Question 1:

You are managing a project that consists of seven activities labelled A through G, where each activity has
been estimated using three-time estimates: optimistic (𝑡𝑜), most likely (𝑡𝐿), and pessimistic (𝑡𝑝), as given
in the table below (in weeks).
Activity Optimistic (𝑡𝑜) Most Likely (𝑡𝐿) Pessimistic (𝑡𝑝)
A 2 6 10
B 4 6 12
C 2 3 4
D 2 4 6
E 3 6 9
F 6 10 14
G 1 3 5
The project logic follows this sequence: Activities A and B start the project; activities C and D begin after
A is completed; activity E begins after B and D are completed; activity F starts after B, C, and D are
completed; and activity G begins after F and is the final activity.
Based on this information, calculate the expected time (𝑇𝐸) for each activity, draw the project network
diagram showing all activities, determine all possible paths through the network and identify the critical
path, compute the total project variance and standard deviation along the critical path, and finally find
the expected duration of the project.
Solution:

t o + 4 t L +t p
T E=
6
Activity Calculation Expected Time (Te)
A (2 + 4 × 6 + 10)/6 = 36/6 6 Weeks
B (4 + 4 × 6 + 12)/6 = 40/6 6.67 Weeks
C (2 + 4 × 3 + 4)/6 = 18/6 3 Weeks
D (2 + 4 × 4 + 6)/6 = 24/6 4 Weeks
E (3 + 4 × 6 + 9)/6 = 36/6 6 Weeks
F (6 + 4 × 10 + 14)/6 = 60/6 10 Weeks
 G (1 + 4 × 3 + 5)/6 = 18/6 3 Weeks

All Paths and Their Durations:

Path 1: A → C → F → G
Duration: 6 (A) + 3 (C) + 10 (F) + 3 (G) = 22 weeks

Path 2: A → D → F → G
Duration: 6 (A) + 4 (D) + 10 (F) + 3 (G) = 23 weeks

Path 3: B → F → G
Duration: 6.67 (B) + 10 (F) + 3 (G) = 19.67 weeks

Critical Path: The longest path is A → D → F → G with a total duration of 23 weeks.

( )
2
2 t p−t o
σ =
6

Activity Variance (σ2) Calculation

A ((10−2)/6)2=(8/6)2≈1.78
D ((6−2)/6)2=(4/6)2≈0.44
F ((14−6)/6)2=(8/6)2≈1.78
G ((5−1)/6)2=(4/6)2≈0.44

Question 2:
A company experiences a constant demand of 18,000 units per year for a particular item. Each time the
company places an order; it incurs a cost of Rs. 150, which includes administrative and delivery
expenses. Additionally, the holding cost of keeping one item in inventory is Rs. 1.50 per month. The
company follows a policy where no shortages are allowed, and every order is replenished instantly.
Based on this information, calculate the Economic Order Quantity (EOQ) for this item, determine the
time interval between two consecutive orders (expressed in months), and find out how many orders the
company needs to place in a year to manage its inventory efficiently.
Solution:
Given:
 D = 18,000 units/year
 S = Rs. 150 per order
 H = Rs. 1.50/month = Rs. 18/year

EOQ Formula:

EOQ=
√ 2 DS
H
=
√2 ×18000 ×150
18
=¿ √ 300000=547.72 units ¿

Time Between Orders:

EOQ 547.72
Time = ×12= ×12 ≈ 0.351 months
D 18000

Number of Orders per Year:

D 18000
= ≈ 32.86 orders/year
EOQ 547.72

Question 3:
A manufacturer produces a product with an annual demand of 10,000 units. The setup cost per order is
Rs. 400, while the holding cost is Rs. 3 per unit per year and the shortage cost is Rs. 6 per unit per year.
The production rate is 20,000 units per year. Based on this information, calculate the Economic Order
Quantity and determine the Maximum Inventory Level that will enable the manufacturer to manage
inventory efficiently.

Solution:
Given:
 D = 10,000 units/year
 S = Rs. 400
 H = Rs. 3/unit/year
 Shortage Cost = Rs. 6 → not needed here as no shortage is allowed
 Production rate (P) = 20,000 units/year
EOQ for Production

EOQ=
√ 2 DS
H
. (
P
P−D
=. ) √ (
2 ×10000 × 400 20000
3
.
10000 )
EOQ=
√ 8000000
3
.2=√ 5333333.33=2309.4 units

Maximum Inventory Level

(
I max=EOQ . 1−
D
P ) (
=2309.4 . 1−
10000
20000 )
=2309.4 . 0.5=1154.7 units