Question 1) Difference Between PERT and CPM:

PERT (Program Evaluation and Review Technique) and CPM (Critical Path Method) are
both project management tools used for planning, scheduling, and controlling projects.
However, they differ in the following ways:
 Focus and Purpose:
o PERT is used for projects with uncertain activities and focuses on estimating
the time required to complete each task in the project. It uses probabilistic time
estimates (optimistic, pessimistic, and most likely) to handle uncertainty in
project scheduling.
o CPM is used for projects with well-defined, predictable tasks. It focuses on the
time and cost aspects of project management, using deterministic time estimates
(fixed time durations for each activity).
 Time Estimates:
o PERT uses three-time estimates (optimistic, pessimistic, and most likely) to
calculate the expected time for a project task.
o CPM uses a single time estimate for each task, which assumes that the time for
completing each task is fixed and predictable.
 Application:
o PERT is typically used for research and development projects or projects that
involve a high degree of uncertainty.
o CPM is used for construction projects or projects where tasks are more
predictable and time-bound.
 Diagram Representation:
o PERT uses a network diagram with nodes representing activities, and arrows
representing the dependencies between them.
CPM also uses a network diagram but focuses more on identifying the critical path
that determines the project duration.
Question 2)
Step 1: Calculate Depreciation for Each Year
Depreciation = Purchase Price − Scrap Value
 Purchase Price = ₹4,50,000
Step 2: Calculate Total Cost for Each Year
Total Cost = Running Cost + Depreciation
Step 3: Identify the Optimal Replacement Year
The optimal replacement policy is determined by the lowest total cost in the first few years.
We compare the Total Cost for each year:
 Year 1: ₹4,00,000
 Year 2: ₹4,11,000
 Year 3: ₹4,28,000
 Year 4: ₹4,36,000
 Year 5: ₹4,53,000
 Year 6: ₹4,63,000
 Year 7: ₹4,74,000
 Year 8: ₹4,80,000
Step 4: Conclusion
 The lowest total cost occurs in Year 1, with a total cost of ₹4,00,000.
 Hence, the optimal replacement policy is to replace the vehicle at the end of Year 1,
as it minimizes the total cost.
Question 3)
The system is unstable because the utilization parameter (ρ) is greater than 1 (ρ = 2.4). This
means the arrival rate exceeds the service rate, causing the queue to grow indefinitely. As a
result, calculations for waiting time, number of customers, and probabilities are not valid. To
stabilize the system, either the arrival rate needs to be reduced or the service rate needs to be
increased.
4 question) Managerial Applications of Linear Programming (LP)
Linear programming (LP) is a powerful mathematical tool used to optimize decision-making
in various managerial scenarios. Its applications are widespread across different industries and
sectors, helping businesses allocate resources efficiently while achieving specific objectives.
Here are some key managerial applications of LP:
1. Production Management: LP is used to determine the optimal mix of products to
produce, considering constraints such as resource availability, labor, and production
time.
2. Supply Chain Management: LP helps in minimizing transportation costs while
maximizing efficiency in distribution systems, ensuring that products are delivered
from suppliers to consumers at the lowest possible cost.
3. Financial Planning: Businesses use LP to allocate investments across different
portfolios or to manage financial resources to maximize returns or minimize risk.
4. Staffing and Scheduling: LP can optimize workforce scheduling to ensure that staffing
levels meet demand while minimizing costs related to overtime, underemployment, and
idle time.
5. Product Mix Optimization: LP helps companies in selecting the optimal combination
of products to produce while considering constraints such as production capacity,
demand, and profit margins.
6. Inventory Management: LP is used to determine optimal inventory levels to minimize
costs related to holding and ordering inventory while meeting customer demand.
7. Marketing and Advertising: LP is applied to allocate budgets across different
advertising media or market segments to maximize market reach and return on
investment.
Steps of Linear Programming Problem (LPP)
Here are the steps involved in solving a Linear Programming Problem:
1. Formulation of the Problem:
o Define the decision variables (the quantities to be determined).
o Express the objective function (the goal to be maximized or minimized).
o Identify the constraints (the limitations or restrictions on resources).
2. Construct the Objective Function:
o The objective function represents the goal of the problem, either to maximize
or minimize.
 o For example: Maximize Z = c₁x₁ + c₂x₂, where x₁ and x₂ are the decision
variables, and c₁, c₂ are constants.
3. Set Up the Constraints:
o Express the constraints as linear inequalities or equalities.
o For example: x₁ + x₂ ≤ 100 or x₁ ≥ 0 (non-negativity constraints).
4. Graphical Representation (Optional for Two Variables):
o If the problem involves two decision variables, plot the constraints on a graph
to find the feasible region (the set of all points that satisfy the constraints).
o The optimal solution lies at one of the corner points of the feasible region.
5. Solve the LP Model:
o Use methods like Simplex Method or Graphical Method (for two variables)
to find the optimal solution.
o For a graphical method, evaluate the objective function at each corner point of
the feasible region.
o For more complex problems, use the Simplex method or computer-based tools
like Excel Solver or specialized software.
6. Interpret the Results:
o After solving the LP model, interpret the optimal values of the decision
variables.
o The results should provide the values of the decision variables that maximize or
minimize the objective function while satisfying all constraints.
7. Sensitivity Analysis (Optional):
o After finding the optimal solution, perform sensitivity analysis to understand
how changes in coefficients or constraints affect the optimal solution. This helps
in making decisions under uncertainty.
Question 5)
 M refers to the Poisson distribution for arrivals (customers arrive randomly over time).
 M refers to the exponential distribution for service times (the service time for each
customer is random but follows an exponential distribution).
 1 indicates that there is only one server (the cashier).
 Average time a customer spends in the system = 14.93 minutes
 Average time a customer keeps waiting in line = 9.93 minutes
 Average queue length = 1.32 customers
 Average number of customers in the system = 1.99 customers
7. Need for and Importance of Operations Research in Decision Making
Operations Research (OR) is a discipline that uses advanced analytical methods, such as
mathematical modelling, statistical analysis, and optimization techniques, to help
organizations make better decisions. It is particularly useful in environments where
multiple conflicting objectives, limited resources, and uncertainty are present.
Need for Operations Research:
1. Handling Complexity: Decision-making in organizations often involves many
variables, such as costs, risks, and time constraints. OR simplifies complex
problems, providing a systematic approach to find optimal solutions.
2. Resource Optimization: Organizations have limited resources (e.g., capital, labor,
raw materials). OR helps allocate these resources in the most efficient way to
maximize profits or minimize costs.
3. Dealing with Uncertainty: In real-life decision-making, uncertainty is inevitable.
OR provides tools for modelling and managing uncertainty, allowing
organizations to make decisions even with incomplete or unreliable data.
4. Improving Efficiency: By using OR methods, organizations can streamline
processes, reduce waste, and increase productivity, leading to cost savings and
improved service delivery.
5. Quantitative Decision-Making: OR removes subjectivity from the decision-
making process by relying on quantitative data, helping to make more informed
and rational decisions.
Importance of Operations Research:
1. Better Decision-Making: OR allows managers to make data-driven decisions,
which improve the quality and effectiveness of choices made in the organization.
2. Cost Reduction: By optimizing processes, OR helps reduce operational costs, such
as inventory, transportation, and production costs, leading to greater profitability.
3. Improved Productivity: OR helps organizations optimize their operations and
resources, increasing efficiency and output, leading to better utilization of human
and physical resources.
4. Strategic Planning: OR provides managers with the tools to evaluate different
scenarios, make informed predictions, and plan long-term strategies that align
with the company's goals.
5. Risk Management: OR helps in identifying, analysing, and managing risks
associated with various business decisions, such as supply chain disruptions or
financial market volatility, improving the ability to make decisions under
uncertainty.
8. Need for Replacement Theory in Managerial Decision Making
Replacement Theory is a decision-making model that helps managers decide when to
replace equipment or assets to minimize costs associated with repairs, downtime, and
depreciation. It focuses on determining the optimal time to replace an asset to maximize
its utility and minimize the total costs.
Need for Replacement Theory:
1. Cost Optimization: As assets age, maintenance costs increase. Replacement theory
helps managers determine the point where continuing to maintain an old asset
becomes more expensive than replacing it with a new one.
2. Maximizing Productivity: Older equipment may become less efficient over time,
leading to reduced productivity. Replacement theory ensures that businesses are
using the most productive assets.
3. Capital Management: Organizations must manage capital expenditure effectively.
Replacement theory helps managers decide when to invest in new assets to ensure
the organization remains competitive while avoiding unnecessary capital
spending.
4. Risk Mitigation: Older equipment is prone to breakdowns and can lead to
operational delays. Replacement theory helps managers minimize risks by
replacing assets at the right time before they become unreliable.
5. Depreciation Control: Over time, the value of assets decreases due to depreciation.
Replacement theory provides a framework for managers to make decisions on
when to replace an asset before it loses too much value.
Importance in Managerial Decision Making:
1. Long-Term Financial Planning: Replacement theory aids in budgeting and
forecasting capital expenditure by helping managers predict when assets need
replacement.
2. Operational Continuity: By replacing old equipment at the right time,
organizations can prevent breakdowns and disruptions in operations, ensuring a
smooth workflow.
3. Optimal Use of Resources: Replacement theory ensures that assets are being
utilized efficiently, reducing the likelihood of costly repairs and improving overall
productivity.
4. Enhanced Profitability: Proper management of asset replacement minimizes
unnecessary costs and allows businesses to maintain a high level of performance,
ultimately improving profitability.
9. Basic Elements of a Queuing System
A Queuing System is a model used to describe the flow of customers (or items) through a
process where service is provided, and waiting lines (queues) are formed. Understanding
these elements is crucial for managing service delivery efficiently.
Basic Elements of a Queuing System:
1. Arrival Process: Describes how customers arrive at the queue. The arrival process
is typically modelled using a Poisson distribution (random arrivals). The arrival
rate λ\lambda is the average number of customers arriving per unit of time.
2. Queue Discipline: This defines the order in which customers are served. Common
queue disciplines include:
o First Come, First Served (FCFS): Customers are served in the order they
arrive.
o Priority Queueing: Some customers are given priority over others based on
certain criteria.
o Shortest Job First (SJF): Customers requiring the least service time are
served first.
3. Service Mechanism: This describes how customers are served. The service rate
μ\muμ indicates the average number of customers that can be served per unit of
time.
4. Number of Servers: A queuing system can have multiple servers. A system with
one server is often referred to as M/M/1 (Markovian arrival, Markovian service,
one server). A system with multiple servers is denoted as M/M/c (multiple servers).
5. Queue Capacity: The capacity of the queue is the maximum number of customers
that can wait in line. A queue can either have a finite or infinite capacity.
6. Population Source: This refers to the origin of customers. In most cases, the
population is considered infinite (e.g., a large number of potential customers), but
in some systems, it may be finite (e.g., a fixed number of customers).
7. Waiting Time: This is the time customers spend in the queue waiting for service.
8. Service Time: This is the time required to serve each customer, which is assumed
to follow an exponential distribution in many queuing models.
9. System Capacity: The total number of customers in the system, including those
waiting and those being served.
10. Importance of Waiting Line System in Management Decisions and Main Elements of
Queuing System in Operations Research
Importance
1. Customer Experience: Long waiting times can result in customer dissatisfaction,
reduced customer loyalty, and lost revenue. Efficient management of waiting lines
improves customer experience by minimizing wait times and enhancing
satisfaction.
2. Resource Allocation: Queuing systems help managers allocate resources (such as
staff or service counters) based on demand patterns. By understanding when and
where queues are likely to form, managers can optimize staffing levels and reduce
customer wait times.
3. Cost Efficiency: Managing waiting lines helps reduce the costs of providing
services. For instance, by optimizing the number of servers and service times,
businesses can reduce labour costs while maintaining service quality.
4. Operational Efficiency: A well-managed queuing system improves the overall
efficiency of operations. By understanding customer flow and service times,
organizations can streamline operations, reduce bottlenecks, and improve
throughput.
5. Strategic Decision-Making: Understanding queuing systems allows businesses to
make strategic decisions about expansion, capacity management, and service
offerings. It helps in deciding when to add new service points or adjust operational
hours.
1. Arrival Process: Defines how customers enter the system. This could be random
or occur at regular intervals, often modelled using Poisson distribution.
2. Service Process: Describes the rate at which customers are served, often modelled
using exponential distribution. This involves the number of servers and the service
rate.
3. Queue Discipline: The order in which customers are served. Common disciplines
include FCFS, priority queuing, and shortest job first.
4. Number of Servers: Refers to the number of service channels available in the
system. A system could have one or multiple servers.
5. Queue Capacity: Refers to the maximum number of customers the system can
accommodate. Some systems have infinite capacity, while others are limited.
6. Population Source: The origin of the customers. In an infinite population, arrival
rates are assumed to be constant. In a finite population, the arrival rate may vary.
7. Waiting Time: The time a customer spends in the queue before being served.
8. Service Time: The time it takes to serve each customer, which is often modelled as
an exponentially distributed random variable in queuing theory.