Budget allocation. Suppose you are charged with allocating a fixed budget among

Question

Budget allocation. Suppose you are charged with allocating a fixed budget among independent projects. The projects and their benefits and costs are given by the following table: Assuming projects are not divisible and are not repeatable, how would you allocate a $50 budget if your goal is to maximize the benefit obtained? Explain your selection, and compute the benefit you obtain. What if you can repeat projects? How does your answer to (a) change? What if the size of your budget is reduced to $30? How does your answer to (a) change?

Explanation / Answer

To maximize the benefits , I will select the projects in a order, such that the project with maximum (B/C) ratio will be selected first.

So , first select B , then A ,and finally D and F.

So, $50 is allocated as $5 to B, $10 to A , $30 to D and $5 to F

b. If one can repeat projects , then only ptoject with highest B/C ratio will be selected.

So Selecting B n times such that

n*5 = 50

n = 10

So, Selecting B 10 times.

C. Again,To maximize the benefits , I will select the projects in a order, such that the project with maximum (B/C) ratio will be selected first.

So first allocate $5 to B , then $10 to A , $5 to F , Now since only $30 - ($5+10+5) = $10, So cann't select D as Cost for D =30 , So Select C

So, $30 is allocated as $5 to B, $10 to A , $5 to F and $10 to C.

If you don't understand anything, then comment, I will revert back on the same.

And If you liked the answer then please do review the same. Thanks :)

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