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# ISYE 3232C Spring 2015 Midterm 1 Solution

Total # of
Exam Takers
62

Min

Max

Mean

Median

23

99.5

81.01

85.25

25%
quantile
72.375

75 %
quantile
95.375

std

CV

16.9

4.77

18

Total
16
Mean: 80.01
Std:16.8

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12
10
8
6
4
2
0
20

25

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90

95

100

1. Performance (63.51%):

## (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) and independently identically distributed. Assume the ordering quantity is
constant, then the profit for each period is (random) and the average of n periods profits is
(random). The long-run average profit converges to the expected profit (known) for a single
period with probability 1 . This theorem is called Strong law of large numbers.

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) Performance (90.46%):

(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.)
Solution:

## E[# of sold fish ] = E[D y] = E[D 25] = 0(di 25)P(D = di )

i=1

= (21 + 22 + 23 + 24 + 25)

1
5
+ 25 = 24
10
10

1
=1
10
1
E[# of lost sale ] = E[D y]+ = E[D 25]+ = (1 + 2 + 3 + 4 + 5) = 1.5
10

## (b) Performance (89.92%):

(6) How many fish should Kyle order every day? (a numerical answer is expected)
Solution:
c p cv 11 2
9
=
=
= 0.75
c p cs
11 + 1 12
d
F(d)

21
0.1

22
0.2

23
0.3

24
0.4

25
0.5

26
0.6

27
0.7

28
0.8

29
0.9

F(y ) = 0.8 y = 28

30
1.0

## (c) Performance (94.35%):

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

## E[profit] = c p E[y D] + cs E[y D]+ cv y

= 11E[26 D] E[26 D]+ 2 26
= 11 24.5 1.5 2 26 = 216

1
1
(21 + 22 + 23 + 24 + 25 + 26) + (26 + 26 + 26 + 26) = 24.5
10
10
1
+
E[26 D] = (5 + 4 + 3 + 2 + 1) = 1.5
10
E[26 D] =

## (d) Performance (86.56%):

(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)
Solution:
P(D y ) = 0.75
D N(500, 402 ), Z =

D 500
N(0, 1) Standardizing a Normally Distributed Random Variable
40
y 500
P(Z
) = 0.75
40
y 500 = 40 0.67

## y = 500 + 40 0.67 = 526.8

Where is 0.67 from? Check the zTable I posted on Tsquare. Find (z) = 0.75 and the corresponding z = 0.67, which means (z = 0.67) =

R z=0.67 1 x2
e 2 dx = 0.75.

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) Performance (97.18%):

(4) What is the optimal ordering quantity (assume there is no initial inventory. A numerical
Solution:
cu = 4

co = 1

cv = 1

cu cv
41
=
= 0.6
cu + co 4 + 1
y 2000
= 0.6 y = 3200
4000 2000

## (b) Performance (85.35%):

(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.)
Solution:

## E[Total Cost] = cu E[D y]+ + co E[y D]+

= 4E[D 2000]+ + E[2000 D]+
= 4[E[D] 2000] = 4(3000 2000) = 4000

## (c) Performance (91.13%):

(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 additional quantity is ordered?
Solution:
3200 2000 = 1200

S = y = 3200

## E[Total Cost] = c f + cv (y 2000) + cu E[D S]+ + co E[S D]+

= 1000 + 1200 + 4E[D 3200]+ + E[3200 D]+
Z 4000

= 2200 + 4

(x 3200)

3200

= 3200

1
dx +
2000

Z 3200
2000

(3200 x)

1
dx
2000

## (d) Performance (91.53%):

(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.
Solution:

B<A

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## (e) Performance (73.87%):

(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.)
Solution:

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## (f) Performance (64.72%):

(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

Solution:
E[Total Cost with no order] = cu E[D s]+ + co E[s D]+
= 4E[D s]+ + E[s D]+
1
1
(4000 s)2 +
(s 2000)2
=
1000
4000
E[Total Cost with order] = c f + cv (S s) + cu E[D 3200]+ + co E[3200 D]+
Z 4000

1
dx +
= 1000 + 3200 s + 4
(x 3200)
2000
3200
= 4200 s + 4 160 + 360 = 5200 s
5200s =

Z 3200
2000

(3200 x)

1
dx
2000

1
1
(4000s)2 +
(s2000)2 4000(5200s) = 4(4000s)2 +(s2000)2
1000
4000

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## (g) Performance (78.63%):

(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)
Solution:

x
order quantity

0
3200

13

1500
1700

2500
0

3800
0

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) Performance (88.71%):

(4) Show that E[processing time for cook]=2 minutes. and Var[processing time for cook]= 12
minutes2 .
Solution:
1
1
1
E[X] = 1 + 2 + 3 = 1 + 1 = 2
4
2
4
1
1
1 1
9 9
E[X 2 ] = 12 + 22 + 32 = + 2 + =
4
2
4 4
4 2
9
1
2
2
2
Var(X) = E[X ] E[X] = 2 =
2
2

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## (b) Performance (88.17%):

(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.)
Solution:

1
per minute
5
1
cashier = per minute
3
1
cook = per minute
2
=

5mins

2mins

cook

1/5

1/2

15

3mins

cashier
1/3

## (c) Performance (84.52%):

(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.)
Solution:

1/5
= 0.4 utilization
cook 1/2

1/5
cashier =
=
= 0.6 utilization
cashier 1/3
Throughput = min( , cashier , cook ) = min(1/5, 1/3, 1/2) = 1/5
cook =

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## (d) Performance (74.52%):

(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.)
Solution:

 P
 c2 + c2 
cook
a
s
E[Wcook ] = E[Vcook ]
1 Pcook
2
c2a = 1
1/2 1
Var(X)
=
c2s =
=
2
E[X]
4
8
0.4 1 + 1/8
E[Wcook ] = 2
= 0.75
1 0.4 2
E[WTotal ] = 0.75 + 2 = 2.75

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## (e) Performance (68.15%):

(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.)
Solution:

L = W =

18

1 11 11
=
5 4
20

## (f) Performance (81.45%):

(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.)
Solution:

1
L = W = 15 = 3
5

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## (g) Performance (69.00%):

(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
Solution:
Arrival rate = 1.

cook =

= 2 (utilization of cook=100%)
cook
cook
1/2
cashier =
=
= 1.5 (utilization of cashier=100%)
cashier 1/3
Throughput = min( , cashier , cook ) = min(1, 1/2, 1/3) = 1/3

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