Kenya Methodist University

School of Business Economics

Department of Business Administration

2Trimester 2022 Assignment

Buss 320 : Quantitative Methods

Instructor : Dr. Wilson Muema

Instructions

1. Answer All Questions

2. Assignments are due before 21st June, 2022

SECTION A

Question One
a) Explain the purpose of in-put output analysis in an economy.
b) Discuss the assumptions of linear programming.
c) Solve the following using matrix algebra

d) Describe the term game theory and describe at least three types of games.
e) Differentiate the following equation
f) Solve the following game

TABLE 1

PLAYER B
B1 B2 B3 B4
A1 3 2 4 0
PLAYER A A2 3 4 2 4
A3 4 2 4 0
A4 0 4 0 8

g) A company estimates that the demand for its product fluctuates with the price it charges.
The demand function is

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 Where q equals the number of units demanded and p equals the price in dollars. The total
cost of producing q units of the product is estimated by the function

i. Determine how many units q should be produced in order to maximize the

annual profit
ii. What price should be charged
iii. Determine The annual profit expected

Question Two
A branch of XYZ bank has only one typist. Since the typing work varies in length (number of pages
to be typed), the typing rate is randomly distributed approximating a Poisson distribution with mean
service rate of 8 letters per hour. The letters arrive at a rate of 5 per hour during the entire 8- hours
work day. If the type writer is valued at £2 per hour, determine:
i. Equipment utilization
ii. The percent time that an arriving letter has to wait
iii. Average system time
iv. Average cost due to waiting on the part of the type writer.

Question three
a) Describe the following terms as used in network analysis
i. Critical activity
ii. Super critical activity
iii. Float
iv. Sub-critical activity
b) R&D department is planning to bid on a large project for the development of a new
communication system for commercial planes. The accompanying table shows the activities,
times and sequences required.

Activity Preceding Time in Days

Activity Optimistic Most likely Pessimistic
Time Time Time
A - 6 6 24
B - 6 12 18
C - 12 12 30
D A 6 6 6
E B 12 30 48
F C 12 30 42
G D,E 18 30 54
H B 17 29 47
I H,F 14 28 48

2
J G,I 14 28 48
K J 6 6 24

Required:-
a) Draw a network to represent the above data
b) Determine the critical path of the project and the expected project length
c) Calculate the variance and standard deviation of the project
d) Compute the probability of completing the project within a period of 120 days
e) Suppose you want to shorten the completion time as much as possible and have the option of
shortening any or all of B, C, D and G each by two days. Which would you shorten? What
would be the new critical path?

SECTION B

Question One
a) Describe the limitations of linear programming technique.
b) Maximize
Subject to

Question Two
a) Highlight the assumptions in a transportation model.
b) Describe the following terms as used in transportation problems
i. Feasible solution
ii. Basic feasible solution
iii. Optimal solution
c) find the optimal solution to the following transportation problem in which the cells contain
the transportation cost in thousands Kenyan Shillings

TABLE 2
W1 W2 W3 W4 W5 Available
F1 7 6 4 5 9 40
F2 8 5 6 7 8 30
F3 6 8 9 6 5 20
F4 5 7 7 8 6 10
Required 30 30 15 20 5 100

Question three
a) Describe the term simulation

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 b) Explain the advantages and disadvantages of simulation techniques
c) Meru bakery keeps stock of a popular brand of cake. Daily demand based on past experience
is given below:

Daily demand: 0 15 25 35 45 50
Probability: 0.01 0.15 0.20 0.50 0.12 0.02
Consider the following sequence of random numbers:
48 78 09 51 56 77 15 14 68 09
i. Using the sequence, simulate the demand for the next 10 days
ii. Find the stock demand if the owner of the bakery decides to make 35 cakes every day. Also
estimate the daily average demand for the cakes on the basis of the simulated data.

SECTION C
Question one

The fixed costs of a company is Kshs 35,000 and the variable cost per unit is Kshs 500. The revenue
function for sale of x units is given by R ( x)  5000 x  100 x 2 . Find;

i) Profit function
ii) Break even values
iii) The values of x which result in a loss
Question two

An economy consists of two industries X and Y with each industry producing a single product. The
table shows the use and production of X and Y over some fixed period of time.

TO X Y Consumer Demand

FROM

X 70 35 95

Y 40 60 60

The final demand for X increases by 40 units and Y decreases by 25%. Determine the new total
output by the two industries so as to satisfy the new final demand.

Question Three
A company uses 100,000 units per year which cost sh. 30 each. Carrying costs are 1% per month
and ordering costs are 250 per order.
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 a) What is the EOQ?
b) How many orders will the company make each year?
c) What is the length of order cycle?
d) What would be the EOQ if the company made the items themselves on a machine with a
potential capacity of 600,000 units per year?
e) What is the cost of having stock annually?

Question four
a company has a team of four salesmen and there are four districts where the company wants to start
its business. After taking into account the capabilities of the salesmen and the nature of districts, the
company estimates in thousands of Kshs for each salesman in each district is as below.

District
1 2 3 4
A 16 10 14 11
Salesman B 14 11 15 15
C 15 15 13 12
D 13 12 14 15

Find the assignment of salesmen to various districts which will yield maximum profit