FOREIGN TRADE UNIVERSITY EXAMINATION NO 2
FACULTY OF INTERNATIONAL EDUCATION SUBJECT: MANAGEMENT SCIENCE
Date: 24th Dec, 2024
Time allowance: 70 minutes
PART I – MULTIPLE CHOICE QUESTIONS
1. What is the main purpose of sensitivity analysis in linear programming?
A. To maximize the objective function
B. To understand how changes in parameters affect the solution
C. To identify infeasibilities in the model
D. To solve non-linear problems
2. Which method is used to visually analyze the impact of parameter changes on the solution space?
A. Computer-based analysis
B. Sensitivity table
C. Graphical sensitivity analysis
D. Duality analysis
3. Which of the following is not a limitation of classical sensitivity analysis?
A. Cannot handle non-linear constraints
B. Requires significant computational effort
C. Cannot assess simultaneous parameter changes
D. Does not provide a range of optimality
4. If the cost coefficient of a variable increases within its allowable range, what will happen to the optimal
solution?
A. It will remain the same
B. It will become infeasible
C. It will shift to a new solution
D. It will become unbounded
5. What is the allowable range for a constraint in sensitivity analysis known as?
A. Feasibility range
B. Shadow range
C. Right-hand side range
D. Constraint boundary
6. Which of the following parameters can be adjusted in sensitivity analysis?
A. Coefficients of decision variables
B. Right-hand side values of constraints
C. Both a and b
D. None of the above
7. In a sensitivity report, what does a shadow price represent?
A. The cost of reducing the solution
B. The change in the objective function value for a one-unit change in a constraint’s rhs
C. The penalty for violating a constraint
D. The optimal value of the solution
8. What is the primary advantage of computer-based sensitivity analysis over graphical methods?
A. Simplicity in representation
B. Ability to handle multiple variables simultaneously
C. Reduced computational time
D. No need for software
9. What is the main goal of a supply chain model?
A. To increase demand
B. To minimize total costs while meeting customer needs
C. To allocate employees across departments
D. To identify bottlenecks in production
10. What is the key concept in solving an assignment problem?
A. Maximizing the flow between nodes
B. Minimizing the total cost of assignments
C. Shortening the route
D. Balancing supply and demand
11. In a maximal flow problem, what does the “capacity” of an edge represent?
A. The cost of using that edge
B. The maximum flow that can pass through the edge
C. The shortest time required to traverse the edge
D. The minimum flow needed to balance the network
12. Which of the following is not an application of network models?
A. Transportation optimization
B. Employee performance management
C. Logistics and distribution
D. Communication routing
13. In an assignment problem, if the number of tasks exceeds the number of workers, what is added to
balance the model?
A. Dummy variables
B. Extra constraints
C. Penalty functions
D. Dummy workers
14. . What is the objective of integrating production and inventory models with distribution networks?
A. To increase warehouse stock
B. To maximize sales only
C. To minimize total costs while ensuring timely delivery
D. To prioritize one product over others
15. What is the biggest challenge in solving a combined distribution and inventory optimization problem?
A. Lack of data
B. Complexity of multiple variables and constraints
C. High computation cost
D. Limited number of warehouses
16. What does the “range of optimality” indicate in sensitivity analysis?
A. The range within which constraints remain feasible
B. The range of changes to the objective function coefficients that keep the current solution optimal
C. The change in objective function value for a one-unit change in rhs
D. The range of feasible solutions
17. In graphical sensitivity analysis, how many variables can be effectively analyzed?
A. One
B. Two
C. Three
D. Unlimited
18. Which of the following is not analyzed in sensitivity analysis?
A. Objective function coefficients
B. Right-hand side of constraints
C. Decision variables’ bounds
D. Non-linear constraints
19. What happens if a decision variable’s coefficient changes beyond its allowable range in sensitivity
analysis?
A. The solution becomes infeasible
B. The optimal solution changes
C. The problem becomes unbounded
D. There is no change
20. What does the shadow price in a sensitivity report signify in business terms?
A. The revenue generated per unit
B. The opportunity cost of using one more unit of a constrained resource
C. The cost of reducing inventory levels
D. The penalty for exceeding constraints
21. How can sensitivity analysis help in decision-making under uncertainty?
A. By providing a single solution to follow
B. By identifying how parameter variations impact the optimal solution
C. By eliminating infeasible solutions automatically
D. By fixing the constraints
22. Which sensitivity analysis approach is more suitable for large-scale linear programming problems?
A. Graphical method
B. Dual simplex method
C. Computer-based analysis
D. Simplex tableau approach
23. What is the main drawback of classical sensitivity analysis in real-world applications?
A. It requires graphical representation
B. It cannot handle changes in multiple parameters simultaneously
C. It is difficult to compute shadow prices
D. It is only applicable to linear constraints
24. Which of the following best describes the assignment problem?
A. A transportation problem with balanced supply and demand
B. A shortest-route problem between multiple cities
C. A model for maximizing production efficiency
D. A problem of allocating tasks to resources at minimum cost
25. What is the main application of the shortest-route problem?
A. Allocating resources
B. Designing communication networks
C. Minimizing transportation costs
D. Determining the quickest path in a network
26. Which of the following is true for the maximal flow problem?
A. The flow cannot exceed the smallest capacity along the path
B. It minimizes costs for each path
C. It finds the shortest path between two nodes
D. It is only applicable for cyclic networks
27. What is the key assumption of the supply chain model?
A. Supply must always exceed demand
B. Demand is perfectly predictable
C. Resources are allocated optimally to minimize cost
D. No constraints exist in production or distribution
28. In the assignment problem, if there are more workers than tasks, what should be done?
A. Add dummy tasks with zero cost
B. Reduce the number of workers
C. Allocate remaining workers randomly
D. Ignore the extra workers
29. Which of the following is not a characteristic of a network model?
A. Nodes represent entities
B. Arcs represent relationships between nodes
C. The flow is always equal in all arcs
D. Constraints govern the capacity of arcs
30. How can the shortest-route problem be extended to handle time-based constraints?
A. By adding dummy nodes for each time interval
B. By introducing weights representing time on each arc
C. By reducing the number of nodes
D. By changing the algorithm to hungarian method
PART 2 – CASE PROBLEM SOLUTION
GreenLine Logistics is a company specializing in delivering packages across several cities. The company
has just secured a contract to deliver packages to five distribution centers (DCs). GreenLine needs to assign
one of its delivery teams to each DC while minimizing the total transportation cost.
Currently, there are five delivery teams available, identified by a code name (Alpha, Beta, Gamma, Delta,
Epsilon). The transportation costs (in hundreds of dollars) for each team to deliver to the respective DCs
are shown in the table below:
Team DC1 DC2 DC3 DC4 DC5
Alpha 35 50 45 55 40
Beta 30 45 40 50 35
Gamma 28 48 38 53 37
Delta 33 46 42 49 39
Epsilon 36 44 41 52 38
Tasks:
a. Develop a network representation of this problem.
b. Formulate a linear programming model to determine the assignment of delivery teams to distribution
centers that minimizes the total transportation cost.
c. Solve the problem using any optimization tool (e.g., Excel Solver or Lingo). Provide the assignment
solution and the total transportation cost.
2. Star Investments is managing a portfolio of assets and has $300,000 available for new investment
opportunities. The company is considering investing in four potential assets, each with its own
characteristics, as shown in the table below:
Asset Price per Annual Rate of Risk Measure per
Unit ($) Return Dollar Invested
Asset X 120 0.10 0.08
Asset Y 70 0.12 0.09
Asset Z 90 0.09 0.07
Asset W 50 0.07 0.06
Investment Guidelines:
• The overall annual rate of return for the portfolio must be at least 10%.
• No single asset can account for more than 40% of the total investment.
• The total investment must not exceed $300,000.
Tasks:
a. Formulate a linear programming model to determine the optimal investment allocation that minimizes
risk.
b. Interpret the objective coefficient ranges for the four variables. What insights do these ranges provide?
c. Suppose the company decides to increase the minimum annual rate of return requirement to 11%. Use
the dual value associated with this constraint to explain the potential impact on risk.