ISyE 3232B Test #1

Spring 2013 - 01
I,
, do swear that I abide by the Georgia Tech Honor Code. I understand
that any honor code violation will result in a zero for this test and one letter grade reduction.
Signature:
You will have 50 minutes.
Turn off your cell phone and leave it on the desk facing down.
This exam is closed book and closed notes. Calculators are not allowed.
Do not remove any page from the original staple. Otherwise, there will be 25 points off.
No scrap paper is allowed. If you need scrap paper, use the front and back pages of the test sheet.
IMPORTANT - guidelines for writing answers on the answer sheet:
1. Our grading is based on your answer and work in the answer sheet.
2. When a numerical answer is requested, your answer must be a real number or fractional 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 if
your work is not shown on the answer sheet.
6. 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, a zero point will be given for the problem.
Some formula that you may need:
A uniform distribution from a to b has the pdf f (x) = 1/(b a) for a < x < b and the CDF F(x) = 0
for x < a; (x a)/(b a) for a x b; and 1 for x > b.
An exponential distribution with rate has mean 1/ and variance 1/ 2 .
For a newsvendor problem, the optimal quantity that maximizes the expected profit is y such that
c +p c
y = min{y : F(y) cpp +puu +hv } where F() is the CDF of demand.
The Kingmans formula: When A represents inter-arrival times and S represents service times,
Wq = m

c2a + c2s
2
where c2a = A 2
1 2
E[A]

and

c2s =

S2
.
E[S]2

1. (20 points) Every four years, Blockbusters Publishers revises its textbooks. It has been three years
since the best-selling book The Joy of OR has been revised. Each copy of the book sold during next
year will bring the publisher $50 in revenues. Any copies that are left at the end of the year are sold to
a discount bookstore at $5 dollars per copy (i.e., Blockbusters Publishers makes $5 dollars per copy
lever over at the end of the year). The cost of printing the book is $25 per book printed.
Suppose that the estimated demand for the book is discrete with Pr{D = 5000} = 0.3, Pr{D =
6000} = 0.2, Pr{D = 7000} = 0.4, and Pr{D = 8000} = 0.1.
(a) (12 points) If the publisher decides to print 6000 copies, what is the expected profit? (A numerical answer is not expected.)

(b) (8 points) What is the optimal number of copies to print to maximize the expected profit? (Show
your work and give a numerical answer.)

2. (30 points) Next months production at a manufacturing company will use a certain solvent for part of
its production process. Assume that there is an ordering cost of $300 incurred whenever an order for
solvent is placed and the solvent costs $25 per liter. Due to short product life cycle, unused solvent
cannot be used in following months. There will be a $5 disposal charge for each liter of solvent left
over at the end of the month. If there is a shortage of solvent, the production process is seriously
disrupted at a cost of $55 per liter short.
The demand is governed by the continuous uniform distribution varying between 300 and 600 liters.
(a) (8 points) What is the optimal order-up-to quantity? (Show your work and a numerical answer
is expected.)

Remark: If you could not get an answer for part (a) and you need answer for (a) for next
problems, then put your initial here
and proceed to next questions assuming that the
optimal order-up-to quantity is 500 liters.
(b) (10 points) Assume that the initial inventory level is m = 400 liters. What is the total expected
cost if we do not place an order? (A numerical answer is not expected.)

(c) (12 points) Assume that the initial inventory level is m = 400 liters. What is the total expected
cost if we place an order? (A numerical answer is not expected.)

3. (30 points) A production line has one machine. Each job needs to processed by the machine. Once it
finishes the processing, it leaves the production line. The machine can process one job at a time. An
arriving job that finds the machine busy waits in a buffer. (The buffer sizes are assumed to be infinite.)
Assume that interarrival times of job arrivals are iid with mean 5 minutes and standard deviation of
10 minutes. The processing times for the machine are iid with mean 4 minutes and standard deviation
of 4 minutes.
(a) (4 points) What is the arrival rate per hour? (A numerical answer is expected.)

(b) (4 points) What is the service rate per hour at the machine? (A numerical answer is expected.)

(c) (4 points) What is the utilization of the machine? (A numerical answer is expected.)

(d) (4 points) What is the throughput (per hour) of the production line? (A numerical answer is
expected.)

(e) (9 points) What is the steady-state average time in the system (W ) in hours? (Show your work
and a numerical answer is not expected.)

(f) (5 points) What is the average number of jobs in the system (L)? (Show your work and a
numerical answer is not expected.)

4. (20 points) A store stocks a particular item. The demand for the product each day is 0 item with
probability 0.5, 1 item with probability 0.1, and 2 items with probability 0.4. Assume that the daily
demands are independent and identically distributed. Each evening if the remaining stock is less than
or equal to 3 items, the store orders enough to bring the total stock up to 5 items. These items reach
the store before the beginning of the following day. Assume that any demand is lost when the item is
out of stock.
Let Yn be the amount in stock at the beginning of day n; assume that Y0 = 4.
(a) (5 points) To show that it is a Markov chain, build a functional relationship between Yn and Yn+1 .

(b) (5 points) Give the state space S and initial distribution a.

(c) (10 points) Define the one-step transition matrix P for {Yn ; n = 1, 2, . . .}.

Bonus(4 points): Suppose a worker needs to process 1000 items. The time to process each item is iid with a
mean of 2 minutes and variance 10 minutes. Approximately, what is the probability that the worker finishes
all 1000 items in 2160 minutes? The standard normal table is given in the next page. (Show your work and
a numerical answer is expected.)