T.

RAMA KRISHANA RAO (8839271225)

TH
MBA 4 SEM
Econometrics
UNIT 5
DETAILED NOTES ,
C.S.V.T.U LAST 10 YEAR QUESTION PAPER SOLVED ,

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

CONTACT FOR: -
CAT , BANK , MBA , BBA , B.COM ,
M.COM AND 11TH 12TH
T.RAMA KRISHANA RAO
(8839271225)

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

UNIT 5
Simulation: Basic Concepts of Simulation, Simulation
Methodology, Monte Carlo Simulation: Designing
Mathematical Simulation Models Using Random
Numbers.

SIMULATION
In simulation, the problem must be defined first. Secondly, the variables of the model are
introduced with logical relationship among them. Then a suitable model is constructed. After
developing a desired model, each alternative is evaluated by generating a series of values of the
random variable, and the behaviour of the system is observed. Lastly, the results are examined

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

and the best alternative is selected the whole process has been summarized and shown with the
help of a flow chart . Simulation technique is considered as a valuable tool because of its wide
area of application. It can be used to solve and analyze large and complex real world problems.
Simulation provides solutions to various problems in functional areas like production, marketing,
finance, human resource, etc., and is useful in policy decisions through corporate planning
models. Simulation experiments generate large amounts of data and information using a small
sample data, which considerably reduces the amount of cost and time involved in the exercise.

For example, if a study has to be carried out to determine the arrival rate of customers at a ticket
booking counter, the data can be generated within a short span of time can be used with the help
of a computer.

Simulation Process

ADVANTAGES AND DISADVANTAGESOF SIMULATION

Advantages

1. Simulation is best suited to analyze complex and large practical problems when it is not
possible to solve them through a mathematical method.
2. Simulation is flexible, hence changes in the system variables can be made to select the
best solution among the various alternatives.
3. In simulation, the experiments are carried out with the model without disturbing the
system.
4. Policy decisions can be made much faster by knowing the options well in advance and by
reducing the risk of experimenting in the real system.

Disadvantages

1. Simulation does not generate optimal solutions.

2. It may take a long time to develop a good simulation model.
3. In certain cases simulation models can be very expensive.
4. The decision-maker must provide all information (depending on the model) about the

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

constraints and conditions for examination, as simulation does not give the answers by
itself.

MONTE CARLO SIMULATION

In simulation, we have deterministic models and probabilistic models. Deterministic simulation
models have the alternatives clearly known in advance and the choice is made by considering the
various well-defined alternatives. Probabilistic simulation model is stochastic in nature and all
decisions are made under uncertainty. One of the probabilistic simulation models is the Monte
Carlo method. In this method, the decision variables are represented by a probabilistic
distribution and random samples are drawn from probability distribution using random numbers.
The simulation experiment is conducted until the required number of simulations is generated.
Finally, the best course of action is selected for implementation. The significance of Monte Carlo
Simulation is that decision variables may not explicitly follow any standard probability
distribution such as Normal, Poisson, Exponential, etc. The distribution can be obtained by direct
observation or from past records.

Procedure for Monte Carlo Simulation:

Step 1: Establish a probability distribution for the variables to be analyzed.

Step 2: Find the cumulative probability distribution for each variable.

Step 3: Set Random Number intervals for variables and generate random numbers.

Step 4: Simulate the experiment by selecting random numbers from random numbers tables until
the required number of simulations are generated.

Step 5: Examine the results and validate the model

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

SIMULATION OF DEMAND FORECASTING PROBLEM

Question 1 : An ice-cream parlor's record of previous month’s sale of a particular variety
of ice cream as follows Simulation of Demand Problem

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

Demand (No. of Ice-creams) No. of days

4 5
5 10
6 6
7 8
8 1
Simulate the demand for first 10 days of the month
Solution: Find the probability distribution of demand by expressing the frequencies in terms of
proportion. Divide each value by 30. The demand per day has the following distribution as
shown in Table
Probability Distribution of Demand

Demand Probability
4 0.17
5 0.33
6 0.20
7 0.27
8 0.03

Find the cumulative probability and assign a set of random number intervals to various demand
levels. The probability figures are in two digits, hence we use two digit random numbers taken
from a random number table. The random numbers are selected from the table from any row or
column, but in a consecutive manner and random intervals are set using the cumulative
probability distribution as shown in Table .

Cumulative Probability Distribution

Demand Probability Cumulative Probability Random Number Interval
4 0.17 0.17 00-16
5 0.33 0.50 17-49
6 0.20 0.70 50-69
7 0.27 0.97 70-96
8 0.03 1.00 97-99
To simulate the demand for ten days, select ten random numbers from random number tables.
The random numbers selected are, 17, 46, 85, 09, 50, 58, 04, 77, 69 and 74
The first random number selected, 7 lies between the random number interval 17-49
corresponding to a demand of 5 ice-creams per day. Hence, the demand for day one is 5.
Similarly, the demand for the remaining days is simulated as shown in Table.
Demand Simulation
Day 1 2 3 4 5 6 7 8 9 10
Random Number 17 46 85 09 50 58 04 77 69 74
Demand 5 5 7 4 6 6 4 7 6 7
Question 2: A dealer sells a particular model of washing machine for which the probability
distribution of daily demand is as given in Table

Probability Distribution of Daily Demand

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

Demand/day - 0 1 2 3 4 5
Demand - 0.05 0.25 0.20 0.25 0.10 0.15

Find the average demand of washing machines per day.

Solution: Assign sets of two digit random numbers to demand levels as shown in
Random Numbers Assigned to Demand
Demand Probability Cumulative Probability Random Number Intervals
0 0.05 0.05 00-04
1 0.25 0.30 05-29
2 0.20 0.50 30-49
3 0.25 0.75 50-74
4 0.10 0.85 75-84
5 0.15 1.00 85-99
Ten random numbers that have been selected from random number tables are 68, 47, 92, 76, 86,
46, 16, 28, 35, 54. To find the demand for ten days see the Table.

Ten Random Numbers Selected

Trial No Random number Demand / day
1 68 3
2 47 2
3 92 5
4 76 4
5 86 5
6 46 2
7 16 1
8 28 1
9 35 2
10 54 3
Total Demand 28
Average demand =28/10 =2.8 washing machines per day. The expected demand /day can be
computed as,

Expected demand per day = (0.05 × 0) + (0.25 × 1) + (0.20 × 2) + (0.25 × 3) + (0.1 × 4) + (0.15
× 5) = 2.55 washing machines.

The average demand of 2.8 washing machines using ten-day simulation differs significantly
when compared to the expected daily demand. If the simulation is repeated number of times, the
answer would get closer to the expected daily demand

Question 3: A farmer has 10 acres of agricultural land and is cultivating tomatoes on the
entire land. Due to fluctuation in water availability, the yield per acre differs. The
probability distribution yields are given below:
a. The farmer is interested to know the yield for the next 12 months if the same water
availability exists. Simulate the average yield using the following random numbers

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

50, 28, 68, 36, 90, 62, 27, 50, 18, 36, 61 and 21, given in Table
Simulation Problem
Yield of tomatoes per acre Probability
(kg)
200 0.15
220 0.25
240 0.35
260 0.13
280 0.12

b. Due to fluctuating market price, the price per kg of tomatoes varies from Rs. 5.00 to
Rs. 10.00 per kg. The probability of price variations is given in the Table below.
Simulate the price for next 12 months to determine the revenue per acre. Also find the
average revenue per acre. Use the following random numbers 53, 74, 05, 71, 06, 49, 11,
13, 62, 69, 85 and 69.
Simulation Problem
Price per kg Probability
(Rs)
5.50 0.05
6.50 0.15
7.50 0.30
8.00 0.25
10.00 0.15

Solution:

Random Number Interval for Yield

Yield of tomatoes Probabilit Cumulative Random Number
per acre y Probability Interval

200 0.15 0.15 00 – 14

220 0.25 0.40 15 – 39
240 0.35 0.75 40 – 74
260 0.13 0.88 75 – 87
280 0.12 1.00 88 – 99

Random Number Interval for Price

Price Per Probability Cumulative Probability Random Number
Kg Interval
5.00 0.05 0.05 00 – 04
6.50 0.15 0.20 05 – 19
7.50 0.30 0.50 20 – 49
8.00 0.25 0.75 50 – 74
10.00 0.25 1.00 75 – 99

Simulation for 12 months period

Mont Yiel Pric
h d e Revenue / Acre (4) = 2 × 3
(1) (2) (3) (Rs)
1 240 8.00 1960
2 220 8.00 1760
3 240 6.50 1560

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

4 220 8.00 1760

5 250 6.50 1820
6 240 7.50 1800
7 220 6.50 1430
8 240 6.50 1560
9 220 8.00 1760
10 220 8.00 1760
11 240 10.00 2400
12 220 8.00 1760

Average revenue per acre = 21330 / 12

= Rs. 1777.50

Example 4: J.M Bakers has to supply only 200 pizzas every day to their outlet situated in city
bazaar. The production of pizzas varies due to the availability of raw materials and labor for
which the probability distribution of production by observation made is as follows:
Simulation Problem

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

Production 196 197 198 199 200 201 20 203 204

per day 2
Probability 0.1 0.1 0.1 0.2 0.2 0.2 0.1 0.1 0
Simulate and find the average number of pizzas produced more than the requirement and the
average number of shortage of pizzas supplied to the outlet.
Solution: Assign two digit random numbers to the demand levels as shown in Table
Random Numbers Assigned to the Demand Levels

Demand Probability Cumulative Probability No of Pizzas shortage

196 0.06 0.06 00-05
197 0.09 0.15 06-14
198 0.10 0.25 15-24
199 0.16 0.41 25-40
200 0.20 0.61 41-60
201 0.21 0.82 61-81
202 0.08 0.90 82-89
203 0.07 0.97 90-96
204 0.03 1.00 97-99
Selecting 15 random numbers from random numbers table and simulate the production per day as
shown in Table Simulation of Production Per Day

No Random Number Production Per day produced shortage

1 26 199 - 1
2 45 200 - -
3 74 201 1 -
4 77 201 1 -
5 74 201 1 -
6 51 200 - -
7 92 203 3 -
8 43 200 - -
9 37 199 - 1
10 29 199 - 1
11 65 201 1 -
12 39 199 - 1
13 45 200 - -
14 95 203 3 -
15 93 203 3 -
  Total 12 4
The average number of pizzas produced more than requirement = 12/15 = 0.8 per day
The average number of shortage of pizzas supplied = 4/15 = 0.26 per day
Question 5: Mr. Srinivasan, owner of Citizens restaurant is thinking of introducing
separate coffee shop facility in his restaurant. The manager plans for one service counter
for the coffee shop customers. A market study has projected the inter-arrival times at the
restaurant as given in the table The counter can service the customers at the following rate

Simulation of Queuing Problem

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

Inter–arrival times Service times

Time between two Probability Service time (minutes) Probability
consecutive arrivals
(minutes)
2 0.15 2 0.10
3 0.25 3 0.25
4 0.20 4 0.30
5 0.25 5 0.2
6 0.15 6 0.15

Mr. Srinivasan will implement the plan if the average waiting time of a customers in the
system is less than 5 minutes.
Before implementing the plan, Mr. Srinivasan would like to know the following:
1. Mean waiting time of customers, before service.
2. Average service time.
3. Average idle time of service.
4. The time spent by the customer in the system.
Simulate the operation of the facility for customer arriving sample of 20 cars when the
restaurant starts at 7.00 Am every day and find whether Mr. Srinivasan will go for the
plan.

Inter–arrival tim
Time between two Probability
consecutive arrivals
(minutes)
2 0.15 15 0-14

3 0.25 40 15-39

4 0.20 60 40-59

5 0.25 85 60-84

6 0.15 100 85-99

Solution: Allot the random numbers to various inter-arrival service times as shown
in Table .
Numbers Allocated to Various Inter-Arrival Service Times

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

Sl. Rando Inter Arriva Servic Rando Servic Servic Waiting Time
No m Arriva l Time e m e Time e Ends   Servic
. Number l Time at Starts Numbe (Min) at e
  (Arrival (Min) at r Custome (Min)
) (service r
)
1 87 6 7.06 7.06 36 4 7.10 - 6
2 37 3 7.09 7.10 16 3 7.13 1 -
3 92 6 7.15 7.15 81 5 7.20 - 2
4 52 4 7.19 7.2 8 2 7.22 1 -
5 41 4 7.23 7.23 51 4 7.27 - 1
6 5 2 7.25 7.27 34 3 7.30 2 -
7 56 4 7.29 7.3 88 6 7.36 1 -
8 70 5 7.34 7.36 88 6 7.42 2 -
9 70 5 7.39 7.42 15 3 7.45 3 -
10 7 2 7.41 7.45 53 4 7.49 4 -
11 86 6 7.47 7.49 1 2 7.51 2 -
12 74 5 7.52 7.52 54 4 7.56 - 1
13 31 3 7.55 7.56 3 2 7.58 1 -
14 71 5 8 8 54 4 8.04 1 2
15 57 4 8.04 8.04 56 4 8.08 - -
16 85 6 8.1 8.1 5 2 8.12 - 2
17 39 3 8.13 8.13 1 2 8.15 - 1
18 41 4 8.17 8.17 45 4 8.21 - 2
19 18 3 8.2 8.21 11 3 8.24 1 -
20 38 3 8.23 8.24 76 5 8.29 1 -
  Total 83       72   20 17

i. Mean waiting time of customer before service = 20/20 = 1 minute

ii. Average service idle time = 17/20 = 0.85 minutes
iii. Time spent by the customer in the system = 3.6 + 1 = 4.6 minutes.

Question 6: Dr. Strong, a dentist schedules all his patients for 30 minute appointments. Some of
the patients take more or less than 30 minutes depending on the type of dental work to be done.
The following Table 15.18 shows the summary of the various categories of work, their
probabilities and the time actually needed to complete the work

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

Simulation Problem
Category Time required Probability of
(minutes) category
Filling 45 0.40
Crown 60 0.15
Cleaning 15 0.15
Extraction 45 0.10
Check-up 15 0.20
Simulate the dentist’s clinic for four hours and determine the average waiting time for the
patients as well as the idleness of the doctor. Assume that all the patients show up at the clinic
exactly at their scheduled arrival time, starting at 8.00 am. Use the following random numbers
for handling the above problem: 40,82,11,34,25,66,17,79.
Solution: Assign the random number intervals to the various categories of work as shown in
Table Random Number Intervals Assigned to the Various Categories

Category of Probabil Cumulative Random Number

work ity probability Interval
Filling 0.40 0.40 00-39
Crown 0.15 0.55 40-54
Cleaning 0.15 0.70 55-69
Extraction 0.10 0.80 70-79
Check-up 0.20 1.00 80-99
Assuming the dentist clinic starts at 8.00 am, the arrival pattern and the service category are
shown in Table 15.20

Arrival Pattern of the Patients

Patient Rando Service Scheduled Service

Number m category Arrival Time
Number
1 40 Crown 8 60
2 82 Check-up 8.3 15
3 11 Filling 9 45
4 34 Filling 9.3 45
5 25 Filling 10 45
6 66 Cleaning 10.3 15
7 17 Filling 11 45
8 79 Extraction 11.3 45
The arrival, departure patterns and patients’ waiting time are tabulated

Time Event (Patient Number) Patient Number (Time to Waiting (Patient Number)
go)
8 1 arrives 1 (60) -
8.3 2 arrives 1 (30) 2
9 1 departure, 3 arrives 2 (15) 3

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

9.15 2 depart 3 (45) -

9.3 4 arrive 3 (30) 4
10 3 depart, 5 arrive 4 (45) 5
10.3 6 arrive 4 (15) 5,6
10.45 4 depart 5 (45) 6
11 7 arrive 5 (30) 6,7
11.3 5 depart, 8 arrive 6 (15) 7,8
11.45 6 depart 7 (45) 8
12 End 7 (30) 8

The dentist was not idle during the simulation period. The waiting times for the patients are as
given in Table below

Patient's Waiting Time

Patient Arrival Time Service Starts Waiting time (minutes)

1 8.00 8.00 0
2 8.30 9.00 30
3 9.00 9.15 15
4 9.30 10.00 30
5 10.00 10.45 45
6 10.30 11.30 60
7 11.00 11.45 45
8 11.30 12.30 60
Total 285

The average waiting time of patients = 285/8 = 35.625 minutes

Question 7 A company manufactures 30 items per day. The sale of these items depends upon
demand which has the following distribution:
Sales (Units) Probability
27 0.10

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

28 0.15
29 0.20
30 0.35
31 0.15
32 0.05
The production cost and sale price of each units are Rs. 40 and Rs.50 respectively. Any unsold
product is to be disposed at a loss of Rs.15 Per unit. There is a penalty of Rs.5 per unit if the
demand is not met. Using the following random numbers estimates total profit / loss for the
company for the next 10 days:
10 99 64 99 95 01 79 11 16 20

If the company decides to produce 29 items per day, what is the advantage or disadvantage to the
company?

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

SIMULATION OF INVENTORY PROBLEMS

Q. A dealer of electrical appliances has a certain product for which the probability distribution
of demand per day and the probability distribution of the lead-time, developed by past
records are as shown in Table
Probability distribution of lead demand

Demand (Units) 2 3 4 5 6 7 8 9 10
Probability 0.05 0.07 0.09 0.15 0.2 0.21 0.1 0.07 0.06
Probability distribution of lead time

Lead Time (Days) 1 2 3 4

Probability 0.2 0.3 0.35 0.15

The various costs involved are,

Ordering Cost = Rs. 50 per order Holding Cost = Rs.1 per unit per day Shortage Cost = Rs.
20 per unit per day , The dealer is interested in having an inventory policy with two

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

parameters, the reorder point and the order quantity, i.e., at what level of existing inventory
should an order be placed and the number of units to be ordered. Evaluate a simulation plan
for 35 days, which calls for a reorder quantity of 35 units and a re-order level of 20 units,
with a beginning inventory balance of 45 units.
Solution: Assigning of random number intervals for the demand distribution and lead- time
distribution is shown in Tables 15.25 and 15.26 respectively.
Random Numbers Assigned for Demand Per Day
Demand per day Probability Cumulative probability Random Number Interval

2 0.05 0.05 00-04

3 0.07 0.12 11-May
4 0.09 0.21 20-Dec
5 0.15 0.36 21-35
6 0.2 0.56 36-55
7 0.21 0.77 56-76
8 0.1 0.87 77-86
9 0.07 0.94 87-93
10 0.06 1 94-99

Random Numbers Assigned for Lead-time

Lead Time (Days) Probability Cumulative Random Number Interval

probability
1 0.20 0.20 00-19
2 0.30 0.50 20-49
3 0.35 0.85 50-84
4 0.15 1.00 85-99

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

Simulation Work-sheet for Inventory Problem (Case – 1)

Reorder Quantity = 35 units, Reorder Level = 20 units, Beginning Inventory = 45 units

  Random   Rando Lead Inventory Qty. Order   Short-
Day Number Deman m Time at end of Recei - ing Holdi age
(Demand d Number (Days) day - ved Cost ng Cost Cost
) (Lead
Time)
0 - - - - 45 - - - -
1 58 7 - - 38 - - 38 -
2 45 6 - - 32 - - 32 -
3 43 6 - - 26 - - 26 -
4 36 6 73 3 20 - 50 20 -
5 46 6 - - 14 - - 14 -
6 46 6 - - 8 - - 8 -
7 70 7 - - 1 35 - 36 -
8 32 5 - - 31 - - 31 -
9 12 4 - - 27 - - 27 -
10 40 6 - - 21 - - 21 -
11 51 6 21 2 15 - 50 15 -
12 59 7 - - 8 - - 8 -
13 54 6 - - 37 35 - 37 -
14 16 4 - - 33 - - 33 -
15 68 7 - - 26 - - 26 -
16 45 6 45 2 20 - 50 20 -
17 96 10 - - 10 - - 10 -
18 33 5 - - 40 35 - 40 -
19 83 8 - - 32 - - 32 -
20 77 8 - - 24 - - 24 -
21 5 3 - - 21 - - 21 -
22 15 4 76 3 17 - 50 17 -
23 40 6 - - 11 - - 11 -
24 43 6 - - 5 - - 5 -
25 34 5 - - 35 35 - 35 -
26 44 6 - - 29 - - 29 -
27 89 9 96 4 20 - 50 20 -
28 20 4 - - 16 - - 16 -
29 69 7 - - 9 - - 9 -
30 31 5 - - 4 - - 4 -
31 97 10 - - 29 35 - 29 -
32 5 3 - - 26 - - 26 -
33 59 7 94 4 19 - 50 19 -
34 2 2 - - 17 - - 17 -
35 35 5 - - 12 - - 12 -
            Total 300 768 -

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

Simulation Work-sheet for Inventory Problem (Case – II)

Reorder Quantity = 30 units, Reorder Level = 20 units, Beginning Inventory = 45 units

  Random   Random Lead Inven        

Da Number Deman Number Time tory Qty. Orderin Holding Shorta
y (Demand d (Lead (Days) at end Recei g Cost Cost ge Cost
) Time) of day ved
0 - - - - 45 - - - -
1 58 7 - - 38 - - 38 -
2 45 6 - - 32 - - 32 -
3 43 6 - - 26 - - 26 -
4 36 6 73 3 20 - 50 20 -
5 46 6 - - 14 - - 14 -
6 46 6 - - 8 - - 8 -
7 70 7 - - 31 30 - 31 -
8 32 5 - - 29 - - 29 -
9 12 4 - - 25 - - 25 -
10 40 6 - - 19 - 50 19 -
11 51 6 21 2 13 - - 13 -
12 59 7 - - 38 - - 38 -
13 54 6 - - 32 30 - 32 -
14 16 4 - - 21 - - 21 -
15 68 7 - - 21 - - 21 -
16 45 6 45 2 15 - 50 15 -
17 96 10 - - 5 - - 5 -
18 33 5 - - 30 - - 30 -
19 83 8 - - 22 - - 22 -
20 77 8 - - 14 - 50 14 -
21 5 3 - - 11 - - 11 -
22 15 4 76 3 7 - - 7 -
23 40 6 - - 31 30 - 31 -
24 43 6 - - 14 - - 14 -
25 34 5 - - 20 - 50 20 -
26 44 6 - - 14 - - 14 -
27 89 9 96 4 5 - - 5 -
28 20 4 - - 1 - - 1 -
29 69 7 - - 24 30 - 24 -
30 31 5 - - 19 - 50 19 -
31 97 10 - - 9 - - 9 -
32 5 3 - - 6 - - 6 -
33 59 7 94 4 0 - - - 20
34 2 2 - - 28 30 - 28 -
35 35 5 - - 23 - - 23 -
            Total 300 683 20

The simulation of 35 days with an inventory policy of reordering quantity of 35 units at the
time of inventory level at the end of day is 20 units, as worked out in Table 10.27. The table
CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

explains the demand inventory level, quantity received, ordering cost, holding cost and
shortage cost for each day.

Completing a 35 day period, the costs are

Total ordering cost = (6 × 50) = Rs 300.00 Total holding cost = Rs. 768.00
Since the demand for each day is satisfied, there is no shortage cost. Therefore,
Total cost = 300 + 768 = Rs. 1068.00

For a different set of parameters, with a re-order quantity of 30 units and the same re- order level
of 20 units, if the 35-day simulation is performed, we get the total of various costs as shown in
Table.

Total ordering cost = 6 × 50 = Rs. 300.00 Total holding cost = Rs. 683.0
Total shortage cost = Rs. 20.00 Therefore,
Total cost = 300 + 683 + 20 = Rs. 1003.00

If we analyze the combination of both the parameters, Case II has lesser total cost than Case I.
But at the same time, it does not satisfy the demand on 33rd day, that might cause customer
dissatisfaction which may lead to some cost.

In this type of problems, the approach with various combinations of two parameter values is
simulated a large number of times to find the total cost of each experiment, compare the total
cost and select the optimum alternative, i.e., that one which incurs the lowest cost.

Question

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

The occurrence of rain in a city on a day is dependant upon whether or not it Rained on the previous
day.If it rained on the previous day, the rain distribution is Given by:
Event Probability
No rain 0.50
1 cm rain 0.25
2 cm rain 0.15
3 cm rain 0.05
4 cm rain 0.03
5 cm rain 0.02
If it did not rain the previous day, the rain distribution is given by: Event Probability
No rain 0.75
1 cm rain 0.15
2 cm rain 0.06
3 cm rain 0.04
Simulate the city , s weather for 10 days and determine by simulation the total days without rain as well
as the total rainfall during the period . Use the following random numbers:
67 63 39 55 29 78 70 06 78 76
for simulation . Assume that for the first day of the simulation it had not rained the day before.

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

EXERCISE PROBLEM
1. A sweet stall observed that the demand for item Mysorpa per week in one kilogram pack is as
follows:

Demand / week
(per kilo pack) 5 10 15 20 25 30
Frequency 4 22 16 42 10 6
Generate the demand for the next 10 weeks, and also find the average demand.
2. At a service station, cars arrive for water-wash daily. The probability of number of cars that
arrive are given in the table below. Simulate the number of cars that will arrive for the next 10
days. Use the following random numbers: 87, 01, 74, 11, 46, 82, 59, 94, 25 and 34.

Cars arrival per 5 6 7 8 9 10

day
Probability 0. 0.1 0. 0.2 0.0 0.0
2 5 3 5 5 5
3. A private bank has installed an ATM in the city bazaar area. It was found that the time between
an arrival and completion of transaction varies from one minute to seven minutes. The arrival
and service distribution times are given below. Simulate the ATM operations for the next 30
arrivals.

Probability
Time (minutes)
Arrival Service
1-2 0.10 0.05
2-3 0.15 0.15
3-4 0.30 0.30
4-5 0.25 0.20
5-6 0.10 0.15
6-7 0.10 0.15

Use Monte-Carlo simulation technique and determine:

a. Waiting time of the customers.
b. Idle time of the ATM.

4. The materials manager of a firm wishes to determine the expected mean demand for a particular
item in stock during the re-order lead time. This information is needed to determine how far
in advance to re-order, before the stock level is reduced to zero. However, both the lead time,
and the demand per day for the item are random variables, described by the probability
distribution.

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

Lead time Probabil Demand / day Probabil

(days) ity (units) ity
1 0.45 1 0.15
2 0.30 2 0.25
3 0.25 3 0.40
4 4 0.20
Manually simulate the problem for 30 re-orders, to estimate the demand during
lead time.

5. A company has the capacity to produce around 300 bikes per day. Daily production varies from
295 to 304 depending upon getting the clearance from the final inspection department. The
probability distribution of bikes passed through final inspection per day is given below:

Production per day Probability

295 0.03
296 0.04
297 0.10
298 0.20
299 0.25
300 0.15
301 0.09
302 0.07
303 0.05
304 0.02
The finished bikes are transported in a long trailer lorry sufficient to accommodate
300 mopeds. Simulate the process for 10 days and find:
1. The average number of bikes waiting in the factory yard.
2. The average empty space in the lorry.

6. In a single pump petrol station, it was observed that the inter-arrival times and service times are
as given in the table. Using the random numbers given, simulate the queue behaviour for a
period of 30 minutes and estimate the probability of the pump being idle and the mean time
spent by a customer waiting to fill petrol.

Inter-arrival time Service time

Minutes Probability Minutes Probability
1 0.10 2 0.10
3 0.17 4 0.23
5 0.35 6 0.35
7 0.23 8 0.22
9 0.15 10 0.10
Use the following random numbers: 93, 14, 72, 10, 21, 81, 87, 90, 38, 10, 29, 17, 11, 68, 10,
51, 40, 30, 52 & 71.

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

7. A one-man TV service station receives TV sets for repair. TV sets are repaired on a ‘first come,
first served’ basis. The observations of the study made over a 100 day period are given below.

No. of TV sets requiring Service

service Frequency of request
1 15
2 15
3 20
4 25
5 25
No. of TV sets serviced Servicing done
Frequency of service
1 10
2 30
3 20
4 15
5 25

Simulate a 10 day period of arrival and service pattern.

8. A box contains 100 balls of which 20 percent are white, 30 percent are black and the remaining
are red. Simulate the process for drawing balls at random from the box, identify and note the
colour and then replace. Use the following 10 random numbers to simulate: 52, 60, 02, 3379,
79, 30, 36, 58 and 43.

9. Rahul, the captain of the cricket team, has the following observations on the number of runs
scored against type of ball. The bowling probability of a bowler for the type of balls bowled
are given below.

Type of bowling Probability of hitting a

boundary
Over pitched 0.1
Short-Pitched 0.3
Outside off stump 0.2
Outside leg stump 0.15
Bouncer 0.20
Attempted Yorker 0.05
The number of runs scored off each type of ball is shown in the table given below:

Type of bowling Probability of hitting a

boundary
Over pitched 1
Short-Pitched 4
Outside off stump 3
Out side leg stump 2

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

Bouncer 2
Attempted Yorker 0
Simulate the game for 3 overs (6 balls per over) and calculate the batting average
of Rahul.

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

C.S.V.T.U. LAST YEAR QUESTION PAPER

2019
Q.1 what ismento carles simulation ?

Q. 2 Simulation is the process of carring out sampline expreiment on the model of the systemrather then
the system itself ekucidate this statement by taking some example .

Q.3 A company manufactures 30 items per day. The sale of these items depends upon demand which has
the following distribution:
Sales (Units) Probability
27 0.10
28 0.15
29 0.20
30 0.35
31 0.15
32 0.05
The production cost and sale price of each units are Rs. 40 and Rs.50 respectively. Any unsold product is
to be disposed at a loss of Rs.15 Per unit. There is a penalty of Rs.5 per unit if the demand is not met.
Using the following random numbers estimates total profit / loss for the company for the next 10 days:
10 99 64 99 95 01 79 11 16 20

If the company decides to produce 29 items per day, what is the advantage or disadvantage to the
company?

Q.4 The occurrence of rain in a city on a day is dependant upon whether or not it Rained on the previous
day.If it rained on the previous day, the rain distribution is Given by:
Event Probability
No rain 0.50
1 cm rain 0.25
2 cm rain 0.15
3 cm rain 0.05
4 cm rain 0.03
5 cm rain 0.02
If it did not rain the previous day, the rain distribution is given by: Event Probability
No rain 0.75
1 cm rain 0.15
2 cm rain 0.06
3 cm rain 0.04
Simulate the city , s weather for 10 days and determine by simulation the total days without rain as well
as the total rainfall during the period . Use the following random numbers:
67 63 39 55 29 78 70 06 78 76
for simulation . Assume that for the first day of the simulation it had not rained the day before.

2018

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

Q.1 what is simulation describe the simulation process what are the reasons for using the simulation ?

Q.2 A company manufactures around 200 mopeds. Depending upon the availability of raw materials and
other conditions, the daily production has been varying from 196 mopeds to 204 mopeds whose
probability distribution is as given below:
Production per day Probability
196 0.05
197 0.09
198 0.12
199 0.14
200 0.20
201 0.15
202 0.11
203 0.08
204 0.06
The finished mopeds are transported in a specially designed three storey lorry That can accommodate
only 200 mopeds. Using the following 15 random numbers
82, 89, 78, 24, 53, 61, 18, 45, 04, 23, 50, 77, 27, 54, 10
Simulate process find out:
(i) What will be the average numbers of mopeds, waiting in the factory?
(ii) What will be the average number of empty spaces on the lorry?

Q.3 A company manufactures 30 items per day. The sale of these items depends upon demand which has
the following distribution:
Sales (Units) Probability
27 0.10
28 0.15
29 0.20
30 0.35
31 0.15
32 0.05
The production cost and sale price of each units are Rs. 40 and Rs.50 respectively. Any unsold product is
to be disposed at a loss of Rs.15 Per unit. There is a penalty of Rs.5 per unit if the demand is not met.
Using the following random numbers estimates total profit / loss for the company for the next 10 days:
10 99 64 99 95 01 79 11 16 20
If the company decides to produce 29 items per day, what is the advantage or disadvantage to the
company?

2017

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

Q.1 what is simulation what are the step involve in it ? Also state its importance application in real world?

Q.2 Company maintain a stock of 100 liter geysers that it sells to households and installs them the
marketing manager would like to have a large inventory on hand to meet customer demand even though it
would involve high inventor carrying cost the marketing manager examines the sales of geysers over the
past 50 week and observes the following;

A. If the company maintains a constant supply of 8 geysers in any given week how many time will it
be out of stock during the following random number 10 24 03 32 23 59 95 35 35 51 08 48 66 97
03 96 46 74 77 44
B. What is the average number of sales pre week including stock out over the 20 week period ?

Q.3 The occurrence of rain in a city on a day is dependant upon whether or not it Rained on the previous
day.If it rained on the previous day, the rain distribution is Given by:
Event Probability
No rain 0.50
1 cm rain 0.25
2 cm rain 0.15
3 cm rain 0.05
4 cm rain 0.03
5 cm rain 0.02
If it did not rain the previous day, the rain distribution is given by: Event Probability
No rain 0.75
1 cm rain 0.15
2 cm rain 0.06
3 cm rain 0.04
Simulate the city , s weather for 10 days and determine by simulation the total days without rain as well
as the total rainfall during the period . Use the following random numbers:
67 63 39 55 29 78 70 06 78 76
for simulation . Assume that for the first day of the simulation it had not rained the day before.

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

2016
Q. 1 Simulation is the process of carring out sampline expreiment on the model of the systemrather then
the system itself ekucidate this statement by taking some example .

Q.2 : Dr. Strong, a dentist schedules all his patients for 30 minute appointments. Some of the
patients take more or less than 30 minutes depending on the type of dental work to be done. The
following Table 15.18 shows the summary of the various categories of work, their probabilities
and the time actually needed to complete the work

Simulation Problem
Category Time required Probability of
(minutes) category
Filling 45 0.40
Crown 60 0.15
Cleaning 15 0.15
Extraction 45 0.10
Check-up 15 0.20
Simulate the dentist’s clinic for four hours and determine the average waiting time for the
patients as well as the idleness of the doctor. Assume that all the patients show up at the clinic
exactly at their scheduled arrival time, starting at 8.00 am. Use the following random numbers
for handling the above problem: 40,82,11,34,25,66,17,79

Q.3 : J.M Bakers has to supply only 200 pizzas every day to their outlet situated in city bazaar.
The production of pizzas varies due to the availability of raw materials and labor for which the
probability distribution of production by observation made is as follows:
Simulation Problem

Production 196 197 198 199 200 201 20 203 204

per day 2
Probability 0.1 0.1 0.1 0.2 0.2 0.2 0.1 0.1 0
Simulate and find the average number of pizzas produced more than the requirement and the
average number of shortage of pizzas supplied to the outlet.

2015

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

Q.1 what is simulation what are the step involve in it ? Also state its importance application in real world?

Q2 : Mr. Srinivasan, owner of Citizens restaurant is thinking of introducing separate coffee shop
facility in his restaurant. The manager plans for one service counter for the coffee shop
customers. A market study has projected the inter-arrival times at the restaurant as given in the
table The counter can service the customers at the following rate

Simulation of Queuing Problem

Inter–arrival times Service times

Time between two Probability Service time (minutes) Probability
consecutive arrivals
(minutes)
2 0.15 2 0.10
3 0.25 3 0.25
4 0.20 4 0.30
5 0.25 5 0.2
6 0.15 6 0.15

Mr. Srinivasan will implement the plan if the average waiting time of a customers in the system
is less than 5 minutes.
Before implementing the plan, Mr. Srinivasan would like to know the following:
1. Mean waiting time of customers, before service.
2. Average service time.
3. Average idle time of service.
4. The time spent by the customer in the system.
Simulate the operation of the facility for customer arriving sample of 20 cars when the
restaurant starts at 7.00 pm every day and find whether Mr. Srinivasan will go for the plan.

Q 3 : A dealer sells a particular model of washing machine for which the probability distribution
of daily demand is as given in Table

Probability Distribution of Daily Demand

Demand/day - 0 1 2 3 4 5
Demand - 0.05 0.25 0.20 0.25 0.10 0.15
Find the average demand of washing machines per day

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH
 T.RAMA KRISHANA RAO (8839271225)

2014

Q. 1 What are the step involve in simulation explain with suitable examples ?
Q. 2 Discuss monte carlo simulation illustrate how would you use it in situation of :
1. Queuing
2. Inventory control
Q.3 Dr. Strong, a dentist schedules all his patients for 30 minute appointments. Some of the
patients take more or less than 30 minutes depending on the type of dental work to be done. The
following Table 15.18 shows the summary of the various categories of work, their probabilities
and the time actually needed to complete the work

Simulation Problem
Category Time required Probability of
(minutes) category
Filling 45 0.40
Crown 60 0.15
Cleaning 15 0.15
Extraction 45 0.10
Check-up 15 0.20
Simulate the dentist’s clinic for four hours and determine the average waiting time for the
patients as well as the idleness of the doctor. Assume that all the patients show up at the clinic
exactly at their scheduled arrival time, starting at 8.00 am. Use the following random numbers
for handling the above problem: 40,82,11,34,25,66,17,79

CONTACT FOR: - CAT , BANK , MBA , BBA , B.COM , AND 11TH 12TH