QUESTION 1
HomeMart’s is considering producing and selling a new product for asphalt repair. The fixed cost for setting up the
production floor is estimated to be $320,000. Variable production and material cost are estimated to be $8 per
unit of the product. HomeMart estimates the total demand for the products to be 25000 units. HomeMart plans to
sell the product to hardware stores for $32 per unit.
a) What is the breakeven point?
b) What profit or loss can be anticipated with a revised demand of 10000 units?
c) With the demand of 10000 units, what is the minimum price per unit that HomeMart must charge to
break even?
d) If HomeMart believes that the price per unit could be increased to $45 and not affect the anticipated
demand of 10000 units, what profit or loss can be anticipated?
QUESTION 2
The sale of HomeMart’s asphalt repair product for the past 10 months is as shown below. If HomeMart uses 3-
month moving average to forecast sales:
Month 1 2 3 4 5 6 7 8 9 10
Sales 450 452 453 451 458 457 461 463 462 465
a) What are the forecasts for months 4-11?
b) What is the resulting MAE, MSE and MAPE values?
QUESTION 3
a) Using the data given in Question 2, forecast the sales of HomeMart’s asphalt repair product for the month
11 using linear trend projection forecast using the least squares method.
b) What is the resulting MAE, MSE and MAPE values?
c) Compare moving average forecast with trend projection forecast. Which method is better? Why?
Midterm Exam | BUSI 2013 | Section 7F | Nov 11, 2021 | Instructor: Sarva Jeganathan
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QUESTION 4
Consider the following linear programming problem:
Max 10A + 12B
s.t
6A + 12B <= 24
10A + 5B <= 25
a) Find the optimal solution using the graphical solution procedure.
b) If the objective function is changed to 10A + 4B, what is the optimal solution?
QUESTION 5
Consider the following linear program
Max 12A + 9B
s.t
5A + 15B <= 25
10A + 6B <= 26
a) Use Excel solver the find the optimal solution and generate the sensitivity report. What is the optimal
solution?
Use the Sensitivity report to answer the following questions:
b) Assume that the objective function coefficient for A changes from 12 to 16. Does the optimal solution
change? Why?
c) Assume that the objective function coefficient for A remains 12, but the objective function coefficient for
B changes from 9 to 12. Does the optimal solution change? Why?
d) Based on the shadow price and the right-hand-side range information in Sensitivity report, what
conclusion can you draw about the effect of changes to the right-hand side of the constraint 1?