Tunis Business School

University of Tunis

Spring 2016
Operations Research 1
Tutorial 1

Question 1
A company manufactures three products A, B and C. Each product requires raw materials and labor.
Resources are available in limited quantities. Quantities of resources required to produce one unit of
each product are as follows:
Product
A
B
C

Raw Material
4
2
1

Labor
2
0.5
3

Unit profit for products A, B and C are respectively 6, 2 and 4 dinars. Every week, 6000 kg of raw
material and 4,000 hour of labor are available. The capacity of storage is limited to 2500 units, all
products combined. Formulate the problem as a linear model.
Question 2
A company manufactures a standard dining chair used in restaurants. The demand forecasts for quarter
1 (January-March) and quarter 2 (April-June) are 3700 chairs and 4200 chairs, respectively. The
company has the policy of satisfying all demand in the quarter in which it occurs.
The chair can be produced by the company or purchased from a subcontractor. This latter currently
charges $12.50 per seat, but has announced a new price of $13.75 effective from April 1. The unit
production cost of the company is of $10.25 with a maximum capacity of 3800 seats per quarter.
Excess of seats at quarter 1 can be stored to the next quarter at a unit holding cost of $1.50. However,
the maximum inventory cannot exceed 300 seats.
Formulate the problem as a LP.
Question 3
An investor has $300,000 that can be invested. In addition to the money at hand, it is possible to
borrow up to $100,000 at 12% interest. This money can be used for leveraging (borrow to invest). The
investor has six alternatives, shown in Table 1. The table also shows the expected annual interest or
dividend for the investment alternatives, the expected annual increase of the value of the investment,
and an indication of the risk of the investment (per dollar).
Investment Type

Expected annual
Expected annual
Average risk
interest/dividend
increase in value
per dollar
Real Estate
0%
18%
20
Silver
0%
10%
12
Savings Account
2%
0%
1
Blue Chips Stocks
3%
6%
7
Bonds
4%
0%
3
Hi-Tech Stocks
0%
20%
30
Table 1: investment alternatives and related results
The investor attempts to maximize the expected value of the assets at the end of the planning period
(one year). The value of the assets after one year equals todays value of the investment plus the
expected interest or dividend plus the expected change in value within a year minus the amount of

money that was borrowed (principal and interest). In addition to the restricted availability of money
already mentioned above, the decision maker faces the following constraints:
The expected value of assets (exclusive interest) at the end of the planning period should be at
least 7% higher than at the beginning,
Invest at least 50% of all the money invested in stocks and bonds combined,
Invest no more than 20% of total amount available (excluding the amount borrowed) in real
estate and silver combined, and
The average risk of the portfolio should not exceed 10.
Formulate the problem as a linear program.
Question 4
1. A firm seeks to recruit employees into its new mechanics workshop. After a first selection, 20
employees were identified and classified into three groups as indicated below. The production
performance and the monthly salaries of the selected employees are indicated below:

Number of
Employees
Group 1
Group 2
Group 3

3
7
10

Number of units
manufactured/employee
/day
30
25
20

Monthly
salary/Employee
500
400
350

The firm requires that the number of employees in the first group does not exceed that of the
other two groups together by more than 5 employees. Given that the firm has a monthly budget of
5,000 dinars, formulate the problem as a linear programming given that the firm seeks to
maximize its daily production.
2. The firm seeks to decide the allocation of three among selected employees E1, E2 and E3 to
three of its machines M1, M2 and M3. The time required on each machine depends on the
employee as shown in the table below:
Time (minutes)
Employee / machine M1
M2
M3
E1
9
10
11
E2
12
11
10
E3
11
12
13

Formulate this problem as a linear programming, given that if M1 is assigned to E1 then M2 must
be assigned to E3.
Question 5: Capital budgeting problem
A municipal construction project has funding requirements over the next four years of $2 million, $4
million, $8 million, and $5 million respectively. Assume that all of the money for a given year is
required at the beginning of the year. The city intends to sell exactly enough long-term bonds to cover
the project funding requirements, and all of these bonds, regardless of when they are sold, will be paid
off (mature) on the same date in a distant future year. The long-term bond market interest rates (that is,
the costs of selling bonds) for the next four years are projected to be 7 percent, 6 percent, 6.5 percent,
and 7.5 percent respectively. Bond interest paid will commence one year after the project is completed

and will continue for 20 years, after which the bonds will be paid off. During the same period the
short-term interest rates on time deposits (that is, what the city can earn on deposits) are projected to
be 6 percent, 5.5 percent, and 4.5 percent respectively (the city will clearly not invest money in shortterm deposits during the fourth year).
What is the citys optimal strategy for selling bonds and depositing funds in time accounts in order to
complete the construction project? Formulate the problem.
Question 6: A job-training problem
A machine tool company conducts a job-training program for machinists. Trained machinists are used
as teachers in the program at a ratio of one for every ten trainees. The training program lasts for one
month. From past experience it has been found that out of ten trainees hired, only seven complete the
program successfully (the unsuccessfully trainees are released).
Trained machinists are also needed for machining and the companys requirements for the next three
months are as follows:
January 100; February 150; March 200. In addition, the company requires 250 trained machinists by
April. There are 130 trained machinists available at the beginning of the year. Payroll costs per month
are :
Each trainee $400
Each trained machinist (machining or teaching) $700
Each trained machinist idle (union contract forbids firing trained machinists) $500
Set up the linear programming problem that will produce the minimum cost hiring and training
schedule and meet the companys requirements.
Question 7: Production planning
A machine shop has one drill press and five milling machines, which are to be used to produce an
assembly consisting of two parts, 1 and 2. The productivity of each machine for the two parts is given
below :
Production time in minutes per piece
Part
Drill
Mill
1
3
20
2
5
15
It is desired to maintain a balanced loading on all machines such that no machine runs more than 30
minutes per day longer than any other machine (assume that the milling load is split evenly among all
five milling machines).
Divide the work time of each machine to obtain the maximum number of completed assemblies
assuming an 8-hour working day.