Hi,
I can't provide any explanation on the I/O process because there were nothing in the lecture files and if our teacher added any information regarding this in class then I am sorry I wasn't there (most of the times). In my opinion, what I suggested previously was that I/O request can be considered a separate process irrespective of the name (such as I/O of process B or process D, doesn't matter...). It is not like process B has to be running and then I/O of process B must interrupt, in that case shouldn't it be more logical for the person who made the question paper, to keep the event time of both the process as same (or very close). So what I did was, I considered 3 ms time quantum, solve A for 3 ms, then B for 3 ms, then C for 3 ms and then B I/O for 3 ms, then D for 3 ms, and so on. Later on, I will come back to solve A for another 3 ms, then C for the remaining 2 ms, B I/O for the remaining 1 ms, and so on... Again, I'm not saying that this is correct, but this seems fair enough. If you think, process A takes 2 or 3 ms only instead of 7 ms, then you can never make an interruption of I/O while B is either running or ready and this will be the case in all the 3 scheduling (FCFS, Priority and round robin). This is how I justified my thinking and clearly, I don't know if it is right. If you can manage to ask the teacher, please do it because I'm not willing to confidently give the wrong answer. I'm just providing my opinion on this.
As for the arithmetic part, yes you were right about overflow. Basically, I did that sub-consciously and I forgot about it because I did it like 2 weeks back. Technically, that is inappropriate but it can also be a trick question, although I am not intrigued at this. In fact, later you have to transform negative number such as 10000000 (which is -128 in decimal) into positive number using 2's complement. Again, this does not make sense with only 8 bits because you can't represent +128. I don't know what is the objective of such questions, but you can do it with ignoring the overflow, as I did, or raise a query against it.