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Case Study

The document describes a company that produces three products (A, B, C) using three machines (M1, M2, M3). It provides the production time required for each product on each machine. The profit for each product and the machine time available are also given. An LP model is formulated to maximize total profit based on these constraints. The optimal solution, target cell value, and adjustable/shadow values are presented.

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Hussain Alkobaity
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43 views2 pages

Case Study

The document describes a company that produces three products (A, B, C) using three machines (M1, M2, M3). It provides the production time required for each product on each machine. The profit for each product and the machine time available are also given. An LP model is formulated to maximize total profit based on these constraints. The optimal solution, target cell value, and adjustable/shadow values are presented.

Uploaded by

Hussain Alkobaity
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Case Study

(adapted from Ravindran-Phillips-Solberg)

A company produces three products A, B and C using three machines M1, M2 and M3.
Each machine is available for 430, 460 and 450 minutes, respectively, per day. Each unit
of Product A requires 1 minute in M1, 3 minutes in M2 and 1 minute in M3. Each unit of
Product B requires 2 minutes in M1 and 4 minutes in M3. Each unit of C requires 1
minute in M1 and 2 minutes in M2. The per-unit profit for A,B and C are $4, $2 and $5,
respectively. The LP for this problem is

Max 4x+2y+5z
such that
x+2y+z ≤ 430
3x+2z ≤ 460
x+4y ≤ 450
x, y, z ≥ 0

Target Cell (Max)


Cell Name Original Value Final Value
$D$5 4x+2y+5z 0 1350

Adjustable Cells
Cell Name Original Value Final Value
$D$8 x 0 0
$D$9 y 0 100
$D$10 z 0 230

Adjustable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$D$8 x 0 -3 4 3 1E+30
$D$9 y 100 0 2 8 2
$D$10 z 230 0 5 1E+30 2

Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$D$14 x+2y+z <= 430 430 1 430 25 200
$D$15 3x+2z <= 460 460 2 460 400 50
$D$16 x+4y <= 450 400 0 450 1E+30 50
Answer the following questions:

1. Due to an increase in the cost of raw material, the per-unit profit of C drops to $4.
Find the new optimal solution and the maximum profit.

The optimal solution remains the same since the decrease in the per-unit profit of C is
less than the allowable decrease. However, the optimal profit decreases by 230. Thus,
the new optimal profit is 1350-230=1120.

2. Suppose the per-unit profit of A is increased to $6, would it be worth producing it?

This increase in the per-unit profit of A is less than the allowable increase. Therefore,
the optimal solution remains the same and thus, it is still not worth producing A.

3. Suppose the capacity of M2 can be increased by another 200 minutes at a cost of


$250. Does it make sense to do this?

Since 200 is less than the allowable increase, we can use the shadow price. Increasing
the capacity of M2 increases the profit by 2*200=400. Since this is more than $250, it
makes sense to increase the capacity of M2 by 200 minutes.

4. Is there any excess capacity on any of the machines? If so, on which machine and
how much excess capacity?

The shadow price of M3 is zero and the allowable decrease is 50. This means that
even if we decrease the capacity of M3 by 50 minutes, the profit will remain the
same. Thus, we have an excess capacity of 50 in M3.

5. Suppose that another company is willing to buy processing time on M1, M2 and M3
from the company. What is the fair price they should offer for each minute on each of
the machines?

Since the shadow prices reflect the per-unit worth of a resource, the per-unit fair price
for each minute of M1 is $1, of M2 is $2 and of M3 is zero dollars.

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