27-11-2013

Panchatantra Corporation

Exhibit 1
Planning Product Mix at Panchtantra Corporation
Parameter 60 x 40 40 x 40
lungis shirting
1. Selling Price (Rs per metre) Rs 10.90 Rs 6.60
2. Variable costs:
a) Wages paid to weavers (Rs per metre) Rs 4.50 Rs 1.50
b) Yarn cost (Rs per metre) Rs 5.50 Rs 4.50
3. Contribution (Rs per metre) Rs 0.90 Rs 0.60
4. Production rate: No. of metre per loom day 5 m. 12 m.
5. Yarn consumption: (in g per metre)
a) 40s yarn 60 g 100 g
b) 60s yarn 40 g

Mathematical Programming Model

What can you play around with?
Decision Variables
What is a solution?
A listing of Values of the Decision Variables
How do you evaluate solutions?
Objective Function
What do you mean a Best Solution?
Objective (Max/Min)
What are your boundaries?
Constraints
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Mathematical Programming Model for Panchatantra

What can you play around with?

Decision Variables: L, S
What is a solution?
A listing of Values of the Decision Variables: e.g. L=11,000; S
=9,600 (Ganeshas Solution)
How do you evaluate solutions?
Objective Function: 0.90L + 0.60S
What do you mean a Best Solution?
Objective (Max/Min): Max 0.90L + 0.60S
What are your boundaries?

Mathematical Programming Model for Panchatantra

What are your boundaries?

Constraints: 1. (1/5)L + (1/12)S <= 3,000 (Loom-Days)
2. 0.060L + 0.10S <= 2,400 (40s yarn)
3. 0.040L + 0S <= 480 (60s yarn)
4. L <= 11,000 (Lungi Sales)
5. S <= 22,000 (Shirt Sales)
6. L, S >= 0 (Non-negativity)

Mathematical Programming Model for Panchatantra

Max 0.90L + 0.60S

Constraints: 1. (1/5)L + (1/12)S <= 3,000 (Loom-Days)
2. 0.060L + 0.10S <= 2,400 (40s yarn)
3. 0.040L + 0S <= 480 (60s yarn)
4. L <= 11,000 (Lungi Sales)
5. S <= 22,000 (Shirt Sales)
6. L, S >= 0 (Non-negativity)

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Non-Negativity Constraints
6. L, S >= 0 (Non-negativity)

S=0
Shirting

L=0

0 Lungi
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Sales Capacities
4. L <= 11,000 (Lungi Sales)
5. S <= 22,000 (Shirt Sales)
Sales cap
on shirting
Sales cap
on lungi

Production capacity (loom-days)

1. (1/5)L + (1/12)S <= 3,000 (Loom-Days)

Sales cap
on shirting
Sales cap
on lungi
Loom-day
availability

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Availability of 40s yarn

2. 0.060L + 0.10S <= 2,400 (40s yarn)

Sales cap
on shirting
Sales cap
on lungi
Loom-day
availability
40s yarn
availability

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Availability of 60s yarn

3. 0.040L + 0S <= 480 (60s yarn)

Sales cap
on shirting
Sales cap
on lungi
Loom-day
availability
40s yarn
availability
60s yarn
availability

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Three alternatives

Ganapathy Sales cap

on shirting
Sales cap
Best on lungi
Loom-day
availability
40s yarn
Ganesh availability
60s yarn
availability

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Contribution = Rs.15,660
Sales cap
on shirting
Sales cap
on lungi
Loom-day
availability
40s yarn
availability
60s yarn
availability

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Contribution = Rs.16,200
Sales cap
on shirting
Sales cap
on lungi
Loom-day
availability
40s yarn
availability
60s yarn
availability

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Contribution = Rs.18,000
Sales cap
on shirting
Sales cap
on lungi
Loom-day
availability
40s yarn
availability
60s yarn
availability

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Contribution = Rs.19000
Sales cap
on shirting
Sales cap
on lungi
Loom-day
availability
40s yarn
availability
60s yarn
availability

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Optimal solution to Question 1

Sales cap
on shirting
Sales cap
on lungi
Loom-day
availability
40s yarn
availability
60s yarn
availability

Produce 6,66.67m Lungi and 20,000m Shirting

Contribution: Rs.18,000 17

Contribution = Rs.10,000
Sales cap
on shirting
Direction of Sales cap
improvement on lungi
Loom-day
availability
40s yarn
availability
60s yarn
Can this be optimal? availability

Optimal solution to a Linear Program cannot be in the interior

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Contribution = Rs.10,000
Sales cap
on shirting
Sales cap
on lungi
Loom-day
availability
40s yarn
availability
60s yarn
availability

Direction of
Can this be optimal? improvement

Optimal solution to a Linear Program will be on the edge

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Contribution = Rs.12,000
Sales cap
on shirting
Direction of
improvement Sales cap
on lungi
Loom-day
availability
40s yarn
availability
60s yarn
Can this be optimal?
availability

Optimal solution to a Linear Program cannot be in the interior

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Contribution = Rs.12,000
Sales cap
on shirting
Sales cap
on lungi
Loom-day
availability
40s yarn
availability
60s yarn
availability

Direction of
Can this be optimal? improvement

Optimal solution to a Linear Program will be on the edge

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For a Linear Program (LP), at least one optimal

solution lies on a corner point
Ganapathy Sales cap
on shirting
Sales cap
on lungi
Loom-day
availability
40s yarn
availability
60s yarn
availability
More Shirting

At least one of the best solution lies on a corner point

More Lungi
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For a Linear Program (LP), at least one optimal

solution lies on a corner point
Sales cap
on shirting
Sales cap
on lungi
Loom-day
availability
40s yarn
Ganesh availability
60s yarn
availability
More Shirting

At least one of the best solution lies on a corner point

More Lungi
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Non-Linear Programming

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Non-Linear Programming

Optimal Solution for a Non-

Linear Program may not
necessarily lie at a corner
point

Wages per loom-day constraint

4.5 + 1.5
20.50
5 + 12

Is the constraint Linear?

4.5 + 1.5 20.50 +

5 12

2.5
0.4 0
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Wages per loom-day constraint

2.5
0.4 0 Wages Constraint
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Sales cap
on shirting
Sales cap
on lungi
Loom-day
availability
40s yarn
availability
Wages per
60s yarn
loom-day
availability

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Optimal solution to Question 2

Sales cap
on shirting
Sales cap
on lungi
Loom-day
availability
40s yarn
availability
Wages per
60s yarn
loom-day
availability

Produce 8,333m Lungi and 16,000m Shirting

Contribution: Rs.17,100 28

Optimal solution to Question 1

Sales cap
on shirting
Sales cap
on lungi
Loom-day
availability
40s yarn
availability
60s yarn
availability

Produce 6,666.67m Lungi and 20,000m Shirting

Contribution: Rs.18,000 29

Available Cash Constraint

10 6 1,50,000 Cash Constraint

Sales cap
on shirting
Cash-flow Sales cap
constraint on lungi
Loom-day
availability
40s yarn
availability
60s yarn
availability

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Optimal solution with Available Cash Constraint

Sales cap
on shirting
Cash-flow Sales cap
constraint on lungi
Loom-day
availability
40s yarn
availability
60s yarn
availability

Produce 1,800m Lungi and 22,000m Shirting

Contribution: Rs.14,820 31

Add wages per loom-day constraint

Production cap
on shirting
Cash-flow Production cap
constraint on lungi
Loom-day
availability
40s yarn
availability
Wages per
60s yarn
loom-day
availability

New optimal solution

Production cap
on shirting
Cash-flow Production cap
constraint on lungi
Loom-day
availability
40s yarn
availability
Wages per
60s yarn
loom-day
availability

Produce 6970m Lungi and 13383m Shirting

Contribution: Rs.14303

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PANCHATANTRA REVISITED

More Products
Panchantantra is contemplating introducing a new
product (hand towel), 1 meter of which will use 50g
each of 40s and 60s yarn. It can be produced at the rate
of 10 meters per loom-day. Assume all the resources
are available in the same quantity as earlier.
Should Panchtantra introduce this product if 1 meter of
it will contribute Rs. 0.45?
Should Panchtantra introduce this product if 1 meter of
it will contribute Rs. 1.00?
What should be the minimum contribution per meter
of hand towel for it to be included in the product mix?

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How much overtime?

Workers have agreed to putting in up to 500 loom-days of
overtime under the condition that they will be paid Rs.1.50
extra per loom day. What is the maximum number of hours
of overtime that Ganesh should bargain for at this rate?

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