- 20 Marks
QTB – Nov 2015 – L1 – SB – Q6 – Operations Research
Formulate a linear programming problem for optimizing investment in conservative and speculative inventories under given constraints.
Question
Assume that the management of Community Bank Limited wants to invest up to N100,000 in inventory considered to be either conservative or speculative. The company’s board-approved investment policy is that the investment in conservative inventory should be at most N80,000, while the investment in the speculative inventory should be at least N12,000. Assume further that N1.6 return is expected on each naira invested in the conservative inventory, N2.0 return is expected on each investment in the speculative inventory, and that monetary policy regulations require that investment in the speculative inventory should be at most one-third of the investment in the conservative inventory.
Required:
a. State the type of Operations Research problem described above. (2 Marks)
b. Formulate mathematically the:
i. Objective function. (4 Marks)
ii. Constraint inequalities. (8 Marks)
iii. Investment problem. (6 Marks)
(Total: 20 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: Constraints, Inventory Management, Investment policy, Linear Programming, Optimization
- Level: Level 1
- Topic: Operations Research
- Series: NOV 2015