IES’s Management College and Research Centre, Mumbai

(FINAL EXAMINATION)
Date: 29/04/2022 Day: Friday Time: 11.00 am to 02.00 pm Duration: 3hrs.
Program: PGDM Term: III Course: Operations Research Max Marks: 60
--------------------------------------------------------------------------------------------------------- ------------------------------------------------------
Instructions:
1) Q1 is compulsory. Solve any 4 questions from the remaining questions.
2) All questions carry equal marks (12)
3) Make suitable assumptions wherever required and also indicate them clearly.
4) Students have the option of solving the problems manually or even using Microsoft excel.
5) In case of solutions worked out on Microsoft Excel sheets, rename the worksheets as question numbers and submit the
same for evaluation.

-------------------------------------------------------------------------------------------------------------------------------------------------
Q. No. (Questions) (Marks) COs
1. The Westchester Chamber of Commerce periodically sponsors public service seminars
and programs. Currently, promotional plans are underway for this year’s program.
Advertising alternatives include television, radio, and newspaper. Audience estimates,
costs, and maximum media usage limitations are as shown.
Constraint Television Radio Newspaper
Audience per advertisement 100,000 18,000 40,000
Cost per advertisement $2000 $300 $600
Maximum media usage 10 20 10
To ensure balanced use of advertising media, radio advertisements must not exceed 50%
of the total number of advertisements authorized. In addition, television should account
for at least 10% of the total number of advertisements authorized.
a) Formulate the problem as LP Model about the promotional plan. 4 CO2
b) If the promotional budget is limited to $18,200, how many commercial messages 6 CO2
should be run on each medium to maximize total audience contact? What is the
allocation of the budget among the three media, and what is the total audience
reached? Solve the problem using Excel-Solver.
c) By how much would audience contact increase if an extra $100 were allocated to 2 CO3
the promotional budget?

2. Amco Ltd has five manufacturing plants P1, P2, P3, P4, P5 at five different locations. The
company now wants to introduce three new products A, B, and C in the market. Since the
manufacturing capacity of the plants is limited, only one product can be
manufactured in one plant. The unit production and average distribution costs are
given in the following tables:
Unit Production Cost (Rs) Unit Distribution Cost (Rs)
Product P1 P2 P3 P4 P5 Product P1 P2 P3 P4 P5
A 20 24 21 35 28 A 12 6 13 3 6
B 12 28 40 25 20 B 14 6 8 10 12
C 21 17 30 22 16 C 17 8 12 18 16
The estimated sales and prices of the three products are as follows
Product Sale (No of units) Selling price (Rs)
A 800 50
B 1000 50
C 400 70
a) Formulate the given information as an appropriate model. 4 CO1
b) Using this information, state which product should be produced in which plant so 6 CO2
that the aggregate profits are maximised.
c) What is the total profit amount? 2 CO3

Page 1 of 3
3. A) A fast-food franchise is considering operating a drive-up window food-service operation.
Assume that customer arrivals follow a Poisson probability distribution, with an arrival
rate of 24 cars per hour, and that service times follow an exponential probability
distribution. Arriving customers place orders at an intercom station at the back of the
parking lot and then drive to the service window to pay for and receive their orders. The
following two service alternatives are being considered:
(i) A single-channel operation in which one employee fills the order and takes the
money from the customer. The average service time for this alternative is 2
minutes.
(ii) A single-channel operation in which one employee fills the order while a second
employee takes the money from the customer. The average service time for this
alternative is 1.25 minutes.
Answer the following questions and recommend an alternative design for the fast-food
franchise:
a) What is the probability that no cars are in the system? 1x5=5 CO2
b) What is the average number of cars waiting for service?
c) What is the average number of cars in the system?
d) What is the average time a car waits for service?
e) What is the average time in the system?
Customer waiting time is valued at Rs 2000 per hour to reflect the fact that waiting time 3 CO3
is costly to the fast-food business. The cost of each employee is Rs 50 per hour. What is
the lowest-cost design for the fast-food business?

B) A firm is using a machine whose purchase price is Rs 13,000. The installation charges 4 CO1
amount to Rs 3,600 and the machine has a scrap value of only Rs 1,600 because the firm
has a monopoly of this type of work. The maintenance cost in various years is given in the
following table.
Year: 1 2 3 4 5 6 7 8 9
Cost (Rs): 250 750 1000 1500 2100 2900 4000 4800 6000
Firm wants to determine after how many years the machine should be replaced on
economic considerations, assuming the machine replacement can be done only at the
year ends.

4. A retailer deals in a perishable commodity. The daily demand and supply are variable. 4 CO1
The data for the past 500 days show the following demand and supply: +
Supply Demand 8 CO2
Availability (Kgs) No. of days Demand (kgs) No. of days
10 40 10 50
20 50 20 110
30 190 30 200
40 150 40 100
50 70 50 40
The retailer buys the commodity at Rs.20 per kg and sells it at Rs.30 per kg. Any
commodity remaining at the end of the day has no saleable value. Moreover, the loss
(unearned profit) on any unsatisfied demand is Rs.8 per kg. Using random numbers,
simulate 20 days’ sales, demand, and profit.

5. A) Informatics Corporation summarizes international information reports (on a weekly

basis), prints sophisticated data and forecasts, which are purchased weekly by mutual
funds, banks and insurance companies. This information is very expensive and the
demand for the reports is limited to a maximum of 40 units. The possible demands are
10, 20, 30 and 40 reports per week. The profit per report sold is Rs 600 and the loss per
report unsold is Rs 200. No production of extra reports during a week is possible.
Further assume that there is a penalty cost of Rs. 1,000 per copy for not meeting the
demand. Unsold reports cannot be carried on to the next week.
a) Based on this information construct a pay-off table. 4 CO2
b) Using the pay-off table, find out the number of reports to be produced if :

Page 2 of 3
 (i) Maximin or pessimistic strategy is adopted. 1 CO3
(ii) Maximax or optimistic strategy is used. 1
(iii) Equally likely or Laplace strategy is used. 1
(iv) Optimism (Hurwicz) Criterion is used. (Use α=0.7) 2
(v) Principle of minimax regret is used. 3

5. A) OR 5. B) (Any one)
5. B) A company which has recently invented a telephone device is faced with the problem of
selecting out the following courses of action available.
i) Manufacture the device itself.
ii) Allow production on royalty basis by another manufacturer or
iii) Sell the rights for its invention for a lumpsum.
The profits (in Rs ‘000) expected in each case and the probabilities associated with the
level of sales are shown in the following table.
Outcome Probability Manufacture itself Royalties Sell all rights
High sales 0.2 800 350 180
Medium sales 0.3 300 200 180
Low sales 0.5 -100 100 180
a) Represent the company’s problem in the form of a decision tree. 4 CO2
b) Obtain the optimal decision. 8 CO3

6. The following table gives the activities in a construction project and other relevant
information.
Activity Immediate Time (months) Direct Cost (Rs.'000)
Predecessor Normal Crash Normal Crash
A ………. 4 3 60 90
B ………. 6 4 150 250
C ………. 2 1 38 60
D A 5 3 150 250
E C 2 2 100 100
F A 7 5 115 175
G D, B, E 4 2 100 240
Indirect costs vary as follows:
Months: 15 14 13 12 11 10 9 8 7
Cost (Rs ‘000): 600 500 400 250 175 100 75 50 35
5 CO2
i. Draw the network diagram and find normal duration and total cost of the
1 CO3
project.
ii. Identify the critical path of the project. 2 CO3
4 CO3
iii. Find out the total float on non-critical activities.
iv. Determine the project duration that will return in minimum total project cost.
7. An air conditioning manufacturer produces room-air-conditioners at plants in
Ludhiana, Nagpur and Meerut. These are sent to regional distributors in Delhi,
Pune, Bangalore and Ranchi. The shipping costs vary and the company would like
to find the least-cost way to meet the demands at each of the distribution centres
(DC). Delhi, Pune, Bangalore and Ranchi needs 800, 600, 200 and 400 air-
conditioners per month respectively. Ludhiana, Nagpur and Meerut has 950, 550
and 500 units available each month respectively. The shipping cost per unit from
Ludhiana to Delhi is Rs 800, to Pune is Rs 1000, to Bangalore is Rs 1400 and to
Ranchi Rs. 1100. The shipping cost per unit from Nagpur to Delhi is Rs 1100, to
Pune is 900, to Bangalore is Rs 1200 and to Ranchi is Rs 1400. The shipping cost
per unit from Meerut to Delhi is Rs 500, to Pune is Rs 1400, to Bangalore is Rs
1500 and to Ranchi is Rs 800. Based on this information find out:
a) Optimal distribution shipment plan from each plant to each regional DC’s? 8 CO2
b) What is the total cost of transportation? 2 CO3
c) If the shipping cost from Ludhiana to Bangalore is reduced by Rs. 150, will the
solution change? 2 CO3

Page 3 of 3