Final Exam 1 (Trial) Suggested Solution Outline

1a) This is a transportation model. Outline of steps: i) ii) iii) iv) State total demand is more than total supply, hence unbalance problem. Decision variable : xij represent number of products from warehouse i to distribution center j. Objective function: Min transportation cost Constraints : note that the supply constraints is = while the demand constraint is <=.

1b) This is an extension of 1a) into a transshipment problem. Let x ij be number of products from location i to location
j , where i 1, 2 ,3, 4 ,5, 6 and i 4 ,5, 6 ,7 ,8,9 . The transshipment nodes A, B and C are

represented by 4, 5 and 6 respectively, and the demand nodes A,B,C are represented by 7,8 and 9 respectively. Note that we are still referring to the same warehouse. The different indexes are meant to differentiate the transshipment point and the demand point.
min 12 x 14 11 x 14 ... 12 x 36 0 x 47 8 x 48 3 x 49 x 57 0 x 58 2 x 59 7 x 67 2 x 68 0 x 69 s .t .

x
j4 6

ij

S i , for i 1, 2 , 3 , and S 1 70 , S 2 80 , S 3 50 D j , for j 7 ,8 , 9 , and D 7 60 , D 8 100 , D 9 50

x
i4 3

ij

3 3

xi4 x i5 xi6

i 1

x
j7 9

4 j

i 1

x
j7 9

5j

i 1

x
j7

6 j

x ij 0 , i 1,..., 6 , j 4 ,..., 9

There are more than one way to do this. The above model is closest to a transshipment model.

2a)

b) Let xij be the flow on branch i-j, for i,j=1,..,7 max x71 s.t. x71-x12-x13-x14=0 x12 x23-x25-x27 =0 x13 -x35=0 x14-x45-x46=0 x25+x35+x45-x57=0 x46-x67=0 x27+ x57+x67-x71=0 x12 10 x13 15 x14 18 x23 12 x25 4 x27 7 x35 12 x45 9 x46 5 x57 10 x67 14 x71 31 xij 0 and integer for all branch i-j.

3) a)

b) You can draw on the AON network using the lecture notations (the one with six box) or present it in table as follows:

c) Critical path = b f j k

Expected project completion time = 28.17 weeks. = 3.00

d)

e) To be discussed in class.

4a) i) Using maximin criterion, choose dealership offer 1 ($150,000). ii) Construct regret table Dealership Offer 1 2 3 EOL(1) = $180,000 EOL(2) = $240,000 EOL(3)=$280,000 Gas Shortage 0.6 $0 $400,000 $180,000 Gas Surplus 0.4 $450,000 $0 $430,000

iii) Using expected value; EV(Offer 1) = 300,000(.6) + 150,000(.4) = $240,000; EV(Offer 2)= 100,000(.6) + 600,000(.4) = $180,000; EV(Offer 3) = 120,000(.6) + 170,000(.4) =$140,000; Hence, select offer 1. OR A FASTER WAY: Using 4a), select the smallest. Hence choose dealership offer 1. iv) EV with perfect info = 0.6(300,000) + 0.4(600,000)=$420,000 EVPI = $420,000-240,000 = $180,000. OR A FASTER WAY: EVPI is exactly equal to smallest EOL. Therefore, EVPI = $180,000. b) Let s- denote the actual shortage. Let S- denote shortage/negative report. Let s+ denote the actual surplus. Let S+ denote surplus/positive report.

Offer 1

Offer 2 Offer 3

Offer 1

Offer 2 Offer 3

ii) If report indicates shortage, then go for offer 1. If report indicates surplus, then go for offer 2.

E(Strategy) = $342,094 EVSI = $342,094 - 240,000 = $102,094