1.

      ABC Bookstore sells new-year diaries in December-January for Rs. 150 per copy. It purchases the diaries
at Rs. 100 per copy. If the diary remains unsold by the end of January, they have to be disposed off at Rs. 50
per copy. According to past experience the demand for the diaries is between 18-23 copies. The order has to
be placed in October for the next year diaries. The problem before the store’s manager is to decide how many
copies to order for the next year. Find the ordering quantity by following criteria.

a)     Maximin,
b)     Maximax
c)      Laplace
d)     Hurwicz (using α = 0.6)
e)     Regret minimax criteria.

Soln

Purchase Price 100 Rs Selling Price 150 Rs

Profit 50 Rs Disposal/loss price 50 Rs

Rules
D<S D*Profit - (S-D)*Loss
D=S S*Profit
D>S S*Profit

Matrix Demand
18 19 20 21 22 23
18 900 900 900 900 900 900
19 850 950 950 950 950 950
20 800 900 1000 1000 1000 1000
Supply 21 750 850 950 1050 1050 1050
22 700 800 900 1000 1100 1100
23 650 750 850 950 1050 1150

Regret Table
Matrix Demand
18 19 20 21 22 23
18 250 250 250 250 250 250
19 300 200 200 200 200 200
20 350 250 150 150 150 150
Supply 21 400 300 200 100 100 100
22 450 350 250 150 50 50
23 500 400 300 200 100 0
py. It purchases the diaries
o be disposed off at Rs. 50
23 copies. The order has to
nager is to decide how many

0.6
Maximin Maximax Laplace Hurwicz
900 900 900 900
850 950 933.3333 910
800 1000 950 920
750 1050 950 930
700 1100 933.3333 940
650 1150 900 950
900 1150 950 950
18 23 20,21 23

Minimax
250
300
350
400
450
500
250
18
 A businessman has two independent investments A and B available to him, but he lacks the capital to undertake both of them simultaneously. He can choose to
or if A is successful then take B, or vice versa. The probability of success on A is 0.7, while for B it is 0.4. Both investments require an initial capital outlay of Rs. 2,
nothing if the venture is unsuccessful. Successful completion of A will return Rs. 3,000 (over cost), successful completion of B will return Rs. 5,000 (over cost). Dra
determine the best strategy.

Solution:
Failure 0.3 2,000

EMV= Failure 0.6

EMV= 800 2,000
1500 Success 3
1
5,000
D2
Accept A 0.7 Success 0.4
3000 0
Stop
D1 EMV= Do nothing
1500 Success
Success 0.7 3000
4
Accept B 0.4
D3
5000 Failure 0.3 2000
EMV= 2 0
800 Stop
2000

Failure 0.6
neously. He can choose to take A first and then stop,
itial capital outlay of Rs. 2,000, and both return
rn Rs. 5,000 (over cost). Draw the decision tree and
Q3) A retailer deals in a perishable commodity. The daily demand and supply are variable. The data fo
The retailer
demand andbuys the commodity at Rs.20 per kg and sells it at Rs.30 per kg. Any commodity remaining
supply:
and has to be discarded. Moreover, the loss (unearned profit) on any unsatisfied demand is Rs.8 per kg
numbers,
(31, simulate
(63, six days’ availability,
(15, (43,sales, and profit.
18); 84); 79); (07, 32); 75); (81, 27)
The first random number in the pair is for supply and the second random number is for demand viz. in
supply and 18 to simulate demand.

Supply Demand

Availabil No. of Demand No. of

ity (kgs) days (kgs) days

10 40 10 50
20 50 20 110
30 190 30 200
40 150 40 100
50 70 50 40

Supply

Availabili No. of Cummula

ty (kgs) days tive
Frequenc Frequenc Opening Closing
Probability y y Supply Supply
10 40 0.08 8 8 0 7 10
20 50 0.1 10 18 8 17 20
30 190 0.38 38 56 18 55 30
40 150 0.3 30 86 56 85 40
50 70 0.14 14 100 86 99 50

Simulated System

Supply Demand
Equivalent Equivalen Supply Opportun
Days Random Random Revenue
Supply t Demand Cost ity Cost
Variables Variables

Day 1 31 30 18 20 600 600 0

Day 2 63 40 84 40 1200 800 0
Day 3 15 20 79 40 600 400 160
Day 4 7 10 32 30 300 200 160
Day 5 43 30 75 40 900 600 80
Day 6 81 40 27 20 600 800 0
supply are variable. The data for the past 500 days show the following
kg. Any commodity remaining at the end of the day has no saleable value
nsatisfied demand is Rs.8 per kg. Given the following pairs of random

m number is for demand viz. in the first pair (31, 18), use 31 to simulate

Demand

Availabili No. of Cummula

ty (kgs) days tive
Probabilit Frequenc Frequenc Opening Closing
y y y Supply Supply
10 50 0.1 10 10 0 9
20 110 0.22 22 32 9 31
30 200 0.4 40 72 31 71
40 100 0.2 20 92 71 91
50 40 0.08 8 100 91 99

Total Profit

0 if S<=D S*30
400 ifS>D D*30
40
-60
220
-200
400
10
20
30
40
50
Q4) The average time between successive arrivals at an automobile service station, which works 8 hou
mechanic who can repair the incoming vehicles at an average rate of 3 per hour. The mechanic is paid R
customer dissatisfaction and lost goodwill, is Rs. 20 per hour of the time spent waiting in the queue. Th
another one who demands Rs. 180 per hour and who can repair 4 vehicles on the average. Under condi
day at present and the total cost per day if the present mechanic is replaced. Is it advisable to replace th

Solution:

Arrival Time λ= 1/30mins 2 /hour

Idle Time= Rs. 20 hours

Mechanic A
Time to repair=μ 3 hour
Mechanic Wage 140 per hour
Shift time 8 hour

No. of machines waiting in the system =

LS = λ/(μ-λ) = 2 hour
Average time machine waiting in the
system = WS = LS/λ = 1 hour
Cost of idle time of the machines= 40 Rs. Per hour

Total Cost for 8 hours shift = 1440 Rs. Per day

 which works 8 hours a day, is 30 minutes. The service station has one
e mechanic is paid Rs. 140 per day while the cost of waiting time, in terms of
ing in the queue. The owner is contemplating to replace the mechanic by
verage. Under conditions of the single server model, calculate the total cost per
visable to replace the existing mechanic?

Mechanic B
Time to repair=μ 4 hour
Mechanic Wage 180 per hour
Shift time 8 hour

No. of machines waiting in the system =

LS = λ/(μ-λ) = 1.00 hour
Average time machine waiting in the
system = WS = LS/λ = 0.50 hour
Cost of idle time of the machines= 20.00 Rs. Per hour

Total Cost for 8 hours shift = 1600 Rs. Per day

1.      In a small town, there are only two stores, ABC and XYZ that handle sundry goods. The total number of
customers is equally divided between the two, because price and quality of goods sold are equal. Both
stores have good reputation in the community, and they render equally good customer service. Assume that
a gain of customers by ABC is a loss to XYZ and vice-versa. Both stores plan to run annual pre-Diwali sales
during the first week of November. Sales are advertised through a local newspaper, radio and television
media. With the aid of an advertising firm store ABC constructed the game matrix given below. (Figures in
the matrix represent a gain or loss of customers.)

Strategy of XYZ
Newspaper Radio Television
Strategy Newspaper 30 40 -80
of ABC Radio 0 15 -20
Television 90 20 50
Determine optimal strategies and the worth of such
strategies for both ABC and XYZ.

Soln

Strategy of XYZ Row

Minimum Maximin
Newspaper Radio Television
Strategy Newspaper 30 40 -80 -80
of ABC Radio 0 15 -20 -20 20
Television 90 20 50 20
Column Maxima 90 40 50
Minimax 40

Maximin≠Minimax=> saddle point does not exist

Strategy of XYZ
Radio Television
Strategy Newspaper 40 -80
of ABC
Television 20 50

Player B Strategy
Player A’s Strategy B1 B2
P1 A1 a11 a12
P2 = 1 - P1 A2 a21 a22
P1= 0.2 P1= a22-a21
P2= 0.8 (a11+a22)-(a12+a21)

Q1= 0.87 Q1= a22-a12

Q2= 0.13 (a11+a22)-(a12+a21)

V= 24 V= (a11a22-a12a21)
(a11+a22)-(a12+a21)
 e total number of
e equal. Both
ervice. Assume that
pre-Diwali sales
o and television
below. (Figures in
 1.      A taxi owner estimates from his past records that the cost per year for operating a taxi whose purcha
Age 1 2 3 4 5
Operatin
g Cost 10,000 12,000 15,000 18,000 20,000
(Rs.)

After five years, the operating cost is Rs. 6,000k where k = 6, 7, 8, 9, 10 and
denotes age in years. If the resale value reduces by 10% of the purchase
value each year, what is the best replacement policy?

Purchase Price= 60000

Cummula Cummula
tive tive
Operating Operating Resale Depreciat Depreciati Average
Years Cost Cost Value ed Value on Total Cost Cost
1 10000 10000 54000 6000 6000 16000 16000
2 12000 22000 48000 6000 12000 34000 17000
3 15000 37000 42000 6000 18000 55000 18333.33
4 18000 55000 36000 6000 24000 79000 19750
5 20000 75000 30000 6000 30000 105000 21000
6 36000 111000 24000 6000 36000 147000 24500
7 42000 153000 18000 6000 42000 195000 27857.14
8 48000 201000 12000 6000 48000 249000 31125
9 54000 255000 6000 6000 54000 309000 34333.33
10 60000 315000 0 6000 60000 375000 37500
ating a taxi whose purchase price is Rs. 60,000 is as given in the table below.
 1.      The details of project activities are given in the table below.

Normal
Duration Months Cost
Predece
Activity ssors
Normal Crash (Rs ’00)

A - 4 3 600
B - 6 4 1500
C - 2 1 380
D A 5 3 1500
E C 2 2 1000
F A 7 5 1150
G D, E, B 4 2 1000

The increment in cost after crashing various activities are as shown in the table below.
Activity A B C D E F G

Increment in cost 300 1000 220 1000 0 600 1400

(Rs 00)

Indirect costs vary as follows:

Months 15 14 13 12 11 10 9 8

Cost (Rs. 00) 6000 5000 4000 2500 1750 1000 750 500

                   i.            Draw the network diagram for the given project, find critical path and project duration.
                  ii.            Determine the project duration which will result in minimum total project cost.

5
D

4
7
A 4
F
G
6
B

2 2
C E
 Paths Duration
P1 1 13 Critical Path 1--2--5 11
P2 A-F 11 1-2-4-5 13
P3 B-G 10 1--4--5 10
P4 C-E-G 8 1-3-4-5 8

Normal Crash Slope of Crashing

Duration Months Cost Crashing Time
Predece Cost
Activity
ssors

Normal Crash (Rs ’00) (Rs ’00) (Rs ’00)

A - 4 3 600 900 300 1

B - 6 4 1500 2500 500 2
C - 2 1 380 600 220 1
D A 5 3 1500 2500 500 2
E C 2 2 1000 1000 0 0
F A 7 5 1150 1750 300 2
G D, E, B 4 2 1000 2400 700 2
7130
e table below.

7 6

350 250

A
oject duration.
ct cost.
F (7)

2 5
D (5)
A (4)
4
G (4)
B (6)
1

E (2)
C (2)
3
 Cumulativ
Crashing Action Duration e
Normal Indirect Crashing
Cost Cost Cost Total Cost

P1 P2 P3 P4
A-D-G A-F B-G C-E-G
13 11 10 8 7130 4000 - 11130
Crash A by 1 day 12 10 10 8 7130 2500 300 9930
Crash D by 1 day 11 10 10 8 7130 1750 800 9680
Crash D by 1 day 10 10 10 8 7130 1000 1300 9430
Crash G and F by 1 day 9 9 9 7 7130 750 2300 10180

Since the total cost starts increasing after crashing beyond 10 days we will stop crashing the
activities
 1.      A small project consisting of eight activities has the following characteristics:

Most Most
optimis Most pessimi
Activity Preceding tic
likely
activity time(tm) stic
time(to) time(tp)

A None 2 4 12
B None 10 12 26
C A 8 9 10
D A 10 15 20
E A 7 7.5 11
F B,C 9 9 9
G D 3 3.5 7
H E,F,G 5 5 5
                                i.      Draw the PERT network for the project.

                              ii.      Determine the critical path and expected project duration.

iii.      If the project manager wants to be 90% sure that the project is
                           
completed on the schedule date, how many weeks before that date should he
start the project work?

Most Most Most

Preceding optimis pessimi Average Varianc
Activity tic likely stic
activity time(tm) Time e
time(to) time(tp)

A None 2 4 12 5 2.777778
B None 10 12 26 14
C A 8 9 10 9
D A 10 15 20 15 2.777778
E A 7 7.5 11 8
F B,C 9 9 9 9
G D 3 3.5 7 4 0.444444
H E,F,G 5 5 5 5 0
6
Variance

i) 15 4
D G
 15
D G
5
A 8 5
E
H
9
C
14 9
B
F

ii)
Paths Duration
A-D-G-H 29 Critical Path
A-E-H 18
A-C-F-H 28
B-F-H 28

Avg Project Duration= 29

Variance= 6
Standard Deviation 2.44949

iii.      If the project manager wants to be 90% sure that the project is
                           
completed on the schedule date, how many weeks before that date should he
start the project work?

z= 1.28
32.14 days 1.28=d-29/2.44
4.59 weeks