SIM Machinery is a local precision engineering manufacturer that specialised in
manufacturing complex special process components for Oil & Gas and Aerospace Industries.
SIM Machinery has 4 main product family: Gas Lift Valves, Dummy Valves, Orifice Valves
and Safety Valve. All four products require performance test and reliability test before they
can be shipped to customers.
A total of 2,880 minutes of performance test time and 1,680 minutes of reliability testing time
are available next week. SIM Machinery planner has provided the possible market demand
(maximum and minimum sales) for each product type. Also, total gas lift valve produced
should not exceed 30% of the total production for all four product family, while total
production for Dummy and Safety valve to should account for at least 25% of the total
Develop a linear programming problem to determine how many pieces of each
product family the company should make next week to maximize the company’s
BUS107e Assignment 2
SIM UNIVERSITY Assignment 2 – Page 3 of 5
(b) Use Microsoft Excel Solver to solve for the optimal solution. Show the relevant
solution output and sensitivity output.
(c) Interpret the reports and discuss the following scenarios (without re-solving it using
Microsoft Excel Solver):
(i) If the profit of Dummy Valve increases by $10, explain if there will be any
changes to the original optimal mix and total profit?
(ii) If the profits of Gas Lift Valve and Safety Valve are reduced by 30% each,
explain if there will be any changes to the original optimal mix and total
(iii) Due to scheduled maintenance, the reliability testing time is expected to be
only 1,480 minutes. How will this affect the optimal solution?
The Retail Sales Index (RSI) measures the short-term performance of retail industries based
on the sales records of retail establishments. The RSI is presented at both current prices and
constant prices. The indices at current prices measure the changes of sales values which can
result from changes in both price and quantity. By removing the price effect, the indices at
constant prices measure the changes in the volume of economic activity. There are several
industries represented in the RSI as shown in Table 2.
As an analyst with a local telecommunication conglomerate, you have been tasked to provide
a reliable projection for the telecommunication industry sector sales performance and growth
strategy in 2017. Refer to the data file provided. The data file contains the monthly industry
sector sales performance from January 2013 to June 2016. The base year is 2014 (2014 =
Determine and justify an appropriate forecasting model for the telecommunication
apparatus and computer sector.
(b) Determine the forecast of RSI for the telecommunication apparatus and computer
sector, up to June 2017.
(c) Use the forecasted values of RSI for the telecommunication apparatus and computer
sector in (b), advise the company’s management on projection and growth strategy for
ABC Singapore is a leading local manufacturer of industrial fan, whose head office is based
in Singapore. The fans are produced in Johor, Malaysia and then shipped to authorised
distributors in Malaysia, Indonesia and Singapore. The company recently acquired another
manufacturer of industrial fan that is based in Hanoi, Vietnam. Due to the tax breaks, and
potential access to the Indochina market, the management is considering consolidating all its
manufacturing operations in Hanoi, Vietnam.
However, by uprooting from its Malaysia plant, the company runs into the risk of losing
potential clients in this region. Complicating matters is the fact that the marketing department
is predicting a decline in the demand for industrial fans. The company considered four
scenarios and the corresponding probabilities:
1. Demand is unchanged, with no noticeable effect on production; 10% chance.
2. Demand and production decline slightly; 15% chance.
3. Demand and production decline with moderate severity; 35% chance.
4. Demand and production decline severely; 40% chance.
By default, the company will appoint Vietnamese distributors to help market its product as it
is cost-effective. However, the management has also considered the possibility of setting up a
wholly owned or a joint venture subsidiary in Vietnam to perform the role of sole distributor
(D3), if it decides to consolidate all operations to Vietnam. This arrangement could help the
company to sell its product directly to customers in the Vietnam and the Indochina region,
mainly, Thailand and Laos. The criteria to form a joint venture hinge on the possibility of
roping a reliable local partner.
The table below shows the total payoffs under each decision and scenario for the case where
the management decides to consolidate all its manufacturing operation in Vietnam and to
operate either a wholly owned (D3a) or joint venture owned sole distributor (D3b). The
probability of securing a reliable local partner to form a joint venture is 30%.
Identify the decision to be made using the decision tree approach. Show the decision
tree and compute the expected values for each node. Advise the management on the
(b) Discuss and determine the expected value of perfect information. Interpret the result.