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GSB 622 Decision Support Systems Linear Programming & Excel Solver

The document describes a linear programming problem faced by Electro-Wiley Corporation. The company received a large order for three models of slip rings but does not have enough in-house production capacity. The problem is to determine the optimal allocation of production between in-house and outsourced to minimize total cost, subject to capacity constraints. Excel Solver is used to find the optimal solution of how many of each model to make in-house versus buy from competitors. Questions are asked about the optimal solution values and remaining unused capacity.

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Gohar Ghaffar
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Download as PDF, TXT or read online on Scribd
62 views

GSB 622 Decision Support Systems Linear Programming & Excel Solver

The document describes a linear programming problem faced by Electro-Wiley Corporation. The company received a large order for three models of slip rings but does not have enough in-house production capacity. The problem is to determine the optimal allocation of production between in-house and outsourced to minimize total cost, subject to capacity constraints. Excel Solver is used to find the optimal solution of how many of each model to make in-house versus buy from competitors. Questions are asked about the optimal solution values and remaining unused capacity.

Uploaded by

Gohar Ghaffar
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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GSB 622 Decision Support Systems

LINEAR PROGRAMMING & EXCEL SOLVER

PART B: LINEAR PROGRAMMING EXAMPLE -- MINIMIZATION

The Electro-Wiley Corporation is the world’s leading manufacturer of slip rings. A slip ring is an
electrical coupling device that allows current to pass through a spinning or rotating connection –
such as a gun turret on a ship, aircraft or tank. The company recently received a $750,000
order for various quantities of three types of slip rings. Each slip ring requires a certain amount
of time to wire and harness. The following table summarizes the requirements for the three
models of slip rings.

Model 1 Model 2 Model 3


Number ordered 3000 2000 900
Hours of wiring required per unit 2 1.5 3
Hours of harnessing required per unit 1 2 1

Unfortunately, Electro-Wiley does not have enough wiring and harnessing capacity to fill the
order by its due date. The company has only 10,000 hours of wiring capacity and 5,000 hours
of harnessing capacity available to devote to this order. Should the company reject the
business because it cannot handle the entire job? Or should the company subcontract a portion
of the order to one of its competitors? The unit costs of producing each model in-house and
buying the finished products from a competitor are provided here:

Model 1 Model 2 Model 3


Cost to make $50 $83 $130
Cost to buy $61 $97 $145

Decision Variables:
X1 number of Model 1 slip rings to make in-house
X2 number of Model 2 slip rings to make in-house
X3 number of Model 3 slip rings to make in-house
X4 number of Model 1 slip rings to buy from a competitor
X5 number of Model 2 slip rings to buy from a competitor
X6 number of Model 3 slip rings to buy from a competitor

The linear programming model representation of this problem consists of:

Minimize: 50X1 + 83X2 + 130 X3 + 61 X4 + 97 X5 + 145 X6 cost


Constraints: X1 + X4 = 3000 demand for Model 1
X2 + X5 = 2000 demand for Model2
X3 + X6 = 900 demand for Model 3
2 X1 + 1.5 X2 + 3 X3 <=10000 wiring constraint
1 X1 + 2 X2 + 1 X3 <= 5000harnessing constraint
All decision variables must be nonnegative
Use Excel Solver (as explained in subsequent pages) to determine the optimal number of each
model to make and to buy in order to minimize cost.

Analyze the Answer Report that is produced and answer the following questions. Then
upload the spreadsheet AND your answers to these questions as well for credit.

1. According to the Solver solution, what is the optimal number of Model 1 slip rings to
make? ___________________ to buy? ________________

2. According to the Solver solution, what is the optimal number of Model 2 slip rings to
make? ___________________ to buy? ________________

3. According to the Solver solution, what is the optimal number of Model 3 slip rings to
make? ___________________ to buy? ________________

4. What is the total cost? __________________________________________

5. How much of the wiring will remain unused? __________________________________

6. Which slip ring Model does Solver indicate should be purchased in greatest number from
a competitor? ___________________________________________________________
Why do you think that Solver is recommending a significant purchase of this particular
Model over the other two? Explain your answer.
Also Click Options and check Assume Non-Negative

Be sure to select the Answer Reports

Upload the spreadsheet AND your answers to the questions as well for credit.

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