MSCI 603 MidTerm # 1 Fall 2016

Surname (Print) Given Names (Print) Student ID

University of Waterloo
Faculty of Engineering
Department of Management Sciences

MSCI 603 Principles of Operations Research

Mid Term Test # 1

Instructor: Mehrdad Pirnia

Date: Tuesday, October 18, 2016
Time: 1:00PM – 2:20PM (80 minutes)

Instructions:

1) You have 80 minutes to complete the exam.

2) Aids allowed: non-programmable, non-communicating calculator only. This is a closed-book,
closed-notes exam.
3) Make sure your handwriting is legible and that any drawings are clearly labeled.
4) All answers should be written in this exam booklet in the indicated spaces. Use the back of the
page only if you need extra space.
5) If you write in pencil, you will not be able to resubmit your exam for re-marking. For this reason,
please state all of your assumptions and show all of your work.
6) Please, no questions during the exam. If you are unsure about something, state your
assumption and proceed with your solution.
7) This exam has 11 pages including the cover page.

Problem Points Maximum

1 20

2 20

3 20

4 30

Total 90

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MSCI 603 MidTerm # 1 Fall 2016

Problem 1 – (20 points total)

LuluBerry produces Yoga clothing (T-shirts, and pants) for women. It has contracted two production
facilities, one in Canada and another one in China, where they take advantage of cheaper labour. The cost
of raw material is the same at both locations. The Operations Manager, at LuluBerry wants to plan a
production schedule to maximize its net profit. Table 1 demonstrates demand at each quarter, the
requirements for labour and material and profit for t-shirts and pants, and Table 2 demonstrates labour and
material availability, and labour cost at each plant:

Table 1: Demand, requirements, profit

T-shirts Pants

Q1 400 300

Q2 200 80
Demand
Q3 300 220

Q4 600 400

Labour 3 hr/ shirt 2hr/ pants

Requirements
Material 3 Sq. meter/ shirt 4 Sq. meter/ shirt

Profit $70 /t-shirt $130 /pants

Table 2: Labour and Material availability at each plant

Labour Material Labour cost

$12 /hr
Plant 1 11000 5700
$4 /hr
Plant 2 2000 3800

Assuming that LuluBerry has only one opportunity to place its production schedule for next year, and cost
of inventory is zero, develop an LP model to determine the production schedule for each plant. You do
not need to solve the model.

Solution:
Decision variables:

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MSCI 603 MidTerm # 1 Fall 2016

Objective function:

Constraints:

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Problem 2 – (20 points total)

Solve the following LP using graphical solution method.

(Do not use the simplex algorithm. Hint: Use the dual problem.)
** Use the provided graph sheet on the next page to draw the graph.

min w= 6y1 +5y2 +52y3 + 63y4

s.t . y1 + 6y3 + 9y4 ≥ 3

y2 + 8y3 + 7y4 ≥ 4
y1, y2, y3, y4 ≥ 0

Solution:

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MSCI 603 MidTerm # 1 Fall 2016

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MSCI 603 MidTerm # 1 Fall 2016

Problem 3 – (20 points total)

Consider the following simplex tableau, corresponding to an LP problem in standard form:

X1 X2 X3 X4
1 0 a ? 3
0 0 -1 1 2
2 1 b 0 c

a) What should be the value of the missing entry (?)? Why?

b) What is the current solution (X1, X2, X3, X4)? What is the current cost?

c) Give specific values of a, b, c (if they exist) for which the dual LP is infeasible?

d) Find necessary and sufficient conditions on a, b, c for this tableau to be optimal, and the problem
to have multiple optimal solutions.

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MSCI 603 MidTerm # 1 Fall 2016
Problem 4 – (30 points total)

Pineapple Inc. produces 4000 desktops, 3000 laptops, and 9000 MP3 players per month. All models can
be sold in either “standard” or “customized” configurations. The total number of items that can be
customized during a normal month is equal to 2500. In addition, up to 1500 extra items can be customized
on overtime, at a higher cost (it requires negotiating with union). The net profits are:
Customized on Regular Customized on Overtime
Standard time

Desktop 100 300 200

Laptops 120 400 230

MP3 Players 20 40 30

The LP problem maximizing the net profit is as follows:

(DS: Standard Desktop, LS: Standard Laptops, MS: Standard MP3 players, DCR: Reg. Customized
Desktop, LCR: Reg. Customized laptop, MCR: Reg. Customized MP3 players, DCO: Overtime Cust.
Desktops,…)

max profit: 100 DS+120 LS+20 MS +300 DCR+400LCR+ 40 MCR + 200 DCO + 230 LCO + 30 MCO

st:
Desktop: DS + DCR + DCO = 4000
Laptops: LS + LCR + LCO =3000
Mp3: MS + MCR + MCO = 9000
Custom: DCR + LCR + MCR <= 2500
Overtime: DCO + LCO + MCO <= 1500
All decision variables being non-negative.

A) Write an LP model for XYZ Company who is planning to purchase pineapple Inc.. (The
proposed model should find an offer price for pineapple Inc. that would be acceptable
considering their current profit).

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MSCI 603 MidTerm # 1 Fall 2016

B) Explain the sign of the shadow price of the overtime constraint (whether it is negative or
positive)

C) After implementing the optimization problem of the production scheduling in an LP solver, we

obtained the following output file:

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MSCI 603 MidTerm # 1 Fall 2016
Interpret the solution obtained above by the solver, in terms of your LP formulation. In
particular, what is the optimal production schedule? What is the optimal dual solution? Which
constraints are binding?

D) If you could increase the production of any item by a certain small fixed amount, which product
(desktops, laptops, MP3 players) would you choose? Why? How should we expect the net profits
to change, by increasing the production of that item by 100 units?

E) How should we expect the net profits to change, if we are forced to produce 10 customized MP3
players (e.g., for a gift)? Should we produce them during regular hours, or during overtime?
Explain exactly how the optimal production plan should change, and why the profit change is
what you computed.

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MSCI 603 MidTerm # 1 Fall 2016
F) Assume that, as a gesture of good will, the worker’s union offers us to customize additional
items. The option is to either customize 50 items during regular hours, or 150 items during
overtime. Which option should we choose? Why?

G) Is it feasible for Pineapple Inc. to incorporate an additional method of production, called double
overtime for producing customized desktops, laptops, and mp3 players beside standard, regular,
and overtime methods, while the double over time customized net profit for desktops, laptops,
and mp3 players are $120, $160, and $40 respectively? There are no limits on double over time
hours.

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