User Account

All Pages

Linear Programming, Advanced Statistics

Assignment Help:
1. The production manager of Koulder Refrigerators must decide how many refrigerators to produce in each of the next four months to meet demand at the lowest overall cost. There is a limited capacity in each month although this will increase in month 3. Due to a new contract, costs are expected to increase. The relevant information is provided in the table below.
Month Capacity Demand Cost of production
1 140 110 $80 per unit
2 140 150 $85 per unit
3 160 130 $90 per unit
4 160 140 $95 per unit

Each item that is left at the end of the month and carried over to the next month incurs a carrying cost equal to 10% of the unit cost in that month (e.g. anything left in inventory at the end of month one incurs an $8 cost). Management wants to have at least 30 units left at the end of month four to meet any unexpected demand at that time. A linear program has been developed to help with this. However, this may or may not be totally correct. You should verify that it is the correct formulation before solving the problem. If it is not correct, make any necessary changes to the linear program before solving it on the computer.
X1 = number of units produced in month 1; X2 = number of units produced in month 2;
X3 = number of units produced in month 3; X4 = number of units produced in month 4;
N1 = number of units left at end of month 1; N2 = number of units left at end of month 2;
N3 = number of units left at end of month 3; N4 = number of units left at end of month 4



(Continued on next page)
Minimize cost = 80X1 + 85X2 + 90X3 + 95X4 + 8N1 + 8.5N2 + 9N3 + 9.5N34
X1 < 140
X2 < 140
X3 < 160
X4 < 160
X1 = 110 + N1
X2 + N1 = 150 + N2
X3 + N2 = 130 + N3
X4 + N3 = 140 + N4
N4 > 30
All variables > 0


2. An investment advisory firm manages funds for its numerous clients. The company uses an asset allocation model that recommends the portion of each client’s portfolio to be invested in a growth stock fund, and income fund, and a money market fund. To maintain diversity in each client’s portfolio, the firm places limits on the percentage of each portfolio that may be invested in each of the three funds. General guidelines indicate that the amount invested in the growth fund must be between 20% and 40% of the total portfolio value. Similar percentages for the other two funds stipulate that between 20% and 50% of the total portfolio value must be in the income fund and at least 30% of the total portfolio value must be in the money market fund.
In addition, the company attempts to assess the risk tolerance of each client and adjust the portfolio to meet the needs of the individual investor. For example, Williams just contracted with a new client who has $300,000 to invest, and all of it must be invested. Based on an evaluation of the client’s risk tolerance, Williams assigned a maximum risk index of 0.06 for the client. The firm’s risk indicators show the risk of the growth fund at 0.10, the income fund at 0.07, and the money market fund at 0.01. An overall portfolio risk index is computed as a weighted average of the risk rating for the three funds. The average risk of the portfolio would be the total risk divided by the total investment as shown here:

(average risk) = (total risk)/(total investment).

For example, to calculate the risk of a $100,000 portfolio with 50,000 in the growth fund, 30,000 in the income fund, and 20,000 in the money market fund, the total risk would be 0.10(50,000) + 0.07(30,000) + 0.01(20,000) = 7,300; the average risk would be 7,300/100,000 = 0.073. (NOTE: When putting the risk measure into the linear program, it is better to work with the total risk rather than the average risk to avoid round-off errors.)
Additionally, Williams is currently forecasting annual yields of 8% for the growth fund, 6% for the income fund, and 2% for the money market fund. Based on the information provided, how should the new client be advised to allocate the $300,000 among the growth, income, and money market funds? A linear program has been developed to help with this. However, this may or may not be totally correct. You should verify that it is the correct formulation before solving the problem. If it is not correct, make any necessary changes to the linear program before solving it on the computer.


G = dollars invested in the growth fund
I = dollars invested in the income fund
M = dollars invested in the money market fund

Maximize yield (return) = 0.08G + 0.06I + 0.02M
Subject to:
G + I + M = 300000 Total investment
0.10G + 0.07I + 0.01M < 18000 Total risk (based on 6% average risk)
G > 60000 Minimum in growth fund
G < 120000 Maximum in growth fund
I > 60000 Minimum in income fund
I < 150000 Maximum in income fund
M > 90000 Minimum in money market fund
G, I, M > 0

NOTE: The equality for the total investment constraint simplifies the other constraints. While the total amount invested is G + I + M, this can be replaced by 300000 due to the equality condition. For example, 20% of (G + I + M) becomes 20% of $300,000 or simply $60,000. If this were a less-than-or-equal-to constraint, this could not be done and that constraint would be G > 0.20(G + I + M).

Related Discussions:- Linear Programming

Explain Geometric distribution, Geometric distribution: The probability di...

Geometric distribution: The probability distribution of the number of trials (N) before the first success in the sequence of Bernoulli trials. Specifically the distribution is can

Odds ratio, Odds ratio is the ratio of the odds for the binary variable in...

Odds ratio is the ratio of the odds for the binary variable in two groups of the subjects, such as, males and females. If the two possible states of variable are labeled as 'succe

SCATTER DIAGRAM, MEANING ,IMPORTANCE AND RELEAVANCE OF SCATTER DIAGRAM

MEANING ,IMPORTANCE AND RELEAVANCE OF SCATTER DIAGRAM

Fisher''s transformation, The transformation of the Pearson's product momen...

The transformation of the Pearson's product moment correlation coefficient, r, can be given by   The statistic z has the normal distribution with mean   here ρ is the pop

Dummy variables, The variables resulting from the recoding categorical vari...

The variables resulting from the recoding categorical variables with more than two categories into the sequence of binary variables. Marital status, for instance, if originally lab

QUANTITATIVE METHOD., an oil company is considering whether or not to bid f...

an oil company is considering whether or not to bid for an offshore drilling contract. The bid would cost $60 with a 65% chance of gaining the contract. Outcome success Probability

Case-cohort study, Case-cohort study : The research design in epidemiology ...

Case-cohort study : The research design in epidemiology which involves the sampling of controls at the outset of the study that is to be compared with the cases from the cohort. Th

Prepare a report using regression analysis, Paul Jordan has just been hired...

Paul Jordan has just been hired as a management analyst at Digital Cell Phone Inc. Digital Cell manufactures a broad line of phones for the consumer market. Paul's boss, John Smith

Vital Statistics, meaning,uses,shortcomings and drawbacks of vital statist...

meaning,uses,shortcomings and drawbacks of vital statistics

Paired samples, Paired samples are the two samples of the observations wit...

Paired samples are the two samples of the observations with the characteristic feature with each of the observation in one sample have only one matching observation in the other s

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd