Management Science Methods Revision Course Questions

J E Beasley

Singapore Institute of Management

Questions shown in bold and italics were on the preliminary examination
Methodology
Question
One methodological issue that arises in Operational Research work relates to optimisation.
What do you understand by optimisation within the context of Operational
Research/Management Science? In particular your answer should make clear what the
assumptions behind optimisation are.
Illustrate your answer by reference to two problems of which you are aware.
Problem structuring and problem structuring methods
Question
What is Journey Making?
Apply Journey Making to two problems with which you are familiar.
Question
Clearly describe the Strategic Choice method.
Apply Strategic Choice to any problem with which you are familiar.
Question
Clearly describe Soft Systems Methodology (SSM), with particular reference to the role
played within SSM by the root definition.
Give two examples to illustrate SSM.
Short notes question
Question
Briefly explain each of the following topics from the viewpoint of Operational
Research/Management Science:
(a)
M/D/7/40/250
(b)
PERT
(c)
The benefits of simulating customer service operations at airport check-in.
Network analysis
Question
A company is planning a small project and the following table gives the various activities in
that project, as well as their associated completion times.
Activity
Completion time (days)
A
14
B
3
C
9
D
15
E
11
F
9
G
11

Here, for example, activity E takes 11 days to be completed.

The immediate precedence relationships are:
Activity
A
must be finished before
B
C
D,E

Activity
B,C
E
D,E
F,G

can start

In addition 12 days must elapse between the end of activity A and the start of activity D; 14
days must elapse between the end of activity B and the start of activity G.
Draw the network diagram.
Calculate the critical activities and the overall project completion time.
Copy the following table into your answer book and fill in the float times for each activity.
Activity
A
B
C
D
E
F
G

Float time (days)

If the completion time for activity F increases by 2 days whilst simultaneously the completion
time for activity C increases by 4 days what effect would this have on the overall project
completion time and the critical path?
Suppose now that the project manager wishes to reduce the project completion time by one
day and all activities in the project can be crashed if necessary. The project manager wishes to
choose just one activity to crash. Which activities would you recommend the project manager
considers for crashing and what criterion would you advise using to select one amongst them?
Decision making under uncertainty
Question
The payoff table below shows for a company the profit expected (m) from three possible
choices (A, B and C) with respect to a possible contract bid depending upon three
scenarios for the forthcoming year (S1 to S3 respectively).

A
B
C

S1
73
42
-19

S2
-5
-17
38

S3
37
31
34
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Here, for example, if the company makes choice B (and it can only choose one of A, B or
C) and the scenario for the forthcoming year turns out to be S2 then it suffers a loss of
17m. The probabilities for scenarios S1, S2 and S3 are estimated to be 0.14, 0.34 and 0.52
respectively.
Copy the following table into your answer book and fill in the choice that should be made
under each criteria and the associated value.
Criteria
Optimistic
Conservative
Regret
Equally likely
Expected monetary value

Choice

Associated value

If these criteria suggest different choices how can the company choose amongst them to
make a single choice?
Inventory control
Question
A news vendor buys a monthly magazine from a publisher for a unit price of 6.60 and
sells it to members of the public for 8.50. Any magazines left over at the end of the month
are returned to the publisher and for each magazine returned the news vendor receives
1.10. Past experience indicates that the demand for this magazine from members of the
public is expected to have a Normal distribution with mean 250 copies and variance 40. By
making use of the table associated with the standard Normal distribution (with mean zero
and variance one) presented at the end of this examination paper what would be your
advice as to how many copies the news vendor should order from the publisher?
A company purchases a particular component from an external supplier. The demand for
the component is estimated to be 420 units per month. The cost of placing an order with
the supplier is 50. The component can be purchased from the supplier at a price per unit
of 110 if so desired. However the supplier also offers a quantity discount such that if the
company orders 200 or more the price per unit is only 95. The cost of holding this
component (per year) is estimated to be 12% of the price. What advice can you offer the
company? Clearly explain any procedure you follow in arriving at your advice.
A machine costs 30,000 to be set up. The machine has the ability to produce 85,000
finished items of a particular product per month. Part finished items are passed to this
machine so they can become finished items ready for sale. Part finished items have been
through previous parts of the production process and have already cost the company 7.50
each. Finishing one item on the machine is estimated to cost 0.35 in labour and 1.75 in
materials. Demand for the finished items produced by this machine is estimated to be
500,000 items per year. The current interest rate is 0.5% per year. A colleague has argued
that each time you operate the machine you should produce enough to satisfy demand for
two years. Would you agree? Give your reasons.
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Markov processes
Question
A company Xpc selling tablet pcs to consumers is aware that its profits are related to how
often customers change their pc. When a customer buys a new tablet pc the issue for
company Xpc is whether they stay with the company or move to one of its two main
competitors, Ytab and Zbest.
Customers buy a new tablet pc every nine months and past estimates of the probability of a
customer making a transition between companies when they come to buy a new tablet pc
are:
To company
Xpc Ytab Zbest
Xpc 0.57 0.04 0.39
From
Ytab 0.30 0.64 0.06
company
Zbest 0.72 0.20 0.08
For example the probability that a customer switches from company Xpc to company Zbest
is 0.39.
What is the long-run prediction for the market shares for each of the three companies?
An advertising firm has approached Zbest and suggested that if they engage their services
they can conduct a marketing campaign that will permanently change the transition
matrix seen above to the one seen below.
To company
Xpc Ytab Zbest
Xpc 0.61 0.04 0.35
From
Ytab 0.26 0.07 0.67
company
Zbest 0.51 0.17 0.32
Each 1% increase in the long-run market share for any company is estimated to be worth
50,000. On this basis what would Zbest gain by engaging the advertising firm? If Zbest
do engage the advertising firm what will be the effect on the long-run market share for
Xpc and Ytab?
Question
A company is considering using Markov theory to analyse pupils switching between four
different fee paying schools. An analysis of data has produced the transition matrix shown
below for the probability of a pupil switching in any year between these schools.

From school

1
2
3
4

1
1
0
0.11
0.27

To school
2
3
0
0
1
0
0.31 0.45
0.44 0.25

4
0
0
0.13
0.04
4

For example the probability that a pupil switches from school 3 to school 2 is 0.31.
What will be the market shares in two years if the current market shares are 10%, 10%, 30%
and 50% for schools 1, 2, 3 and 4 respectively?
What is the long-run prediction for the market shares for each of the four schools?
If school 4 were to adopt a marketing campaign in order to increase the probability that pupils
switch to it from school 3 do you think this would be a good idea or not? Give your reasons.
Mathematical programming formulation
Question
The student has decided what car she wants to purchase, but has a choice of accessories to
go with the car.
She has six possible accessory options, labelled A to F inclusive. The cost of each option,
and her rating of the attractiveness of each option, is as shown in the table below.

Accessory

A
B
C
D
E
F

Cost ()
150
300
50
75
125
200

Rating
4
10
1
3
7
6

Here, for example, accessory D costs 75 and is rated 3. The higher the rating the more
attractive the accessory is. The student has some constraints relating to her choice of
accessory:
accessories D and F are mutually exclusive, so if she chooses accessory D she
cannot choose accessory F (and vice-versa).
if she chooses accessory B she must also choose accessory D.
The total budget she has to spend on accessories is 500.
Formulate her problem of choosing the accessories to buy so as to maximise the total
rating of the accessories bought as an integer program with linear constraints.
Linear programming solution
Question
Solve the following linear program graphically using an iso-cost/iso-profit line.
Maximise
Subject to

2x + 3y
3x + 2y 60
x 3y 18
x,y 0

constraint 1
constraint 2

This linear program has been solved numerically using Solver in Excel and an inexperienced
person has looked at the solution and believes the following three statements to be true:

opportunity cost associated with y is 0.79 (to two decimal places)

shadow price associated with constraint 1 is 0.95 (to two decimal places)
shadow price associated with constraint 2 is 3.41 (to two decimal places)

Taking each of the three statements above in turn explain whether it is true or not and why.
Data envelopment analysis
Question
An international organisation that provides global outsourcing services has a number of
different call centres (A to G) that provide telephone (voice) and internet (email) support to
customers of other organisations. Voice calls/emails originating from a customer are
allocated to their geographically nearest call centre. The data shown below as to the
operation of these call centres over a one week period has been collected.
Call
centre
A
B
C
D
E
F
G

Number of voice calls

dealt with (000)
48.6
42.5
39.3
27.1
25.3
48.2
12.5

Number of emails
dealt with (000)
14.3
11.9
12.8
17.4
14.6
18.0
17.2

Number of
employees
230
350
240
210
150
120
80

During the week for which data was collected call centre E, for example, dealt with 25,300
voice calls, 14,600 emails and had 150 employees.
Apply data envelopment analysis to compare the relative performance of these call centres.
Copy the table shown below into your answer book and fill in the efficiencies and
reference sets (where appropriate).
Call centre

Efficiency

Reference set

A
B
C
D
E
F
G
It is proposed to close the call centre that your analysis has shown is the worst performer.
Would you support this course of action? Give your reasons.
A colleague has raised the issue that employees in call centres A to F are paid US$50 per
week, whilst those in call centre G are paid UK150 per week. The current exchange rate
is 1 UK = 1.60 US$. With this new information analyse the relative performance of these
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calls centres. Copy the table shown below into your answer book and fill in the efficiencies
and reference sets (where appropriate).
Call centre

Efficiency

Reference set

A
B
C
D
E
F
G
Multicriteria decision making
Question
A student of Management Science has thought about the problem of choosing a future
partner and she has decided that she has three objectives in choosing her future partner:
Objective 1 attractiveness the more attractive the better.
Objective 2 earning capacity the more they can earn the better.
Objective 3 family wealth the wealthier their family the better.
Her pairwise comparison matrix for these objectives is:

Objective

1
2
3

1
1
-

Objective
2
7
1
3

3
9
1

By using the analytic hierarchy process (AHP) decide whether the judgements she has
made with respect to these objectives are reasonably consistent or not. Assume the value of
RI for three objectives (n=3) is 0.58.
Question
A company sells two products (X and Y) and has available three suppliers (A, B and C)
from which it buys these products for later resale. The suppliers charge a different price
per unit supplied, and have differing availability, as in the table below.

Product

X
Y

Price per unit ()

A
B
C
4.1
4.2
3.9
4.5
4.8
5.2

Availability (units)
A
B
C
1200 1380 3000
1345 1500 2000

Product X, for example, can be purchased from supplier A for 4.1 per unit; from Supplier
B for 4.2 per unit and from supplier C for 3.9 per unit. These suppliers can supply up to
1200, 1380 and 3000 units respectively.
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The company has forecast likely demand and believes that they need at least 2000 units of
product X and 2400 units of product Y.
The company has a number of goals:

they would like supplier B to get an order for 1000 units of X

they would like their expenditure with supplier C to equal 8,000

they would like their total expenditure to equal 20,000

Formulate this problem as a weighted goal program with linear constraints. Note here that
you are not expected to simplify any linear equations that you give.
If the company has two priorities:

priority level 1: minimise the upward deviation from the supplier B goal

priority level 2: minimise the downward deviation from the supplier C goal
then formulate this problem as a sequential goal program with linear constraints. Note
here that you are not expected to simplify any linear equations that you give.
Discuss how any issues related to subjective weights might be resolved.
Queueing and simulation
Question
For a single server queueing system illustrate the basics of discrete-event simulation by
performing a simulation using the (randomly generated) values given below.
Customer
Interarrival time (minutes)
Service time (minutes)
1
5
4
2
2
7
3
1
6
4
5
8
5
6
6
6
8
5
Here, for example, customer 2 has an interarrival time of 2 minutes and a service time of 7
minutes.
For your simulation when will the queue have two customers waiting?
Question
For a single server queueing system with a Poisson arrival distribution and an exponential
service time distribution the server takes (on average) two minutes to serve a customer, with
customers arriving (on average) at a rate of four every ten minutes.
What do you understand by the statement that this queueing system is in a steady state?
Assuming that the system is in a steady state calculate:

The average number of customers in the queue.

The probability that a customer has to wait for service.

The average time that a customer spends in the system.

The probability that there are three customers in the system.

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