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The University of Nottingham

BUSINESS SCHOOL

A LEVEL 2 MODULE, AUTUMN SEMESTER 2011-2012

INTRODUCTION TO MANAGEMENT SCIENCE FOR BUSINESS DECISIONS

Time allowed TWO Hours plus 10 minutes reading time

______________________________________________________________________

Candidates must NOT start writing their answers until told to do so

Answer FOUR questions from Section A and TWO questions from Section B.
Each question from Section A is worth 5% of the total marks and each question
from Section B is worth 40%

Only silent, self contained calculators with a Single-Line Display or Dual-Line Display
are permitted in this examination.

Dictionaries are not allowed with one exception. Those whose first language is not
English may use a dictionary to translate between that language and English provided
that neither language is the subject of this examination.

No electronic devices capable of storing and retrieving text, including electronic

dictionaries, may be used.

DO NOT turn examination paper over until instructed to do so

ADDITIONAL MATERIAL: Normal distribution table

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SECTION A

Answer any FOUR questions from this section. Each question is worth 5%

1. Explain what is involved in the queuing problem, and describe the components of
a queuing system.
[5%]

2. What are the advantages and limitations of simulation models?

[5%]

3. What is meant by project crashing, and how can it be done by hand?

[5%]

4. Develop your own objective function and set of constraints for an LP with
unbounded feasible region but finite optimal solution. Illustrate graphically.
[5%]

5. Describe an application that can be modelled as a maximal flow problem.

[5%]

6. Explain why, in general, integer programmes are much harder to solve than linear
programmes.
[5%]

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SECTION B

Answer any TWO questions from this section. Each question is worth 40%

1. The Classic Furniture Company is trying to determine the optimal quantities to

make of six possible products: tables and chairs made of oak, cherry, and pine. The
products are to be made using the following resources: labour hours and three
types of wood. The availability of each resource as well as each item’s resource
usage (technological coefficients) are shown in the Excel layout (Figure 1).
Minimum production requirements are as follows: at least 3 each of oak and cherry
tables, at least 10 each of oak and cherry chairs, and at least 5 pine chairs. The
objective function coefficients in Figure 1 refer to the unit profit per item. The LP
Sensitivity Report is shown in Figure 2. Answer each of the following questions,
each of which is independent of the others.

Answer the following questions:

(a) What is the optimal solution? Which constraints are binding?

[4%]

(b) Interpret the shadow prices of the following three constraints: labour hours,
the amount of cherry wood available, and the minimum production quantity
for oak tables.
[6%]

(c) Suppose Classic Furniture are forced to produce at least one table in pine.
What would be the impact on profit?
[4%]

(d) Classic Furniture can purchase an additional 1,000 pounds of oak at a price
of £0.75 per pound. Should Classic Furniture buy this wood and do they need
to change the current production plan? (Why?) What would be the impact on
profit?
[6%]

(e) Classic Furniture is considering the production of coffee tables. One coffee
table would make a profit of £55 while its production requires 30 pounds of
oak, 10 pounds of cherry and 5 hours of labour. Should the company produce
coffee tables? Why (not)?
[8%]

(f) It appears that Classic Furniture underestimated the profit of each item by
10%. Should Classic Furniture adapt the production plan? Why (not)?
[6%]

(g) Tables and chairs usually sell in sets. For each type of wood, the number of
chairs produced should not exceed 10 times the number of tables produced.
What constraints should be added to the LP to reflect these conditions? Does
the current solution satisfy these constraints?
[6%]
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[Total: 40%]

Figure 1: Excel layout

Figure 2: Sensitivity Report

2. A new ringroad is being built through terrain points A, B, C, D, and E. The distances
(in miles) between consecutive locations along this road are shown in Figure 3. To
level the route, net earth surpluses and deficits (expressed in number of truckloads)
must be corrected at all five locations. This will be done by moving truckloads of
earth from surplus to deficit points along the route (travel in the two directions is
possible). Any remaining surplus earth should be disposed of at the dumpsite. The

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distances between the surplus locations (A, B, and D) and the dumpsite are: 5
miles, 4 miles and 8 miles respectively. The company carrying out the works wants
to determine the terrain levelling plan that minimises the total truck travel distance.

Figure 3: Earth deficit and surplus locations along the ringroad.

Answer the following questions:

(a) Formulate this problem as a linear programming model. Clearly explain the
decision variables, the objective function and the constraints.
[20%]

(b) What type of network model do you recognise in the problem description
above? Draw an appropriate graph and explain the meaning of the different
nodes and arcs. Show a feasible (but not necessary optimal) solution on
your network.
[8%]

(c) Because the earth at surplus location D may be contaminated, the company
has reconsidered its objectives and formulated the following ranked goals:

Rank 1: As much as possible earth from location D should be moved to the

dumpsite.

Rank 2: Preferably, no earth from location D should be transported to E.

Rank 3: The total truck travel distance should not exceed 10,000 miles.

Formulate this problem as a goal programming model.

[12%]
[Total: 40%]

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3. A salesperson of a large bicycle shop is paid a bonus if he sells more than 4 bicycles
a day. The probability of selling more than 4 bicycles a day is only 0.40. If the
number of bicycles sold is greater than 4, the probability distribution of sales is as
shown in Table 1. The shop has two different models of bicycles (type A and type
B). The amount of the bonus paid out varies by type. The bonus for a type A bicycle
is £5; the bonus for a type B bicycle is £20. The probability of a type B bicycle being
sold is only 0.25; the remaining proportion of sales (0.75) consists of type A
bicycles.

Table 1
No. of bicycles sold Probability
5 0.35
6 0.45
7 0.15
8 0.05

Answer the following questions:

(a) Develop a manual Monte Carlo simulation model to calculate the bonus the
salesperson can expect in a day. Clearly explain the random choices in your
model with their probability distributions. Using the sequence of two-digit
random numbers below, simulate 12 days of business and organise your
calculations in a table.

Random numbers: 69 56 30 32 66 79 55 24 80 35 10 98 92 92 88 13 04
86 31 13 23 44 93 13 27 33 16 17 29 62 08 59 41 47 72 25 96 58 14
68 15 18 99 13 05 03 83 34 78 50 89 98 93 70 11 49 01 09 35 64 43
71 48 36 78 53 64 37 00 57 02 25 34 18 62 99 58 71

[25%]

(b) Based on your calculations for Part (a) above, estimate (1) the probability
that 7 or more bicycles are sold on a day and (2) the expected daily bonus
for the salesperson
. [5%]

(c) Would you recommend using your results to Part (b) in decision making?
What improvements would you suggest to make your results more
accurate? How can a computer help in conducting a simulation study?
[10%]
[Total: 40%]

4. Bowman Builders manufactures steel storage sheds for commercial use. Joe
Bowman, president of Bowman Builders is contemplating producing sheds for home
use. The activities necessary to build an experimental model and related data are
given in Table 2.

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Table 2
Activit Immediate Normal Time Normal Cost
y Predecessors (weeks) (£)
A none 3 1,000
B none 2 2,000
C none 1 300
D A 7 1,300
E B 6 850
F C 2 4,000
G D, E 4 1,500
Crash Time Crash Cost
(weeks) (£)
2 1,600
1 2,700
1 300
3 1,600
3 1,000
1 5,000
2 2,000

Answer the following questions:

(a) Draw an activity on node network for this project and determine the critical
path(s). Calculate also the earliest and latest start and finish times, and the
slack for each activity. What is the minimum duration for completing the
project?
[20%]

(b) Develop a weekly budget for this project using latest start times.
[10%]

(c) Develop an LP model to crash this project to 10 weeks.

[10%]
[Total: 40%]

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