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Student Name: ______________________________________

California State University San Marcos

College of Business Administration

OM 406: Decision Models

Instructor: Dr. Robert Aboolian

Fall 2021

Examination # 2 Time: 100 minutes

December 2021 Maximum: 200 points

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1 Please remember to identify yourself on the top of this page.

2 You may use the book and your excel files but you are not allowed to communicate with other students during the exam via email or in person.

3 Read the problems carefully, time yourself, and show your work to get credit. Do your work in this set, and mark clearly where your final answer is to be found.

4 Cell phones and handheld devices must be shut down during the exam.

5 There are two problems on two pages.

6 You should email all of the exam files to me just before you leave in one attachment (each problem comes at a different worksheet).

7 Please proceed after the go-ahead from the instructor.

Good Luck!

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Problem 1: (80 points) J.B. Machine Co. has 4 warehouses in Detroit, Houston, Los Angeles and New York. J.B. Machine Co. is considering opening one or more plants which will be serving the warehouses. Three locations which are candidates to open plants are Cincinnati, Kansas city, and Seattle. Plant potential capacities, market demand, transportation cost per unit shipped, and fixed costs per month at each plant are shown in Table 2.

Transportation Unit Cost to Demand City Potential Fixed

Supply City Detroit Houston NY LA Supply Cost

Cincinnati $25 $55 $40 $60 5800

$400,000

Kansas City $35 $30 $50 $40 7300 $550,000

Seattle $60 $38 $65 $27 5000 $350,000 Demand 1400 1500 3600 3500

Table 2

Formulate and solve a spreadsheet model which finds the location (of factories to open) and the demand allocation (how much to ship from each plant to each warehouse) for J.B. Machine Co., which minimizes the total cost of fixed facilities and transportation.

Problem 2: (120 points) Michael Wise operates a newsstand at a busy intersection downtown. Demand for the Sunday Times averages 300 copies with a standard deviation of 50 copies (assume a normal distribution). Michael purchases the paper for $0.75 and sells them for $1.25. Any left paper at the end of the day is bought back at a price which is uniformly distributed between $0.10 and $0.20.

a) Suppose that Michael buys 350 copies for his newsstand each Sunday morning. Use Crystal Ball to perform 1000 trials of a computer simulation on a spreadsheet. What will be Michael’s mean profit from selling the Sunday Times? What is the probability that Michael will make at least $0 profit? (80 points)

b) Generate a Decision table to consider five possible order quantities between 250 and 350. Which order quantity maximizes Michael’s mean profit? (40 points)