REVISION QUESTIONS

(a) The total revenue function of producing product “G” is quadratic in nature. The following data
shows the number of units of product G sold and the corresponding sales revenue in thousands of
shillings:

Sales revenue (R) Sh.“000” 2,325 2,900 3,750

Number of units sold (Q) 15 20 30

Required:
(i) Formulate the total revenue function. (6 marks)

(ii) Determine the maximum revenue of producing product “G”. (4 marks)

(iii) Calculate the total revenue when the number of units sold is 80. (2 marks)
(Total: 20 marks)

QUESTION THREE
(a) An economy produces food, clothing and shelter. To produce one unit of food, it requires 0.6 units
from food sector, 0.2 units from clothing sector and 0.1 units from the shelter sector. To produce one
unit of clothing, it requires 0.1 units from the food sector, 0.4 units from clothing sector and 0.2 units
from the shelter sector. To produce one unit of shelter it requires 0.1 units from the food sector, 0.4
units from the clothing sector and 0.4 units from the shelter sector.

Required:
(i) Determine the matrix of technical coefficient (A).
(2 marks)

(ii) Compute the total output for food, clothing and shelter sectors to satisfy a final demand
of 50 units of food, 400 units of clothing and 400 units of shelter.

Assume that;

1 0.28 0.08 0.10

(I – A)–1 = 0.086 0.16 0.23 0.18
0.10 0.09 0.22 (4 marks)

(iii) Account for the usage of clothing sector output determined in (a) (ii) above. (3 marks)

(a) (i) Find the value of the following integral:

∫(4x3 + 2x + 5)dx for an interval between x = 1 and x = 3
(4 marks)

(ii) A function of a curve is given as:

Y = 3x2 – 12x + 64

Find the integral equation of the function. (2 marks)

 (a) Given the

following

sets: A =
B = {c, d, e, f, g}
C = {h, i, j, c, d}

Required:
Find:

(i) The universal set “⋃”. (2 marks)

(ii) A⋂B⋂C. (2 marks)

'
(iii) C. (1 mark)

(a) TOC Limited, an oil processing company purchased a machine that they intend to use in one of their
production processes. The machine is expected to have a useful life of 10 years after which it can be
disposed for Sh.200,000. The net book value of the machine after 8 years is estimated to be
Sh.560,000.

Required:
(i) The linear depreciation equation for the value of the machine.
(4 marks)

(ii) Determine the value of the machine after 6 years. (2 marks)

(iii) Determine the number of years when the value of the machine will be Sh.1,460,000. (2 marks)

(a) Clekex Cleaning Limited manufactures bar soaps for a hotel industry. The company specialises in
three different types of bar soaps weighing 0.5kg, 0.75kg and 1kg respectively. The three types of bar
soaps are made by two machines, machine A and machine B. The number of hours required for each
type of bar soap in each machine is shown below:

Type of bar soap Time taken for bar soap production (hours)
Machine A Machine B
0.5 0.40 0.25
0.75 0.60 0.12
1 0.50 0.60

Machine A has 2,800 hours available while machine B has 1,090 hours available. The management
has decided that 1,000 bar soaps of 0.5kg must be produced.

Required:
The number of 0.75kg bar soaps and 1kg bar soaps that will be produced assuming machine A
and B hours are fully utilised.
(6 marks)

(a) Highlight SIX assumptions of Markov analysis. (6 marks)

(a) A solar panel production firm intends to research on a launch of a new solar panel which would
increase the sales of the panels to between 2,000 units to 3,000 units per week. The weekly revenue
in thousands of shillings over the range of sales could be represented by:

R = –3x2 + 7x

Where x is the weekly solar panel units produced and sold in thousands. Past records of the solar
panel production in the firm estimates its marginal costs in thousands of shillings could be
represented by the function;

MC = 2x2 – 3x + 5

The fixed costs will be Sh.1,000 per week.

Required:
(i) The average cost function of the firm.
(2 marks)

(ii) The average revenue function of the firm. (1

mark)

(iii) The profit maximising output. (5

marks)

(iv) The price that should be charged to maximise profits. (2

marks)

(b) World K Tours has Sh.6 million that may be used to purchase new rental minibuses for hire during
the coming holidays. The minibuses may be purchased from two different manufacturers.

Important data concerning the minibuses is summarised below:

Minibus type Manufacturer Cost Maximum seating Expected daily profit

capacity per minibus (Sh.)
Weaverbird Fastbus 80,000 11 10,000
Eaglet Fastbus 90,000 14 12,000
Dovey Smartbus 70,000 7 9,000
Crowlet Smartbus 140,000 18 16,000

World K Tours wishes to purchase at least 80 minibuses and equal numbers from each of the
manufacturer. World K Tours wishes to have a total sitting capacity of at least 500.

Required:
(i) Formulate the above linear programming problem.
(6 marks)

(ii) Outline FOUR assumptions of the linear programming technique. (4

marks)
(c) A training institution requires that all its employees participate in one of three sports clubs namely;
football, rugby or chess. In each term, the training institution designates an open selection period
within which employees may change from one club to another.

Prior to the last open selection period, 10% of the employees preferred football, 35% preferred rugby
and the remaining chess. During the open selection period, 25% of the employees taking football
 switched to rugby, while 15% switched to chess. 30% of the employees taking rugby switched to
football and 10% switched to chess, 20% of the employees taking chess switched to football and
10% switched to rugby.

Required:
(i) The transition matrix.
(2 marks)

(ii) The percentage of employees that will be taking each sport after the last open selection
period. (4 marks)

(iii) Assuming that the trend continues, determine the percentage of the employees who will
be taking each sport in the long-run.
(6 marks)

(a) Safi Limited manufactures and sells two types of cleaning pads; Osha and Oga. The demand
functions for the two products are given by:
P1 = 1,200 – 2x – 5y
P2 = 1,700 – 3x – 2y

Where P1 is the unit price of Osha in

shillings. P2 is the unit price of Oga in
shillings. x is the number of units sold of
Osha. y is the number of units sold of Oga.

The total cost of producing both products is given by the function TC = 230x + 90y.

Required:
(i) The number of units of each product required to maximise total profit.
(10 marks)

(ii) The maximum total profit. (2

marks)
(b) Highlight FOUR applications of Markov chain analysis in business and finance.
(4 marks)

(a) An economy is based on 2 sectors; Agriculture and Manufacturing. Production of a shilling worth of
Agriculture requires an input of 0.3 from the Agriculture sector and 0.1 from the Manufacturing
sector.

Production of a shilling worth of manufacturing requires an input of 0.2 from the Agriculture sector
and 0.4 from the Manufacturing sector.

Required:
Find the output from each sector that is needed to satisfy a final demand of Sh.12 billion for
Agriculture and Sh.8 billion for Manufacturing.
(8 marks)

(b) Consider the following data for 120 students of a College concerning the languages they are
studying namely; French, German and Russian.
 15 students study Russian and German.
  58 students study German or French but not Russian.
 28 students study French only.
 90 students study French or German.
 20 students study French and Russian.
 44 students study at least two of the three languages.
 20 students do not study any of the three languages.

Required:
(i) Present the above information in a Venn diagram.
(6 marks)

(ii) Number of students who study all the three languages.

(2 marks)

(iii) Proportion of students who study French.

(2 marks)

Number of students who study at least one language. (2 marks)

(a) A manufacturer of dresses makes two types of dresses; Standard and Executive. Each Standard dress
requires 10 labour hours from the cutting department and 30 labour hours from the sewing
department. Each Executive dress requires 20 labour hours from the cutting department and 40 labour
hours from the sewing department. The maximum labour hours available in the cutting department
and the sewing department are 320 and 540 respectively. The company makes a profit of Sh.500 on
each Standard dress and Sh.800 on each Executive dress.

Required:
(i) Formulate a mathematical model for the above linear programming problem.
(4 marks)
(b) Explain the following terms as used in Markovian analysis:

(i) Transition matrix.

(2 marks)

(ii) Equilibrium state.

(2 marks)

(iii) Initial probability vector.

(2 marks)
(c) The Sales Manager of XYZ Ltd. estimates that the revenue function of the company is linear in
nature. He has observed that at a selling price of Sh.200, the company sold 6,000 units. When the
company increased the selling price per unit to Sh.700, the company sales decreased to 1,000 units.

The Cost Accountant of the company estimates that the cost function is quadratic in nature. The
following data was provided:

Number of units (Q) 100 200 400

Total cost (Sh.) TC 79,000 76,000 124,000

Required:
(i) The revenue function.
(4 marks)

(ii) The total cost function. (8

marks)
 (iii) The profit maximising level of production. (4
marks)
(Total: 20 marks)
QUESTION TWO
(a) A survey was recently conducted to determine the preferences of 360 customers with regard to three
brands of cooking oil namely; sunflower oil, coconut oil and olive oil.

The following results were obtained:

220 customers preferred

sunflower oil. 160
customers preferred
coconut oil. 180
customers preferred
olive oil.
80 customers preferred both sunflower oil and
coconut oil. 110 customers preferred both
sunflower oil and olive oil. 100 customers
preferred both coconut oil and olive oil.
50 customers preferred none of the brands of cooking oil.

Required:
(i) Present the above information in the form of a Venn diagram. (4 marks)

(ii) Determine the probability that a customer picked at random prefers all the three brands of
cooking oil. (2 marks)

(iii) Determine the probability that a customer picked at random prefers at least two brands of
cooking oil. (2 marks)

QUESTION THREE
(a) Using the information given below, determine the level of output necessary from each sector to
support a final demand of 500 units for sector X1, 1,600 units for sector X2 and 2,000 units for sector
X3:

Output Inputs to
X1 X2 X3 Final demand
(units)
X1 40 40 40 680
X2 40 80 80 1,400
X3 400 1,200 280 2,120
(12 marks)