Linear Programming Basic Application


Intended for Internal Use of MBA Course, In-house Berau Coal

April 2019
What we are going to learn during this short course

#5. Graphical solution

#1. Equation & inequality
(optional)
• What is the difference between
• How to create a graphical solution of linear
them? programming models?
• How can it helps me to solve my • What are the limitations?
problem?

#2. Model formulation #3. Linear programming #4. Report interpretation

• Problem identification for model • Solver tools on different • What are those solver’s reports?
simulation
spreadsheet application • How do we interpret those reports?
• Formulate a mathematical model of
• Maximization, minimization, or
the unstructured problem and then
transform it into spreadsheet model
target value?
• What makes one model good or bad? • Solve the model
Equations and inequalities are both mathematical
sentences formed by relating two expressions to each other

In an equation, the two expressions are Where as in an inequality, the two expressions
deemed equal which is shown by the symbol =. are not necessarily equal which is indicated by the
symbols: >, <, ≤ or ≥.

x = y, x is equal to y
x>y, x is greater than y

x≥y, x is greater than or equal to y

x<y, x is less than y

x≤y, x is less than or equal to y

An equation or an inequality that contains at least one
variable is called an open sentence
What makes one model good or bad?

Begin with the End Model Simplicity Model Integrity

Understand the problem and the If you’re confused with your model, Zero effect!
objective of your model then there must be something
wrong with your model.

If you need to re-create your model

to solve similar problem, then
throw away your model.
 An overview of linear programming

Objectives of business firms frequently include • Steps in application:

maximizing profit or minimizing costs. • Identify problem as solvable by linear
programming
• Formulate a mathematical model of the
unstructured problem and then transform
it into spreadsheet model
• Solve the model
What is linear programming?
Linear programming is an analysis technique in which linear
algebraic relationships represent a firm’s decisions given a business
objective and resource constraints.
What are model components and formulation in the linear
programming?
• Resource availability:

• Decision variables
 40 hours of labor per day

mathematical symbols representing levels of activity of 120 pounds of clay
a firm. • Decision Variables:

x1=number of bowls to produce/day

• Objective function
 x2= number of mugs to produce/day
a linear mathematical relationship describing an
• Objective  function:

objective of the firm, in terms of decision variables, that maximize Z = $40x1 + 50x2

is maximized or minimized where Z= profit per day

• Constraints
 • Resource Constraints:


1x1 + 2x2 £ 40 hours of labor

restrictions placed on the firm by the operating 4x1 + 3x2 £ 120 pounds of clay

environment stated in linear relationships of the Non-negativity Constraints:, x1≥0; x2 ≥ 0
decision variables. • Complete Linear Programming Model:

maximize Z=$40x1 + 50x2

• Parameters
 subject to

numerical coefficients and constants used in the 1x1 + 2x2 £ 40

objective function and constraint equations 4x2 + 3x2 £ 120

x1, x2 ≥ 0
Let’s practice
Module 1

01. See Question 1, Appendix A

How to use solver tools • Maximize Z = 3X + Y. 

12X+14Y ≤85 

3X+2Y ≤18 Y≤4 


02. See Question 2, Appendix B

• Maximize Z = 2A + 4B. 

4A+6B ≥120 

2A+6B ≥72 

B ≥10
Module 2, will be provided in class

• Max 50A + 60B + 55C • State the optimal solution!

• Constraints • What is the optimal objective function value?
• A + B + C <= 100 • What would happen to the optimal solution IF
• 2A + 3B + 2C <= 300 • the unit profit on B decreases by 20?
• 2A + 3B + 2C >= 250 • the unit profit on C decreases to 45?
• A + 2C >= 60 • the unit profit on A & C change to 53?
• A, B, C >= 0 • Interpret the reduced cost for A
• What would happen to the objective function IF
• the RHS of constraint 1 increases by 5?
• the RHS of constraint 2 decreases to 250?
• the RHS of constraint 4 changes to 44?
• Which constraints are binding?
• What are the slack/surplus values?