SECTION A: Answer all five questions. Each question carries two marks [5x2=10].

1. Two firms A, B are engaged in a price war. If both of them cut prices, then firm A, the incumbent,
gains Rs. 1 lakh, while firm B, the entrant, losses Rs.1 lakh. If both stick to the market price, then
firm A gains Rs. 50,000, while firm B loses Rs. 50,000. If one firm cuts price while the other
sticks to the market price, then the firm which has cut price gains Rs. 25,000 at the expense of the
firm which has stuck to the market price. Formulate the problem as a 2PZS (matrix) game, and
find the optimal solution.

2. Solve the following LPP graphically:

min w = 5x1 + 8x2

st. x1 + 2x2  180
2x1 + x2  30
x1 + x2 = 20
x1, x2 0

3. Solve the following 2PZS matrix game, and interpret the solution:

B1 B2
A1 3 -4
A2 -2 6

4. A bank has a single counter dedicated for statement enquiry. On average, 125 customers arrive at
the bank every hour for statement enquiry. Each customer takes on average twenty-five seconds to
process. Assuming that the system follows M/M/1, find the steady-state average waiting time of a
customer in the bank before service.

5. A newspaper vendor needs to decide how many copies of a popular magazine should he stock.
The demand for the same is between 21 to 26 copies. The magazine costs him Rs. 10 and sells for
Rs. 15. Unsold copies can be sold to a library for Rs. 3. Construct a payoff table for various action
– event combinations, and determine the optimal strategy under the maximin principle and the
minimax opportunity cost principle.

SECTION B: Answer three questions. Each question carries five marks [3x5=15].

1. Solve the following maximisation assignment problem using the Hungarian assignment method:

W X Y Z
A 32 40 - 37
B 30 - 31 32
C 38 - 29 -
D - 33 37 32
E 34 36 38 -

2. Solve the following transportation problem using the Vogel approximation method.

P Q R S
A 33 29 27 25 45
B 28 26 25 18 35
C 31 29 28 33 40
30 40 35 35
 3. A bank has two counters: one for deposits, the other for withdrawals. Both counters take two
minutes on an average to serve a customer. Depositors arrive at a rate of 29 customers per hour,
while withdrawers arrive at a rate of 28 customers per hour.
a. Assuming that each counter has a separate queue, find the average queue lengths and the
average waiting times of customers in the queues.
b. Assuming that both counters can handle either type of transaction, without affecting the
service rates, and a combined queue is formed, find the average queue length and the
average waiting time of a customer in the queue.

4. Solve the following LPP using the simplex method:

max z = x1 + 2x2
st. 2x1 – 3x2  120
– x1 + 2x2  80
3x1 + 4x2  180
x1, x2  0

SECTION C: Answer four questions. Each question carries ten marks [4x10=40].

1. A small furniture manufacturer produces tables and chairs. Each product must go through three
stages of the manufacturing process: assembly, finishing, and inspection. Each table requires 3
hours of assembly, 2 hours of finishing, and 1 hour of inspection. Each chair requires 2 hours of
assembly, 2 hours of finishing, and 1 hour of inspection. The selling price per table is $120 while
the selling price per chair is $80. Currently, each week there are 200 hours of assembly time
available, 180 hours of finishing time, and 40 hours of inspection time. Assume that one hour of
assembly time costs $4.00; one hour of finishing time costs $5.00; one hour of inspection time
costs $3.50; and that whatever labor hours are not required for the table and chairs can be applied
to another product. Formulate as a Linear programming problem, and develop the optimal
production schedule.

2. Solve the following maximisation traveling salesman problem using the Hungarian assignment
method (note that some of the assignments are restricted):

A B C D E
A - 38 41 - 39
B 32 - 34 46 35
C 36 32 - 35 -
D 41 37 - - 43
E 34 40 32 38 -

3. Solve the following crew assignment problem:

Bangalore - Mangalore Mangalore - Bangalore

Route Departure Arrival Route Departure Arrival
A 0600 1900 P 0500 1800
B 1000 2100 Q 1200 0100
C 1700 0600 R 1900 0800
D 2000 0900 S 2200 1100
minimum layover time = 4 hours

4. Solve the following LPP using the two-phase method:

 min w = 2x1 + 3x2
st. x1 + x2  100
2x1 + x2  10
3x1 + x2 = 60
x1, x2 0

5. Simulate the following queueing system with the given distribution . Estimate the average
customer waiting time and average percentage service idle time by a process of simulation, using
the following 4 digit random numbers: 1990, 6597, 5167, 1795, 6352, 6061, 9899, 7638, 5305,
0287, 3514, 9451, 9151, 6509, 2071. The first two digits may be used for simulating the customer
arrivals and the next two for simulating the service. Since the purpose of the problem is only to
illustrate, simulation may be done for only 15 customers.

Inter-Arrival Time %age

(Minutes)
0.5 2
1.0 6
1.5 10
2.0 25
2.5 20
3.0 14
3.5 10
4.0 7
4.5 4
5.0 2

Servicing Time %age

(Minutes)
0.5 12
1.0 21
1.5 36
2.0 19
2.5 7
3.0 5

SECTION D: Answer the following compulsory question. [1x35=35].

TJ’s Inc, makes three nut mixes for sale to grocery chains located in the Southeast. The three mixes,
referred to as the Regular Mix, the Deluxe Mix, and the Holiday Mix, are made by mixing different
percentages of five types of nuts. In preparation for the fall season, TJ’s has just purchased the following
shipments of nuts at the prices shown:

Shipment Amount Cost per

Type of Nut
(pounds) Shipment ($)
Almond 6000 7500
Brazil 7500 7125
Filbert 7500 6750
Pecan 6000 7200
Walnut 7500 7875

The Regular Mix consists of 15% almonds, 25% Brazil nuts, 25% filberts, 10% pecans, and 25% walnuts.
The Deluxe Mix consists of 20% of each type of nut, and the Holiday Mix consists of 25% almonds, 15%
Brazil nuts, 15% filberts, 25% pecans, and 20% walnuts.
TJ’s accountant analyzed the cost of packaging materials, sales price per pound, and so forth, and
determined that the profit contribution per pound is $1.65 for the Regular Mix, $2.00 for the Deluxe Mix,
and $2.25 for the Holiday Mix. These figures do not include the cost of specific types of nuts in the
different mixes because that cost can vary greatly in the commodity markets.

Customer orders already received are summarized here: 10,000 pounds of Regular Mix, 3000 pounds of
Deluxe Mix, and 5000 pounds of Holiday Mix. Because demand is running high, it is expected that TJ’s
will receive many more orders than can be satisfied. TJ’s is committed to using the available nuts to
maximize profit over the fall seasons; nuts not used will be given to a local charity. Even if it is not
profitable to do so, TJ’s president indicated that the orders already received must be satisfied.

After formulating a linear programming model to determine the production levels that would maximize
profit, the corresponding sensitivity report are shown in the following table:

Variable Cells
    Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$B$2 Regular 17500 0 1.65 0.35 0.15
$C$2 Deluxe 10625 0 2 0.2 0.1077
$D$2 Holiday 5000 0 2.25 0.175 (infinity)
Constraints
    Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$F$11  Regular 17500 0 10000 7500 (infinity)
$F$12  Deluxe 10625 0 3000 7625 (infinity)
$F$13  Holiday 5000 -0.175 5000 4692.3077 5000
$F$6  Almond 6000 8.5 6000 583.3333 610
$F$7  Brazil 7250 0 7500 (infinity) 250
$F$8  Filbert 7250 0 7500 (infinity) 250
$F$9  Pecan 5125 0 6000 (infinity) 875
$F$10  Walnut 7500 1.5 7500 250 750

Management Report
Perform an analysis of TJ’s product-mix problem, and prepare a report for TJ’s President that summarizes
your findings. Be sure to include information and analysis on the following:
1. The cost per pound of the nuts included in the Regular, Deluxe and Holiday mixes.
2. The optimal product mix and the total profit contribution
3. Recommendations regarding how the total profit contribution can be increased if additional
quantities of nuts can be purchased.
4. A recommendation as to whether TJ’s should purchase an additional 1000 pounds of almonds for
$1000 from a supplier who overbought.
5. Recommendations on how profit contribution could be increased (if at all) if TJ’s does not satisfy
all existing orders.