (U); 12 are male (M) and U.S. citizens; 6 are female
the probability is 45/500 = .09
and non-U.S. citizens (N); 2 are male and non-U.S. citizens. A
name is randomly selected from the class roster and it is female. (c) What is the probability that an employee who is not involved
What is the probability that the student is a U.S. citizen? in an exercise program will get a cold next year?
Solution:
P(U F)=
𝑃(𝐹𝑈)
=
0.333
= 𝟎. 𝟔𝟐𝟓 =155 of the 500 people who did not exercise got a cold, so the
𝑃(𝐹) 0.533 probability is 155/500 = .31
3.) Your professor tells you that if you score an 85 or better on
your midterm exam, then you have a 90% chance of getting an
A for the course. You think you have only a 50% chance of In a health clinic, the average rate of arrival of patients is 12
scoring 85 or better. Find the probability that both your score is patients per hour. On an average a doctor can serve patients at
85 and better and you receive an A in the course. the rate of one patient every four minutes. Assume, the arrival
Solution: of patients follows a Poisson distribution and service to patients
P( A and 85) = P(A 85) x P(85) = (0.90)(0.50) = 45% follows an exponential distribution. Find the following:

4.) Katherine D’Ann is planning to finance her college a. Average number of patients in the waiting
education by selling programs at the football games for State line (Lq)
University. There is a fixed cost of $400 for printing these
b. Average number of patients in the clinic (L)
programs, and the variable cost is $3. There is also a $1,000 fee
that is paid to the univer- sity for the right to sell these programs. c. Average waiting time in the waiting line
If Katherine was able to sell programs for $5 each, how many (Wq):
would she have to sell in order to break even? d. Average waiting time in the clinic (W):
Solution: e. Utilization Factor:
BEP = F/ (S-V)
BEP= 1400/(5-3)
BEP= 700 units

5-6.) Evertight, a leading manufacturer of quality nails,

produces 1-, 2-, 3-, 4-, and 5-inch nails for various uses. In the
production process, if there is an overrun or the nails are slightly
defective, they are placed in a common bin. Yesterday, 651 of
the 1-inch nails, 243 of the 2-inch nails, 41 of the 3-inch nails,
451 of the 4-inch nails, and 333 of the 5-inch nails were placed
in the bin

(a) What is the probability of reaching into the bin and getting
a 4-inch nail?

P(4 inch) = 451 / 1719 = .2624 or 26.24%

(b) What is the probability of getting a 5-inch nail?

P(5 inch) = 333 / 1719 = .1937 or 19.37%

1. Cutie Company plans to begin production of a new product on July Moss Point Manufacturing recently completed and sold an order of
1. An 80% learning curve is applicable to Cutie’s manufacturing 50 units that had the following costs:
operations. If it is expected to take 1,000 direct labor hours to produce Direct materials P 1,500
the first unit, how many direct labor hours should it take to produce the Direct labor (1,000 hours @ P8.50) 8,500
third and fourth units? Variable overhead (1,000 hours at P4.00) 4,000
A. 640 C. 1,600 Fixed overhead 1,400
B. 960 D. 2,560 P15,400
*Applied on the basis of direct labor hours.
Cumulative average DLH after 4 units: (1,000 x 0.8 x 0.8) 640 *Applied at the rate of 10% of variable cost.
Total DLH after 4 units: 4 x 640 2,560 The company has now been requested to prepare a bid for 150
Less Total DLH used after 2 units (1,000 x 0.8 x 2) 1,600 units of the same product.
Total DLH used by 3rd and 4th units 960 If an 80 percent learning curve is applicable, Moss Point’s total
cost on this order would be estimated at
A. P26,400
2. Wind Company expects an 85% learning curve. The first batch of C. P31,790
a new product required 500 hours. The first four batches should take B. P37,950
an average of D. P38,500
A. 361.25 hours Cumulative Ave. DHL
C. 500.0 hours
B. 425.0 hours 50 units 20.0
D. 322.4 hours
100 units 16.0 ( 20 x 80% )

Units Cumulative Average Time Computation 200 units 12.80 ( 16 x 80% )

1 500.00
Total hrs required by 200 units 128.80 x 2,000 2,560
2 425.00 (0.85 x 500.00) Less Hours used by first 50 units 1,000
Additional Hours 1,560
4 361.25 (0.85 x 425.00)
Costs
Direct materials (1,500 x 3) P 4,500
3. A construction company has just completed a bridge over the Direct labor 1,560 x 8.50 13,260
Visayan area. This the first bridge the company ever built and it Variable OH 1,560 x 4 6,240
required 100 weeks to complete. Now having hired a bridge Total variable Costs 24,000
construction crew with some experience, the company would like to Fixed OH 10% x 24,000 2,400
continue building bridges. Because of the investment in heavy Total Cost P26,400
machinery needed continuously by this crew, the company believes it
would have to bring the average construction time to less than one
year (52 weeks) per bridge to earn a sufficient return on investment.
The average construction time will follow an 80% learning curve. To
bring the average construction time (over all bridges constructed)
below one year per bridge, the crew would have to build approximately
a. 2 additional bridges.
b. 3 additional bridges.
c. 7 additional bridges.
d. 8 additional bridges.

No. of Bridges Cumulative Average Weeks Computation

1 100.00

2 80.00 (0.8 x 100.0)

4 64.00 (0.8 x 80.00)

Problem 1.

States of Nature
Alternatives Good Fair Bad
A 100 60 -50
B 80 50 -10
C 40 20 -5
If the company decided to use Equally Likely (Laplace)
Approach, which alternative should they choose to invest?
Show your solution.

Ans. Alternative B = 40

Problem 2

Decision Good foreign Poor foreign

competitive competitive
condition condition
Expand 800,0000 500,000
Maintain 1,300,000 -150,000
status quo
Sell now 320,000 320,000
A. Determine the best decision with probabilities
assuming .70 probability of good condition, .30 of
poor condition. Use expected value and expected
opportunity loss.
B. Develop a decision tree with expected value at the
nodes.

Problem 3

The school canteen can sell either halo-halo or mami. The

contribution margin that the canteen could earn from halo-
halo and mami is affected by the weather, as follows:

Item sold Contribution Margin

Hot Weather Cold
Weathher
Halo-Halo P15,000 P6,000
Mami 11,400 12,000
Probability .60 .40

What is the Expected Value of Perfect information

(EVPI=EVwPI-EVwoPI)? P2160