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An Introduction To Management Science Quantitative Approaches To Decision Making 2nd Edition David Ray Anderson, Dennis J. Sweeney, Thomas Arthur Williams, Mik Wisniewski - Solutions
a. Formulate a goal programming model for this problem.b. Use the goal programming computer procedure illustrated in Section 14.2 to solve the model formulated in part (a).
A committee in charge of promoting a Ladies’ Professional Golf Association tournament is trying to determine how best to advertise the event during the two weeks prior to the tournament. The committee obtained the following information about the three advertising media they are considering using.
Industrial Chemicals produces two adhesives used in the manufacturing process for aeroplanes. The two adhesives, which have different bonding strengths, require different amounts of production time: the IC-100 adhesive requires 20 minutes of production time per gallon of finished product, and the
The Ruiters’ Manufacturing Company produces two products, which have the following profit and resource requirement characteristics.Characteristic Product 1 Product 2 Profit/unit E4 E2 Dept. A hours/unit 1 1 Dept. B hours/unit 2 5 Last month’s production schedule used 350 hours of labour in
DJS Investment Services must develop an investment portfolio for a new client. As an initial investment strategy, the new client would like to restrict the portfolio to a mix of two stocks:The client wants to invest E50 000 and established the following two investment goals. Priority Level 1 Goal
RMC’s production is constrained by a limited availability of the three raw materials. For the current production period, RMC has the following quantities of each raw material: material 1, 20 tons; material 2, 5 tons; material 3, 21 tons. Management wants to achieve the following P1 priority level
A ton of solvent base is a mixture of 0.5 ton of material 1, 0.2 ton of material 2 and 0.3 ton of material
The RMC Corporation blends three raw materials to produce two products: a fuel additive and a solvent base. Each ton of fuel additive is a mixture of 0.4 ton of material 1 and 0.6 ton of material
Use the analytical hierarchy process.
Develop and solve a scoring model.
Formulate and solve a goal programme.
A risk profile for your recommended strategy.
A decision strategy that Allied should follow if they decide to make Erik a counteroffer of E400
A recommendation regarding whether Allied should accept Erik’s initial offer to settle the claim for E750
A decision tree.
A recommendation as to whether Oceanview should employ the market research firm, along with the value of the information provided by the market research firm.
A decision strategy that Oceanview should follow if the market research is conducted.
A recommendation regarding what Oceanview should do if the market research information is not available.
A decision tree that shows the logical sequence of the decision problem.
A new product has the following profit projections and associated probabilities: Profit 150000 100000 50000 0 -50000 -100000 Probability 0.10 0.25 0.20 0.15 0.20 0.10a. Use the expected value approach to make the decision of whether to market the new product.b. Because of the high euro values
Zondo Industries is considering purchasing an insurance policy for its new office building in Port Elizabeth. The policy has an annual cost of 10000. If Zondo Industries does not purchase the insurance and minor fire damage occurs to the office building, a cost of 100000 is anticipated; the cost if
A firm has three investment alternatives. The payoff table (in thousands of euros) and associated probabilities are as follows: Economic Condition Investment Up Stable Down d d 100 25 0 75 50 25 d 50 Probabilities 0.40 50 0.30 50 0.30a. Using the expected value approach, which decision is
In Problem 16, if P(s) = 0.25, P(52) = 0.50 and P(s) = 0.25, find a recommended decision for each of the three decision makers. Note that for the same decision problem, different utilities can lead to different decisions.
Three decision makers have assessed utilities for the following decision problem (payoff in euros). State of Nature Decision Alternative d dz 20 50 -20 80 100 -100 The indifference probabilities are as follows. Indifference Probability (p) Payoff Risk Avolder Risk Taker Risk Neutral 100 1.00 1.00
What is the efficiency of the information?
The Russo Manufacturing Company must decide whether to manufacture a component part at its Milan plant or purchase the component part from a supplier. The resulting profit is dependent upon the demand for the product. The following payoff table shows the projected profit (in thousands of euros).
Suppose that you are given a decision situation with three possible states of nature: s1, s2 and s3. The prior probabilities are P(s1) ¼ 0.2, P(s2) ¼ 0.5 and P(s3) ¼ 0.3. With sample information I, P(I|s1) ¼ 0.1, P(I|s2) ¼ 0.05 and P(I|s3) ¼ 0.2. Calculate the revised or posterior
Romero’s Department Store faces a buying decision for a seasonal product for which demand can be high, medium or low. The purchaser for Romero’s can order 1, 2 or 3 lots of the product before the season begins but cannot reorder later. Profit projections (in thousands of euros) are shown.State
Kotze Publishing Company received a six-chapter manuscript for a new college textbook. The editor of the college division is familiar with the manuscript and estimated a 0.65 probability that the textbook will be successful. If successful, a profit of E750 000 will be realized. If the company
The probabilities shown at nodes 4, 8 and 9 are based on the projected outcomes of the market research study.a. Verify Dante’s profit projections shown at the ending branches of the decision tree by calculating the payoffs of E2 650 000 and E650 000 for the first two outcomes.b. What is the
Node 4 is a chance node showing the possible outcomes of the market research study. Nodes 5, 6 and 7 are similar in that they are the decision nodes for Dante to either build the office complex or sell the rights in the project to another developer. The decision to build the complex will result in
The upper branch from node 2 shows that the company has a 0.8 probability of winning the contract if it submits a bid. If the company wins the bid, it will have to pay E2 000 000 to become a partner in the project. Node 3 shows that the company will then consider doing a market research study to
Dante Development Corporation is considering bidding on a contract for a new office building complex. Figure 13.14 shows the decision tree prepared by one of Dante’s analysts. At node 1, the company must decide whether to bid on the contract. The cost of preparing the bid is E200
Consider a variation of the PDC decision tree shown in Figure 13.7. The company must first decide whether to undertake the market research study. If the market research study is conducted, the outcome will either be favourable (F) or unfavourable (U). Assume there are only two decision alternatives
The following profit payoff table was presented in Problems 1 and 4.State of Nature Decision Alternative s1 s2 s3 d1 250 100 25 d2 100 100 75 The probabilities for the states of nature are P(s1) ¼ 0.65, P(s2) ¼ 0.15, and P(s3) ¼ 0.20.a. What is the optimal decision strategy if perfect
For the PDC problem in Section 13.3, the decision alternative to build the large complex was found to be optimal using the expected value approach. In Section 13.4 we conducted a sensitivity analysis for the payoffs associated with this decision alternative. We found that the large complex remained
Scot Air Express decided to offer direct service from Edinburgh to Manchester. Management must decide between a full-price service using the company’s new fleet of jet aircraft and a discount service using smaller capacity commuter planes. It is clear that the best choice depends on the market
The following payoff table shows the profit for a decision problem with two states of nature and two decision alternatives.State of Nature Decision Alternative s1 s2 d1 10 1 d2 4 3a. Use graphical sensitivity analysis to determine the range of probabilities of state of nature s1 for which each of
Khan Corporation is considering three options for managing its data processing operation: continuing with its own staff, hiring an outside vendor to do the managing (referred to as outsourcing), or using a combination of its own staff and an outside vendor. The cost of the operation depends on
Suppose that the decision maker obtained the probability assessments P(s1) ¼ 0.65, P(s2) ¼ 0.15, and P(s3) ¼ 0.20. Use the expected value approach to determine the optimal decision. State of Nature Decision Alternative s1 s2 s3 d1 250 100 25 d2 100 100 75
The following profit payoff table was presented in Problem
Khobar Corporation’s decision to produce a new line of recreational products resulted in the need to construct either a small plant or a large plant. The best selection of plant size depends on how the marketplace reacts to the new product line. To conduct an analysis, marketing management has
Suppose that a decision maker faced with four decision alternatives and four states of nature develops the following profit payoff table.State of Nature Decision Alternative s1 s2 s3 s4 d1 14 9 10 5 d2 11 10 8 7 d3 9 10 10 11 d4 8 10 11 13a. If the decision maker knows nothing about the
The following payoff table shows profit for a decision analysis problem with two decision alternatives and three states of nature. State of Nature Decision Alternative s1 s2 s3 d1 250 100 25 d2 100 100 75a. Construct a decision tree for this problem.b. If the decision maker knows nothing about the
Evaluate the value of perfect information.
Construct and explain a decision tree.
Calculate and explain expected value.
Be sure to note the number of customers Effortless Events is likely to lose due to long customer waiting times with each design alternative
Run the simulation for 1000 customers for each alternative considered. You may want to consider making more than one run with each alternative. [Note: Values from an exponential probability distribution with mean can be generated in Excel using the following function: ¼*LN(RAND()).]
List the information the spreadsheet simulation model should generate so that a decision can be made on the store design and the desired number of clerks.
Discuss any other recommendations you have that might improve the income for Dunes.
Assuming a 90-day spring golf season, what is the estimate of the added revenue using your recommendation?
Your recommendation as to the best replay option.
Statistical summaries of the revenue expected under each replay option.
Telephone calls come into an airline reservations office randomly at the mean rate of 15 calls per hour. The time between calls follows an exponential distribution with a mean of four minutes. When the two reservation agents are busy, a telephone message tells the caller that the call is important
Run the Dome simulation for 500 customers. The analytical model in Chapter 11 indicates an average waiting time of three minutes per customer. What average waiting time does your simulation model show?b. One advantage of using simulation is that a simulation model can be altered easily to reflect
The Dome queuing model in Section 11.1 studies the waiting time of customers at its restaurant. Dome's single-channel queuing system has a mean of 0.75 arrivals per minute and a service rate of one customer per minute.a. Use a worksheet based on Figure 12.11 to simulate the operation of this
South Central Airlines operates a commuter flight between Munich and Innsbruck. The plane holds 30 passengers, and the airline makes a E100 profit on each passenger on the flight. When South Central takes 30 reservations for the flight, experience has shown that on average, two passengers do not
The normal probability distribution is assumed to be a good description of the demand.a. Create a worksheet similar to the inventory worksheet in Figure 12.7. Include columns showing demand, sales, revenue from sales, amount of surplus, revenue from sales of surplus, total cost and net profit. Use
The variable cost, which includes material, labour and shipping costs, is E34 per doll. During the holiday selling season, Baba will sell the dolls for E42 each. If Baba overproduces the dolls, the excess dolls will be sold in January through a distributor who has agreed to pay Baba E10 per doll.
In preparing for the upcoming holiday season, Baba Toy Company designated a new doll called Nora. The fixed cost to produce the doll is E100
If the building contractor would like to bid such that the probability of winning the bid is about 0.80, what bid would you recommend? Repeat the simulation process with bids of E775 000 and E785 000 to justify your recommendation.
A building contractor is preparing a bid on a new construction project. Two other contractors will be submitting bids for the same project. Based on past bidding practices, bids from the other contractors can be described by the following probability distributions: Contractor Probability
The variable cost for the product is uniformly distributed between E16 and E24 per unit. The product will sell for E50 per unit. Demand for the product is best described by a normal probability distribution with a mean of 1200 units and a standard deviation of 300 units. Develop a spreadsheet
Develop a worksheet simulation for the following problem. The management of Madeira Manufacturing Company is considering the introduction of a new product. The fixed cost to begin the production of the product is E30
The management of Jacobsen Corporation is interested in using simulation to estimate the profit per unit for a new product. Probability distributions for the purchase cost, the labour cost and the transportation cost are as follows:Purchase Cost (E) Probability Labour Cost (E) Probability
A project has four activities (A, B, C and D) that must be performed sequentially. The probability distributions for the time required to complete each of the activities are as follows: Activity Activity Time (weeks) Probability A 5 0.25 6 0.35 7 0.25 8 0.15 B 3 0.20 5 0.55 7 0.25 C 10 0.10 12 0.25
A variety of routine maintenance checks are made on commercial aeroplanes prior to each takeoff. One particular maintenance check of an aeroplane’s landing gear requires between ten and 18 minutes of a maintenance engineer’s time. In fact, the exact time required is uniformly distributed over
The price of a share of a particular stock listed on the Frankfurt Stock Exchange is currently E39. The following probability distribution shows how the price per share is expected to change over a three-month period. Stock Price Change (E) Probability 2 0.05 1 0.10 0 0.25 +1 0.20 +2 0.20 +3 0.10
A retail store experiences the following probability distribution for sales of a product.Sales (units) 0123456 Probability 0.08 0.12 0.28 0.24 0.14 0.10 0.04a. Set up intervals of random numbers that can be used to simulate sales.b. Random numbers generated for the first ten days of a simulation
Use the random numbers 0.3753, 0.9218, 0.0336, 0.5145 and 0.7000 to generate five simulated values for the PortaCom direct labour cost per unit.
The variable cost for the product is expected to be between E16 and E24 with a most likely value of E20 per unit. The product will sell for E50 per unit. Demand for the product is expected to range from 300 to 2100 units, with 1200 units the most likely demand.a. Develop the profit model for this
The management of Madeira Manufacturing Company is considering the introduction of a new product. The fixed cost to begin the production of the product is E30
Consider the PortaCom project discussed in Section 12.1a. An engineer on the product development team believes that first-year sales for the new printer will be 20 000 units. Using estimates of E45 per unit for the direct labour cost and E90 per unit for the parts cost, what is the first-year
Build a simulation model.
Explain the principles of simulation modelling.
What are the annual savings of your recommendation in part (6) compared to the planning committee’s proposal that 30 customers will require three service technicians? Assume 250 days of operation per year.
What is your recommendation for the number of service technicians to hire when OEI expands to 30 customers? Use the information that you developed in part (4) to justify your answer.
What is your recommendation for the number of service technicians to hire when OEI expands to 20 customers? Use the information that you developed in part (4) to justify your answer.
OEI is satisfied that one service technician can handle the ten existing customers. Use a queuing system model to determine the following information: l Probability that no customers are in the system. l Average number of customers queuing. l Average number of customers in the system. l Average
Queuing system models generally assume that the arriving customers are in the same location as the service facility. Discuss the OEI situation in light of the fact that a service technician travels an average of one hour to reach each customer. How should the travel time and the waiting time
What is the mean service rate in terms of the number of customers per hour? Note that the average travel time of one hour becomes part of the service time because the time that the service technician is busy handling a service call includes the travel time plus the time required to complete the
What is the mean arrival rate for each customer per hour?
The telephone arrival data presented are for the 10:00 A.M. to 11:00 A.M. time period; however, the arrival rate of incoming calls is expected to change from hour to hour. Describe how your waiting line analysis could be used to develop a ticket agent staffing plan that would enable the company to
What appear to be the advantages or disadvantages of the expanded system? Discuss the number of waiting callers the expanded system would need to accommodate.
A detailed analysis of the operating characteristics of the reservation system based on your recommendation regarding the number of agents Regional should use.
A detailed analysis of the operating characteristics of the reservation system with one agent as proposed by the vice president of administration. What is your recommendation concerning a single-agent system?
Five administrative assistants use an office copier. The average time between arrivals for each assistant is 40 minutes, which is equivalent to a mean arrival rate of 1 /40 ¼ 0.025 arrival per minute. The mean time each assistant spends at the copier is five minutes, which is equivalent to a mean
Cairo Cab, Inc., uses two dispatchers to handle requests for service and to dispatch the cabs. The telephone calls that are made to Cairo Cab use a common telephone number. When both dispatchers are busy, the caller hears a busy signal; no waiting is allowed. Callers who receive a busy signal can
A large insurance company maintains a central computing system that contains a variety of information about customer accounts. Insurance agents in a six-state area use telephone lines to access the customer information database. Currently, the company’s central computer system allows three users
The Robotics Manufacturing Company operates an equipment repair business where emergency jobs arrive randomly at the rate of three jobs per eight-hour day. The company’s repair facility is a single-channel system operated by a repair technician. The service time varies with a mean repair time of
Jobs arrive randomly at a particular assembly plant; assume that the mean arrival rate is five jobs per hour. Service times (in minutes per job) do not follow the exponential probability distribution. Two proposed designs for the plant’s assembly operation are shown.a. What is the mean service
Gubser Welding, Inc., operates a welding service for construction and automotive repair jobs. Assume that the arrival of jobs at the company’s office can be described by a Poisson probability distribution with a mean arrival rate of two jobs per eight-hour day. The time required to complete the
A study of a multiple-channel food-service operation shows that the average time between the arrival of a customer at the food-service counter and his or her departure with a filled order is ten minutes. Customers arrive at the average rate of four per minute. The foodservice operation requires an
Patients arrive at a dentist’s office at a mean rate of 2.8 patients per hour. The dentist can treat patients at the mean rate of three patients per hour. A study of patient waiting times shows that, on average, a patient waits 30 minutes before seeing the dentist.a. What are the mean arrival and
l Customer waiting time is valued at E25 per hour to reflect the fact that waiting time is costly to the fast-food business. l The cost of each employee is E6.50 per hour. l To account for equipment and space, an additional cost of E20 per hour is attributable to each channel. What is the
The following cost information is available for the fast-food franchise in Problem
A fast-food franchise is considering operating a drive-up window food-service operation. Assume that customer arrivals follow a Poisson probability distribution, with a mean arrival rate of 24 cars per hour, and that service times follow an exponential probability distribution. Arriving customers
Agan’s management would like to evaluate two alternatives: l Use one consultant with an average service time of eight minutes per customer. l Expand to two consultants, each of whom has an average service time of ten minutes per customer. If the consultants are paid $16 per hour and the customer
Refer to the Agan Interior Design situation in Problem
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