JAIPURIA INSTITUTE OF MANAGEMENT, LUCKNOW

POST GRADUATE DIPLOMA IN MANAGEMENT

3nd Trimester (Batch 2018-20)
END TERM EXAMINATIONS
Course Name Operations Research Course Code IO304
Max. Time 120 minutes Max. Marks 50
Attempt all questions. Marks are indicated against each question.

Q1. An electronic company is engaged in the production of two components C1 and C2 used in T.V. sets.
Each unit of C1 costs the company Rs. 25 in wages and Rs.25 in material, while each unit of C2 costs the
company Rs. 125 in wages and Rs.75 in material. The selling price C1 is Rs. 150 per unit and of C2 it is Rs.
350 per unit. The production of each C1 requires 6 hours of machine time and 4 hours of assembly time,
whereas the production of each C2 requires 4 hours of machine time and 6 hours of assembly time. The
company has available in each period 4000 hours of machine time and 2800 hours of assembly time. In the
beginning of production-period, the company has an initial balance of Rs. 20000. (10 marks)

a. Identify the options available before the electronic company.

b. Identify and explain the decision variables.
c. What should be the objective of the company and so formulate the objective function.
d. Identify and explain all the limitations/restrictions in achieving the objective.
e. Formulate the OR Model for the situation.

Q2. Two electronic companies ‘Samsung’ and ‘LG’ are competing for sales in two different but equally
profitable product line. Because of the recent technological breakthrough, both companies will be making a
major improvement in both products. If both product improvement are developed simultaneously, either
company can have them ready for sale in 10 months. Another alternative is to have a ‘crash program’ to
develop only one product first to get it marketed ahead of the competition. By doing this, ‘Samsung’ could
have one product ready for sale in 8 months, whereas ‘LG’ would require 7 months. For either company, the
second product could then be ready for sale in an additional 7 months.
The market research team of ‘Samsung’ developed the following information for the varying product
development strategies:
 If both companies market their improved products simultaneously, ‘Samsung’ would
increase its share by 10% on either of the product
 If ‘Samsung’ marketed their product sooner than ‘LG’ by 2, 4 and 6months, ‘Samsung’
would increase its share by 22%, 32% and 42% respectively.
 If ‘LG’ marketed their product sooner than ‘Samsung’ by 1, 3, 5 and 8 months,
‘Samsung’ would lose its share by 2%, 8%, 10% and 12% respectively.
Find the development strategies of both companies and determine which strategy ‘Samsung’
should use to increase its share. (10 marks)

Q3. TriStar plans to open a new plant. The company can open a full size plant now or a small size plant. The
time horizon for the decision problem is 10 years. Tristar estimates that the probability of high and low
demands over the next 10 years are 0.75 and 0.25 respectively. In the second option, if company observes
high demand in first two years then decision of opening full size plant can be reconsidered.

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The cost of immediate construction is 50 lakhs for a large plant and 10 lakhs for a small plant. The
expansion cost of a small plant after 2 years from now is 42 lakhs.
High demand with full size plant now would give annual income of 10 lakhs per year whereas low demand
with full size plant now would give annual income of 3 lakhs per year. High demand with small size plant
now would give annual income of 2.5 lakhs per year whereas low demand with small size plant now would
give annual income of 2 lakhs per year.
In the second options (small size plant now), if company decides to open full size plant after two years then
would get annual income of 9 lakhs per year.
Construct the decision tree and suggest optimum decision process to TriStar company
(10marks)

Q4. Max co. Company is fully integrated company that both produces goods and sells them at its retail
outlets. After production, the goods are stored in the company’s two warehouses until needed by the retail
outlets. Trucks are used to transport the goods from the plant to the warehouses, and then from the
warehouse to the two retail outlets.
The table below shows the plant’s monthly supply, its shipping cost per unit to each warehouse, and the
maximum amount that it can ship per month to each warehouse.

Unit shipping cost Shipping capacity Supply

Plant warehouse 1 warehouse 2 warehouse 1 warehouse 2 300
Rs 50 Rs 60 175 200

For each retail outlet (RO), the table below shows its monthly demand, its shipping cost per unit from each
of the warehouse and, the maximum amount that can be shipped per month from each warehouse

Unit shipping cost Shipping capacity

RO1 RO2 RO1 RO2
Warehouse 1 Rs 47 Rs 49 100 100
Warehouse 2 Rs 39 Rs 44 125 75
Demand Target Cell (Max) 150 150
Cell Name Original Value Final Value

Management $G$5
now wants to determine
Profit a distribution
0 plan that will minimize the total shipping cost. Draw a
321132.40
network diagram, identify the supply, trans-shipment nodes and demand nodes in this network. Also
Adjustable Cells
formulate OR model for this problem. (10
marks) Cell Name Original Value Final Value

Product
$C$4 A 0 34.26

Product
$D$4 B 0 70.45
Q5. The Zenon Production Works Company is producing three products A, B and C on the monthly basis. The unit
profit would be Rs. 6000, Rs. 3500 and Rs. 3000 respectively. The products use three machines with limiting capacity
Product
as: Cutter 600 $E$4
hours, Smoother 400
C hours and Polisher 0150 hours 18.50
Company wants to know how many units of each product to produce to maximize the profit. From operation
Constraints
department of the company following results (Answer Report and Sensitivity Analysis) were provided. (10
marks) Cell Name Cell Value Formula Status Slack

$F$
6 Cutter 600 $F$6<=$H$6 Binding 0

$F$
7 Smoother 4002 of$F$7<=$H$7
Page 3 Binding 0

$F$ Not
8 Polisher 118 $F$8<=$H$8 Binding 32
 SensitivityReport

    Final Reduced Objective Allowable Allowable

Cell Name Value Cost Coefficient Increase Decrease

$C$4 Product A 34.26 0 6000 200 2300

$D$4 Product B 70.45 0 3500 1E+30 100

$E$4 Product C 18.50 0 3000 2000 120

    Final Shadow Constraint Allowable Allowable

Cell Name Value Price R.H. Side Increase Decrease

$F$5 Cutter 600 389 500 60 130

$F$6 Smoother 400 150 350 190 70

$F$7 Polisher 118 0 150 1E+30 50

(i) Suggest the optimum production policy to the company with appropriate recommendations.
(ii) Comment on the utilization of resources available with the company?
(iii) The unit profit values of the three products are estimated values only. Suggest maximum care should be taken
in which estimation (estimation of Product A, B or C).
(iv) The company can arrange additional time for the Smoother by hiring a part-time worker. The worker is asking
for a charge of Rs. 500 for 1 hour of smoothening time. What recommendations would you give in this
aspect?
(v) If company is to hire only one worker for either Cutter or Smoother or Polisher, suggest for which job worker
is to be hired?

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