Linear programming:

Graphical Method

F. M. Kapepiso
Learning objectives

At the end of the lecture, you should be able to:

• Explain linear programming (LP) model and identify
problems solved by LP
• Formulate linear programming problems in the standard
format
• Describe the meaning of the function and various types of
constraints
• Formulate LP both maximising and minimising problems
and solve them graphically
Introduction
In the previous topic we saw how to determine the profit-
maximising allocation of scarce resources when an
organization is faced with just one resource constraint.
When there is more than one resource constraint, the technique of
linear programming can be used
There are two linear programming techniques.
◦ The graphical method is used for problems involving two products
◦ The simplex method is used if the problem involves more than two products
Key Terms Used
 Alternate Optimal Solution: A situation in which more
than one optimal solution is possible. It arises when the
slope of the objective function is the same as the slope of a
constraint.
 Constraint: A restriction or limitation on the resources
available.
 Corner Point or Extreme Point: A point that lies on
one of the corners of the feasible region.
 Corner Point Method: The method of finding the
optimal solution to an LP problem by testing the profit or
cost level at each corner point of the feasible region.
Key Terms Used…
 Dual Price: The improvement in the objective function
value that results from a one-unit increase in the right-hand
side of that constraint.
 Feasible Region: The area satisfying all of the problem's
resource restrictions; that is, the region where all
constraints overlap. All possible solutions to the problem lie
within this feasible region.
 Inequality: A mathematical expression containing a
greater than-or-equal-to relation or a less-than-or-equal-to
relation.
 Infeasible Solution: Any point lying outside the feasible
region. It violates one or more of the stated constraints.
Key Terms Used…
 Isoprofit Line: A straight line representing all
combinations of Xl and X2 for a particular profit level.
 Non negativity Constraints: A set of constraints that
requires each decision variable to be nonnegative.
 Objective Function: A mathematical statement of the
goal of an organization, which may be maximization or
minimization.
 Redundancy: The presence of one or more constraints
that do not affect the feasible solution region.
 Shadow Price: The increase in the objective function value
that results from a one-unit increase in the right-hand side
of that constraint.
Linear programming defined
 A mathematical technique which can be employed by
management to determine the optimal utilisation of limited
resources.
 (CIMA definition: Linear programming is the use of a series of
linear equations to construct a mathematical model. The objective
is to obtain an optimal solution to a complex operational problem,
which may involve the production of a number of products in an
environment in which there are many constraints.
 It comprises the formulation of a model which is solved
mathematically to provide an optimal answer.
Linear programming…
Characteristic of LP problems
 Includes at least two decision variables (products produced
or services)
 Must be possible to define objective (maximisation of profit/
minimisation of costs)
 Objective must be subject to one or more restrictions
(constraints or limitation)
 To achieve objective there must be a number of alternatives
 LP problem can deal with only one objective function at a
time.
Linear programming model
 A decision making model consisting of two main
components
◦ Namely, a linear objective function and linear restrictions
 The objective function is expressed in a linear equation
format (maximisation of profit/ minimisation of costs)
 Linear restrictions (constraints or limitation) are also
expressed in a mathematical equation
Linear programming model…
The following constraints are often encountered:
 Capacity e.g. availability of machinery
 Resources e.g. availability of material, labour, funds etc.
 Composition and quality e.g. ingredients
 Technological e.g. quantities required as input to obtain
output
 Demand e.g. demand for a product
Underlying Assumptions (Prerequisites) of LP
 Problem can be expressed (stated) in numeric terms.
 Factors involved have linear relationships as explained
above.
 Restrictions on one or more factors involved.
 Availability of choices (alternative courses of action), thus
permitting selection of the best alternative.
 Non negative variables.
Graphic method
 The graphical method of linear programming is used for
problems involving two products
 If the problem involves only two decision variables, the
easiest way of solving an LP problem is graphical method
 So far as limitations (constraints) are concerned graphical
method can deal with fairly large number of variables,( not
more than 5- 6 constraints)
Graphic method…
Steps for solving graphic method
 Summarize data in standard LP format
 Define the variables
 Establish the objective function
 Establish the constraints
 Draw up a graph
 Plot all the constraint by means of a straight line
 Identify the feasible region
 Optimal solution is found either by corner point method
or isoprofit method
Graphic method…
EXAMPLE 1-MAXIMISATION PROBLEM
LPG is a Windhoek based firm of professional accountants and has
been providing two type of services viz. preparing and filing income
tax returns and preparing & filing VAT returns for past more than 10
years.
The process involves up to date record keeping also. From the past
experience it is revealed that two kind of services are more or less
similar in that both requires similar kind of processing, i. e.; certain
number of hours worked by articles and qualified accountants.
It is also known that processing one income tax return contributes
N$ 70 towards profit while a VAT return contributes N$ 50 after
deducting all variable expenses. The following table summarizes the
time requirement for processing both type of returns and availability
of working hours.
Graphic method…
EXAMPLE 1-MAXIMISATION PROBLEM…

Required : Looking at the shortage of manpower, the owner

of LPG requests you to suggest an optimum mix of two types
of tax returns that can be processed for maximizing the profit.
Graphical method- Example 2
Let us suppose that WX manufactures two products A and B.
both products pass through two production departments,
mixing and shaping. The organization's objective is to
maximize contribution to fixed costs.
Product A is sold for $1.50 whereas product B is priced
$2.00. There is unlimited demand for product A but demand
for B is limited to 13 000 units per annum. The machine
hours available in each department are restricted to 2 400
per annum. Other relevant data are as follows:
Machine hours required
Mixing Shaping
Product A 0.06 0.04
Product B 0.08 0.12

Variable cost per unit

Product A 1.3
Product B 1.7
Required: Suggest the optimal solution using graphical method
Graphical method…
EXAMPLE 3-MAXIMISATION PROBLEM
A manufacturer produces two products, Alpha and Beta. Alpha has
a contribution of N$3 per unit and Beta N$ 4 per unit. The
manufacturer wishes to establish the weekly production plan which
maximizes contribution. Production data and per unit requirements
are as follows:
Machining Labour Material
(Hours) (Hours) (kg)
Alpha 4 4 1
Beta 2 6 2
Total available per week 200 360 80
Because of a trade agreement, sales of Beta are limited to a weekly
maximum of 25 units and to honour an agreement with an old
established customer at least 30 units of Alpha must be sold per
week.
Required: Determine the optimal production mix that will maximize
the contribution
Exercise 1
A manufacturer of fitted kitchens produces two
units, a base unit and a cabinet unit. The base unit
requires 90 minutes in the production department
and 30 minutes in the assembly department. The
cabinet unit requires 30 and 60 minutes
respectively in these departments. Each day 21
hours are available in the production department
and 18 hours are available in the assembly
department. It has already been agreed that no
more than 15 cabinets are produced each day. If
base units make a contribution to profit of N$20
per unit and cabinet units of N$50 per unit.
 Required: Using LP graphic what product mix
will maximize the contribution to profit and
what is this maximum?
Practice question 1
Pin Point Ltd assembles and sells two products; printers and desktop
computers. Customers can purchase either(a) a computer or (b) a
computer plus a printer. The printers are not sold without a computer. The
result is that the quantity of printers sold is equal to or less than the
quantity of desktop computers sold. The contribution margins are N$200
per printer and N$100 per computer.
Each printer requires 6 hours assembly time on production line 1 and 10
hours assembly time on production line 2. Each computer requires 4 hours
assembly time on production line 1 only. (Many of the components of each
computer are preassembled by external suppliers.) Production line 1 has
24 hours of available time per day. Production line 2 has 20 hours of
available time per day.
Let x represent units of printers and y represent units of desktop
computers. The production manager must decide on the optimal mix of
printers and computers to manufacture.
Required:
1. Express the production manager’s problem in an LP format.
2. Which combination of printers and computers will maximize the
operating profit of Pin Point Ltd? Use simplex and graphical method
Practice question 2
Syntax is a small electronics company that manufactures tape recorders
and radios. The per-unit labor costs, raw material costs, and selling price
of each product are given in Table below.

Description Tape recorder Radio

Selling price (N$) 110 90
Material cost (N$) 45 30
Labour (N$) 30 30
Maximum sales 100 units 80 units
Minimum sales 20 units

On December 1, 2007, available raw material is 400 units. Each tape recorder
requires 3 units of raw material while radio requires 2 units. Labour requirement
for both products is 3 hour per unit and maximum hours available are 510.
Required:
1. Formulate LP problem stating objective function and constraints clearly.
2. Solve above LPP using graphic method.
 Adapted: Test 1 of 2016
2.1. A company manufactures two products (X and Y) in one of its factories. The
manufacturer wants to determine the production mix which will maximize profit. The
profit on product X is $25 and $50 on product Y. A maximum that can be sold for
product X is 50 and product Y 40. Production takes place in two departments. The
finishing department has a capacity of 300 hours while the assembly department has
a capacity of 480 hours.
The manufacturing times are as follows:
Finishing Assembly

Product X 5 hours 3 hours

Product Y 6 hours 6 hours

Required:

a) Formulate a linear programming model for this problem? (7 marks)

b) Determine the feasible region with the aid of a graph? (7 marks)
c) Indicate the solution using the corner point method. (5 marks)
d) Determine the optimal solution production mix? (2 marks)
 Adapted: Supplementary June 2016 examination
Nathan Transport Ltd, has both commercial and private customers. The average space
required to transport a private customer’s goods is 160 m³. To transport a commercial
customer’s goods however required on average 80 m³. The available transport space per
month is 1600 m³, with the available labour only 15 transport trips can be handled per month.
As a result of competition, at least 6 trips per month should be allocated to commercial
customers.

The average marginal contributions per transport trip are $200 for private customer and $150
per commercial customer.

Required:
3.1. Formulate the linear programming model. (6 marks)

3.2. Give a full graphic representation of the problem. (7 marks)

3.3. Determine how many private customer trips and how many commercial customer
trips should be undertaken to maximize profits, using the corner-point methods. (12
marks)
 Adapted: Normal June 2013 examination
A company manufactures two products (X and Y) in one of its factories. Production capacity
is limited to 80 000 machine hours per period. The available direct labour hours are 50000
per period.

The following information is provided concerning the two products:

Product X Product Y

Estimated Demand & Capacity (units) 315 150

Selling price (per unit) N$11200 N$15700

Variable costs (per unit) N$6300 N$8700

Machine hours 160 280

Direct labour hours 120 140

Fixed costs are absorbed into unit costs based upon full capacity and amounts to N$4000 per
unit of X and N$7000 per unit of Y respectively.

Required:

a) Using graphical method of linear programming, determine the optimum production

mix to maximize contribution. (17 marks)
b) Calculate the total profit earned? (4 marks)
c) Determine which of the constraints are binding. Why? (4 marks)
Graphical method- minimization
 Although decision problems concerned with resource
constraints usually involve the maximization of
contribution/profit, the may be a requirement to minimize
costs. The objective function is to minimize cost or other
quantities.
 The procedure for drawing axes and inserting lines for
constraints is similar to that of maximization problems.
 However, most of the limitations in minimization problems
are of more than or equal to (≥) type, hence, feasible
region is above all or most of constraint lines (as opposed
to maximization problems in which feasible region is found
below all or most of constraint lines).
Graphical method- minimization…
EXAMPLE 3-MINIMIZATION PROBLEM
A manufacturer is to produce and market a new fertilizer, which is to be a
mixture of two semi processed materials A and B. Materials A and B are
processed before introducing them in to the fertilizer manufacturing process
and have the following characteristics and cost pattern.
Nitrogen Lime Phosphates Cost/ kg
Material A 25% 45% 30% N$ 12
Material B 35% 25% 40% N$ 8
To compete with other brands and gain brand popularity the management
has decided that the fertilizer will be sold in packages of 100 kg each with
following qualitative characteristics.
It must contain at least 30% nitrogen
It must contain at least 30% lime
It must contain at least 20% phosphates

Required: you are requested to suggest the optimal course of action so

that the above requirements can be met with minimum possible cost
Exercise 2
The dean of the faculty of Economic and Management
Sciences at the University of Namibia is planning the
2nd semester of 2016. The course offerings will be
based on student demands which make it necessary to
offer at least 30 undergraduate and 20 postgraduate
courses in the term. Faculty agreements with the
Ministry of Higher Education also dictate that at least
60 courses be offered in total. Each undergraduate
course taught costs the university an average of N$
5000 in salaries, and each postgraduate course costs
N$ 6000.
Required: Using LP graphic, how many undergraduate
and postgraduate courses should be taught in the
faculty so that resources are put to the most efficient
use?
Thanks