Assignment 1

1. Discuss the similarities and difference between minimization and

maximization problems using the graphical approaches solution of LP.
2. The Electrocomp Corporation manufactures two electrical products:air
conditioner and large fans. The assembly process for each is similar in that
both require a certain amount of wiring and drilling. Each air-conditioner
takes 3 hours of wiring and 2 hours of drilling. Each fan must go through 2
hours of wiring and 1 hour of drilling. During next production period,240
hours of wiring time are available and up to 140 hours of drilling time may be
used. Each air-conditioner sold yields a profit of RM25. Each fan assembled
may be sold for a RM15 profit. Formulate and solve this LP production mix
situation to find the best combination of air conditioners and fans that yields
the highest profit. Use the corner point method.
3. The dean of the Western College of Business must plan the schools course
offerings for the fall semester. Student demands make it necessary to offer at
least 30 undergraduate and 20 graduate courses in the term. Faculty also
dictate that at least 60 courses be offered in total. Each undergraduate
course taught costs the college and average of $2,500 in faculty wages, and
each graduate course costs $3,000. How many undergraduate and graduate
courses should be taught in the fall so that total faculty salaries are kept to a
minimum.
4.

5. Convert the following LP models to standard form.

a)

b)
Minimize Z = 84x1 + 4x2 + 30x3

Maximize Z = 30x1 + 40x2 + 35x3

subject to

subject to

8x1 + x2 + 3x3

3x1 + 4x2 + 2x3

90

240
16x1 + x2 + 7x3

2x1 + x2 + x3

480

54

8x1 - x2 + 4x3

x1 + 3x2 + 2x3
160

= 93
x 1, x 2, x 3

x 1, x 2, x 3

6. IMB Sdn. Bhd. manufactures three products, a, b and c. The products must go
through
three production processes: Machining (Resource 1), Assembly
(Resource 2) and Packaging (Resource 3). The company wants to maximize
profit. Profits for the products a, b and c are RM50, RM20 and RM30
respectively. The simplex tableau for this problem is given below.
Basic
Variable
s

s1

s2

s3

RHS

-1

-1

40

-1

10

s3

-1

30

20

20

10

a)

Is the above tableau optimal? Explain.

b)

What is the value of N in the above tableau?

c)

State the optimal solution.

d)

Which resource(s) is/are fully utilized.

e)

Which resource(s) is/are not fully utilized and state the value(s).

f)

State the shadow price for each resource and interpret.

g) What would be the effect on total profit if resource 1 was increased by
10 units and resource 3 was increased by 5 units?

7. Abdul Rahman is thinking about producing a new product for his company. If
the market were favorable, he would get a return of RM100,000, but if the
market were unfavorable he would lose RM40,000. He estimates that the
probability of a favorable market is 0.5. He is also considering doing a survey
to gather additional information about the market. The cost of the survey is
RM4,000. Furthermore, the revised probability for the favorable market given
that the survey result is positive is 0.73. The probability of the favorable
market given that the survey is negative is 0.22. The probability that the
survey will result in a positive market is 0.55.

a)
b)
c)

Draw a decision tree for this problem.

Give the best decision that Abdul Rahman should take.
Compute the Expected Value of Sample Information for the problem
and explain the value obtained.

8. Borneo Manufacturing Company must decide whether it should manufacture

component A or component B. The profit (RM) depends on the demand of the
components and is given in the following table:
State of nature
Alternatives

High demand (H)

Low demand (L)

Component A

100,000

-20,000

Component B

70,000

10,000

Probability

0.6

0.4

Market research firm offers to perform a study of the market for a fee of
RM4,000 and will report either a favorable market (F) or unfavorable market
(U)
The relevant conditional probabilities are as follows:
P(FH) = 0.88

P(UH) = 0.12

P(FL) = 0.3

P(UL)

= 0.7
The company has calculated the following posterior probabilities:
P(HF) = 0.82
a)
b)
c)
d)

P(LF) = 0.18

Show that P(HU) = 0.2 and P(LU) = 0.8

Draw a decision tree for the above problem.
Determine whether the study should be performed.
Calculate the Expected Value of Sample Information (EVSI).

Due date: 28 January 2015. Fail to submit the assignment on the time will cause
deduction in your marks. TQ