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# ISYE 3232C Spring 2015 Midterm 1

## , do swear that I abide by the Georgia Tech Honor Code. I understand

I,
that any honor code violation will result in a F for this course.
Signature:
You will have 1 hour and 15 minutes.
Turn off your cell phone and leave it on the desk facing down.
This midterm is closed book and closed notes. Calculators are NOT allowed. No scrap paper is
allowed. If you need scrap paper, use the front and back pages of the test sheet.
If you need extra space, use the back of the page and indicate that you have done so.
Do not remove any page from the original staple. Otherwise, there will be 25 points off.
Show your work. If you do not show your work for a problem, we will give zero point for the
We will not select among several answers. Make sure it is clear what part of your work you
want graded. If two answers are given, zero point will be given for the problem.
number (e.g., 0.356, 100, 3 per hr, 3/8 etc.).
3. If a numerical answer is not requested, it is better to leave your answer with mathematical
operations to avoid any point off due to calculation errors (e.g., 345 50 + 500 + 3(10 + 20 +
30)/49).
4. When a numerical answer is not expected, you will receive full credit if someone with no
understanding of calculus, probability, and statistics could simplify your answer to obtain a
correct numerical answer with a basic calculator. For example, an answer like E[(D 3)+ ]
will receive no point but an answer like (1 + 2 + 3 + 4)/5 will receive full credit if it is
correct.
5. If you are asked to show work, you must do so on the answer sheet. No point will be given

## 1. (4) Circle the right answer and fill the blanks.

Newsvender model is a single period decision making model where the demand for each period is
(random/known) and independently identically distributed. Assume the ordering quantity is constant, then the profit for each period is (random/known) and the average of n periods profits is
(random/known). The long-run average profit converges to the expected profit (random/known)
for a single period with probability 1 . This theorem is called
.
2. Kyle runs a seafood restaurant. He cannot predict exactly how many fish he will be able to sell,
but in the past, he has observed that demands follow the discrete uniform distribution from 21 to
30. (that is, p(x) = 1/10 for x = 21, 22, ..., 29, 30). Each fish costs him \$2 to order and can sell
for \$11. He must place his order for the fish the night before they are sold. Unsold fish are not
fresh enough to sell and cost \$1 per fish to dispose them.
(a) (6) Assume Kyle orders 25 fish every day, what are the expected number of sold fish, expected
number of unsold fish and expected number of lost sale. (Express them with numbers.)

(b) (6) How many fish should Kyle order every day? (a numerical answer is expected)

(c) (6) Assume Kyle orders 26 fish per day, what is the expected daily profit?

(d) (6) Now suppose that the demand was approximately normally distributed with mean 500 fish
and variance 402 fish2 . How many fish should be ordered? (a numerical answer is expected)

3. An auto company is to make one final purchase of a rare engin oil to fulfill its warranty services
for certain car models. The current purchasing price for the engine oil is \$1 per gallon. If the
company purchases the engine oil, the company needs to pay \$1,000 delivery charge regardless
of the purchase amount. If the company runs out the oil during the warranty period, it will
purchase the oil from a supply at the market price of \$4 per gallon (no fixed ordering cost in this
case). Any leftover engine oil after the warranty period is useless, and costs \$1 per gallon to get
rid of. Assume the engine oil demand during the warranty is uniformly distributed (continuous
1
distribution) between 2,000 gallons to 4,000 gallons. (Note: X Uniform(a,b) has the pdf ba
xa
and CDF ba
, EX = 21 (a + b).)
(a) (4) What is the optimal ordering quantity (assume there is no initial inventory. A numerical

(b) (6) Assume that the company currently has 2,000 gallons of engine oil in stock. What is the
total expected cost when no additional quantity is ordered?(A numerical answer is exptected.)

(c) (7) Assume that the company currently has 2,000 gallons of engine oil in stock and additional
quantity is ordered. How many gallons should be ordered if the answer for (a) is assumed to
be 3,200 gallons? (A numerical answer is exptected.)What is the total expected cost when the

(d) (2) Suppose the numerical answer for part (b) no order and part (c) order are A and B, respectively. Explain when the company should place an order (using A and B). No Calculation
is required.

(e) (5) Assume that the optimal decision for the company is order when it has 2,000 gallons
of engine oil in stock. Infer the interval that s could be in for (s,S) policy. What is S if the
answer for (a) is assumed to be 3,200 gallons?(A numerical number is expected.)

(f) (12) Assume S = 3200. Using the following quantities to show that the parameter s of (s,S)
policy satisfies
4000(5200 s) = 4(4000 s)2 + (s 2000)2 .
Useful quantities:

R 4000
3200

1
(x 3200) 2000
dx = 160.

R 3200

1
2000 (3200 x) 2000
dx = 360.
1
+
E[D s] = 4000 (4000 s)2
1
E[s D]+ = 4000
(s 2000)2

(g) (2) Assume (s=2305.6, S=3200). What is the optimal order quantity when the initial inventory
is x = 0, 1500, 2500, 3800 gallons? (Numerical answers are expected)

4. You are the manager at the Student Center in charge of running the food court. The food court is
composed of two parts: cooking station and cashiers desk. Every person should go to the cooking
station, place an order, wait there and pick up first. Then, the person goes to the cashiers desk
to check out. After checking out, the person leaves the food court. The cook and the cashier can
handle one person at a time. We have only one cook and only one cashier. An arriving person
who finds the cook or the cashier busy waits in line. The waiting space is assumed to be infinite.
The processing times for the cook X are iid having the following distribution (in minutes):
x
P(X=x)

1
1/4

2
1/2

3
1/4

The processing times for the cashier are iid having exponential distribution with mean 3 minutes.
Assume the inter-arrival times of persons arriving at the food court are iid having exponential
distribution with mean 5 minutes.(Note, X exp( ), E[X] = 1 ,Var(X) = 12 , where is the rate
parameter.)
(a) (4) Show that E[processing time for cook]=2 minutes and Var[processing time for cook]= 21
minutes2 .

(b) (3) What is the arrival rate to the food court per minute? What is the service rate for the
cashier per minute? What is the service rate for the cook per minute?(numerical answers are
expected.)

(c) (5) What is the utilization of the cook? What is the utilization of the cashier? What is the
throughput of the whole system?(numerical answers are expected.)

(d) (5) What is the long-run average system time spent at the cooking station, including the
service time at the cooking station? (A numerical answer is expected.)

(e) (4) What is the long-run average number of people waiting for the cooking station (including
the people in cooking service)?(A numerical answer is expected.)

(f) (4) It is known that the average time spent in the food court is 15 minutes per person. What is
the long-run average number of people in the food court?(A numerical answer is expected.)

(g) (9) Assume the mean inter-arrival time is changed to 1 minute. What is the utilization of
the cook? What is the utilization of the cashier? What is the throughput of the whole system?(numerical answers are expected.)