MSBA7003 Quantitative Analysis Methods

Assignment 2 (Due September 20 at 5PM; Please submit with the template)

Q1.
Dumoor Appliance Center sells and services several brands of major appliances. Past sales
for a particular model of refrigerator have resulted in the following probability distribution
for demand:
Demand per Week 0 1 2 3 4
Probability 0.20 0.20 0.20 0.35 0.05
The replenishment lead time, in weeks, is described by the following distribution:
Lead Time (weeks) 1 2 3
Probability 0.15 0. 50 0.35

Based on cost considerations as well as storage space, the company has decided to order 15
units each time. The shipping cost for each order is $30. The holding cost is $5 per week per
unit that is left in inventory at the end of the week. The stock-out cost is $40 per unit. The
company has decided to place an order whenever there are only two refrigerators left at the
end of the week. No order can be placed when refrigerators are being shipped on the way.
Simulate 10 weeks of operation for Dumoor Appliance by hand assuming that there are
currently 5 units in inventory. You must use the random numbers listed in the table below to
generate demand and lead time values, respectively.
Week Order Total R.N. Demand Sales Lost Ending Place R.N. Lead
Received Available Sales Inventory Order Time
1 0 5 0.52 0.56
2 0.37 0.45
3 0.82 0.07
4 0.98 0.16
5 0.96 0.48
6 0.33 0.61
7 0.50 0.31
8 0.88 0.43
9 0.90 0.28
10 0.06 0.31

Which of the following statement(s) is(are) true?

A) The total sales during this 10-week period is 15.
B) The total lost sales during this 10-week period is 6.
C) The total number of orders placed during this 10-week period is 2.
D) The total (not average) cost of inventory holding, ordering, and stock-out costs during
this 10-week period is $415.
E) None of the above.
Q2.Consider the following linear programming problem.
max 𝑐!𝑥
s.t. 𝐴𝑥 ≤ 𝑏,
𝑥 ≥ 0,
𝑥" 3 10 30
3
where 𝑥 = -𝑥 ., 𝑐 = - ., 𝐴 = 15 2 4, and 𝑏 = 1254. Which of the following statement(s)
# 1
2 0 8
is(are) true?
A) The corner points of the feasible region are (x1,x2) = (0,0), (0,3), (4,0), and (4,2).
B) The optimal solution is (x1,x2) = (4,2).
C) There is a redundant constraint.
D) There are infinitely many optimal solutions.
E) None of the above.

Q3. Consider the worker scheduling problem in the lecture slides. Suppose that the post
office can force employees to work one day of overtime each week on the day immediately
following this five-day shift. For example, an employee whose regular shift is Monday to
Friday can also be required to work on Saturday. Each employee is paid $100 a day for each
of the first five days worked during the week and $124 for the overtime day (if any). The
goal of the post office is to minimize the cost of meeting its weekly work requirements.
Which of the following statement(s) is(are) true? Note that there could be multiple optimal
solutions, please select the option(s) that can admit an optimal solution.
A) The minimum total weekly cost is $11,540.
B) In the optimal solution, the post office needs six workers to start working on Monday.
C) In the optimal solution, the post office needs four workers to work overtime on Monday.
D) In the optimal solution, no workers should start working on Friday.
E) None of the above.

Q4.The Heinlein and Krampf Brokerage firm is instructed by a client to invest $250,000
among five possible securities as shown in the table below. The return of each security is
uncertain and depends on the market condition. The client listed the following guidelines:
(1) Municipal bonds should constitute at least 20% of the invested value;
(2) At least 40% of the invested value should be placed in a combination of electronic
firms, aerospace firms, and drug manufacturers;
(3) No more than 50% of the amount invested in municipal bonds should be placed in a
high-risk, high-yield nursing home stock;
(4) The investment in no single security can exceed 30% of the total budget;
(5) No short selling, and it is okay to hold some cash.
 Projected Return (%) in a bearish market in a bullish market
Los Angeles municipal bonds 1.1 2.3
Thompson Electronics, Inc. -5.0 6.8
United Aerospace Corp. -1.7 4.9
Palmer Drugs -0.3 8.4
Happy Days Nursing Homes -10.5 11.8
The objective is to maximize the worse-case return. Which of the following statement(s)
is(are) true?
A) It is optimal to hold some cash.
B) In the optimal solution, the investment in Happy Days Nursing Homes is zero.
C) In the optimal solution, the worst-case expected return is $675.
D) In the optimal solution, the marginal return rate in the worst case is zero.
E) None of the above.