Answer

0.94 S1 Favorable D1 8 8 7.94 0.06 8(0.94) + S2 Favorable 7(0.06) 7 7 0.
94 S1 Favorable
0.77 Favorable 14 D2 14 14 3 0 18.26 0 13.46 0.06 Max(7.94, S2 Favorable 14(0.94) +
13.46, 18.26) 5(0.06) 5 5 0.94 S1 Favorable 20 D3 20 20 18.26 0.06 20(0.94) + S2
Favorable Research undertaken (-9)(0.06) -9 -9 10 15.9347 0.35 8.26(0.77) S1 Unfavorable
+ 8.15(0.23 DI 18 8 0 7.35 0.65 8(0.35) + S2 Unfavorable 7(0.65) 0.35 S1 Unfavorable 0.23
Unfavorable 14 D2 14 14 2 0 3.15 0 3.15 0.65 Max(7.35, 4(0.35) + S2|
Unfavorable 8.15, 1.15) 5(0.65) 5 1 0.35 15.9347 SI Unfavorable 20 D3 20 20 0 1.15 0.65
20(0.35) + S2
Unfavorable (-9)(0.65) -9 -9 -9 0.8 D1 8 8 0 7.8 0.2 8(0.8) + 7(0.2) 7 7 0.8
Not undertaken D2 14 14 14 3 0 14.2 12.2 0.2 Max (7.8, $2 14(0.8) + 12.2, 14.2) 5(0.2) 5 5
0.8 D3 20 20 20 0 14.2 0.2 $2 20(0.8) + (-9)(0.2) = 14.2
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Recommended decision:
Undertake the research first.
Then if the outcome of the research is favorable, opt for D3.
Otherwise, for an unfavorable outcome, opt for D2.
Max EMV of the above-mentioned recommended decision = 15.9347 million Rial
2.
Define the events for writing ease:
F - Failure happens
H - hardware problem happens
S - software problem happens
O - other problems happen
Prior probabilities: P(H) = 0.1; P(S) = 0.6; P(O) = 0.3
Conditional probabilities: P(F|H) = 0.9; P(F|S) = 0.2; P(F|O) = 0.5
Implement Baye's rule to find the Posterior probabilities as follows:
So, if there is a failure, the most likely cause is 'Others' because P(O|F) is the highest
among the three posterior probabilities.
Q2
Excel model is
formulated as
below: A B C D
EFWN3
Catalot inputs
Model of
responses 4
Fixed cost of
printing 20000
Response rate
8% 5 Variable
cost of printing
mailing 0.25
Number of
responses 8000 6 7 Decision varaible Model of revenue, costs, and profit 8 Number mailed
100000 Total revenue 320000 9 Fixed cost of printing 20000 10 Order inputs Total variable cost
of printing mailing 25000 11 Average order 40 Total variable cost of orders 257600 12 Variable
cost per order 32.20 Total cost 302600 13 Profit 17400 14 15
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EXCEL FORMULA: A B C D Im Catalot Inputs Model of responses 4 Fixed cost of printing 20000
Response rate 0.08 5 Variable cost of printing mailing 0.25 Number of responses -B8 14 7 Decision
varaible Model of revenue, costs, and profit 8 Number mailed 100000 Total revenue
"Number_of_responses* Average_order 9 Fixed cost of printing -Fixed_cost of_printing 10 Order
inputs Total variable cost of printing mailing =Variable_cost_of_printing mailing* Number_mailed 11
Average order 40 Total variable cost of orders =Variable_cost per_order* Number_of responses 12
Variable cost per order 32.2 Total cost =SUM(E9:[11) 13 Profit =Total_revenue-Total_cost 14 15 16
B17 X
v fx
=Profit A B C D E N 3 Catalot inputs Model of responses Fixed cost of printing 20000 Response
rate 8% 5 Variable cost of printing mailing 0.25 Number of responses 8000 6 7 Decision
varaible Model of revenue, costs, and profit 8 Number mailed 100000 Total revenue 320000 9
Fixed cost of printing 20000 10 Order inputs Total variable cost of printing mailing 25000 11
Average order 40 Total variable cost of orders 257600 12 Variable cost per order 32.20 Total
cost 302600 13 Profit 17400 14 15 Sensitivity of profit to response rate 16 Response rate Profit
17 17400 18 1% 19 2% 20 3%
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A C D m 2 3 Catalot inputs Model of responses 4 Fixed cost of printing 20000 Response rate 8%
5 Variable cost of printing mailing 0.25 Number of responses 8000 6 7 Decision varaible Model
of revenue, costs, and profit Number mailed 100000 Total revenue 320000 9 Fixed cost of
printing 20000 10 Order inputs Total variable cost of printing mailing 25000 11 Average order
40 Total variable cost of orders 257600 12 Variable cost per order 32.20 Total cost 302600 13
Profit 17400
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14 15 Sensitivity of profit to response rate 16 Response rate Profit 17 Data Table 17400 X 18 1% Bow
input cell: T 19 2% 20 Column input cell: SES4 3% 4% NN OK Cancel 5% 23 6% 7% 25 8% 26 9%
27 10% 28 11% 29
A B C D 2 3 Catalot inputs Model of responses 4 Fixed cost of printing 20000 Response rate 8%
5 Variable cost of printing mailing 0.25 Number of responses 8000 6 7 Decision varaible Model
of revenue, costs, and profit 8 Number mailed 100000 Total revenue 320000 9 Fixed cost of
printing 20000 10 Order inputs Total variable cost of printing mailing 25000 11 Average order
40 Total variable cost of orders 257600 12 Variable cost per order 32.20 Total cost 302600 13
Profit 17400 14
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Step-by-step explanation
a)
Let fuel additive quantity be x and solvent base quantity bey
Maximize Profit (Z) = 40x + 30y
Constraints:
Material 1: 2/5x + 1/2y <= 20
Material 2: 1/5y <= 5
Material 3: 3/5x + 3/10y <= 21
x,y >= 0

b)
By use of Graphical method-
Point A is 0,
25
Z = 40*0 +
30*25 = 750
Point B is
75/4, 25
Z = 40*75/4
+ 30*25 =
1500
Point C is
25, 20
Z = 40*25 +
30*20 =
1600
Point D is
35, 0
Z = 40*35 +
30*0 = 1400
Maximum
value is at Point C (25, 20)
Total Profit = 1600$

c)
(y = 20,so 20/5 is 4 tons, against available quantity of 5 tons), 1 ton is left. At this point,
material 2 is unused.

d)
Yeah. Constraint of Material 2 is redundant

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0.94 S1 Favorable D1 8 8 7.94 0.06 8(0.94) + S2 Favorable 7(0.06) 7 7 0.

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