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1. The soft goods department of a large department store sells 150 units per month of a certain
large bath towel. The unit cost of a towel to the store is $10 and the cost of placing an order has
been estimated to be $160. The store uses an inventory carrying charge of 25% of unit cost per
year. (7 marks)
(i) Find the optimal order quantity that minimizes the total cost.
(ii) What is the number of orders per year?
(iii) What is the total annual cost?
(iv) Assume that the parameters given in the problem were wrong. Using the correct
parameters, we calculated the optimal order quantity again and obtain 385.333. However,
the number of towels in each order should be integer. How many service representatives
should be in each training group? How would you find optimal integer order quantity?
Explain your approach and why it is working. (You do not need any calculation.)
2. How do you test the initial feasible solution of transportation problem for degeneracy?
(4 marks)
3. (a) Explain the use of dummy activity in the network analysis. (3 marks)
(b) The owner of a chain of Fast - Food restaurants has to install computer system for the
accounting and inventory control. A company sent the following information about the system
installation (7 marks)
Activity Activity Immediate Time Estimate (in days)
Identification Description Predecessor Most Most Most
optimistic likely pessimistic
A Select the - 4 6 8
computer model
B Design A 5 7 9
C Design monitoring A 4 8 12
D Assemble B 15 20 25
E Develop the main B 10 18 26
F Develop C 8 9 16
G Create data base E 4 8 12
H Install the system D, F 1 2 3
I Test and G, H 6 7 8

(i) Construct a network diagram for this project

(ii) Calculate the EST/EFT and the LST/LFT
(iii) Compute the expected project completion time.
(iv) What is the probability that the project will be completed within 55 days?
(v) How many days before should the company start the project so as to complete it within
the time with 99% assurance?
4. A cement company has three factories which manufacture cement which is then transported to
four distribution centres. The quantity of monthly production of each factory, the demand of
each distribution centre and the associated transportation cost per quintal are given as follows
(6 marks)
Distribution centres Monthly production
W X Y Z (in quintals)
Factories A 10 8 5 4 7000
B 7 9 15 8 8000
C 6 10 14 8 10000
Monthly demand 6000 6000 8000 5000
(in quintals)

(i) Suggest the optimal transportation schedule.

(ii) Is there any other transportation schedule which is equally attractive? If so, find it.
5. Determine the solution to the following two-person zero-sum game presented in matrix form:
(3 marks)


W 1 0 4 6

X 3 6 0 4

Y 5 3 2 3

Z 2 1 6 7