Operations Management
Fall 2022
Problem 1: Resource allocation (10 points)
Given the following activities for staging a community play on Independence Day,
a)
b)
c)
d)
e)
Calculated the expected time and variance of each activity.
Draw an AON diagram with ES, EF, LS, LF.
What is the project duration and standard deviation?
What is the probability to finish the project in 45 days? 42 days? 38days?
How many days will be needed to finish the project with 80% probability? 95% probability?
Activity
Predecessor
A
B
C
D
E
F
G
H
B
A
A
B, D
C
C, F
Time (days)
a
m
b
2
4
6
5
5
5
3
5
7
7
9
11
11
12
13
5
6
7
9
10
11
4
7
10
I
J
K
D
E
F
7
3
8
9
3
10
11
3
12
L
M
N
O
H
I, J
G
L, M
6
7
10
4
8
8
12
6
10
15
14
8
Problem 2: Resource allocation (10 points)
Please use the following information to develop a project plan. In addition to the project activity cost there
is a overhead cost of $20/day. The client wants the project to finish by 6 days and they imposed a penalty
of $50 per day after day 6, also they will pay a bonus of $50 per day if the project finishes before day 6.
What is your suggestion for the company? Please show all your network diagrams and calculations for
each day with a graph showing total cost against number of days.
Problem 3: Decision Analysis (10 points)
Charles is considering three investment options for a small inheritance that he has just received 3tocks,
bonds, and money markets. The return of his investment depends on the performance of the economy,
which can be strong, average, or weak. The returns for each possible combination are shown in the
following table:
PAYOFFS
Outcomes
Alternatives
Strong Average Weak
Stocks
15%
5%
-10%
Bonds
8%
5%
-1%
Money Market
5%
3%
1%
Probability
0.2
0.35
0.45
a.
b.
c.
d.
e.
f.
g.
h.
Which investment should Charles choose if he uses maximax criterion?
Which investment should Charles choose if he uses maximin criterion?
Which investment should Charles choose if he uses equally likely criterion?
Which investment should Charles choose if he uses the criterion of realism with alpha = 0.5?
Which investment should Charles choose if he uses minimax regret criterion?
Using EMVs, which option should Charles choose? What is the maximum EMV?
Using EOL, which option should Charles choose? What is the minimum EOL?
Compute the EVPI and show that it is the same as the minimum EOL.

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