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Linear Programming Notes From Cabrera

Linear programming is a mathematical technique that determines the optimal allocation of limited resources to maximize profit or minimize costs. It involves defining decision variables, expressing the objective function and constraints in terms of these variables, and using computational methods like the graphic, algebraic, or simplex method to find the best solution. An illustrative problem demonstrates maximizing contribution margin by determining the optimal product mix and production levels for two products given constraints on grinding and polishing machine hours. The solution finds the firm should produce 10 units of Product A and 20 units of Product B for a total contribution margin of $110.

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88 views

Linear Programming Notes From Cabrera

Linear programming is a mathematical technique that determines the optimal allocation of limited resources to maximize profit or minimize costs. It involves defining decision variables, expressing the objective function and constraints in terms of these variables, and using computational methods like the graphic, algebraic, or simplex method to find the best solution. An illustrative problem demonstrates maximizing contribution margin by determining the optimal product mix and production levels for two products given constraints on grinding and polishing machine hours. The solution finds the firm should produce 10 units of Product A and 20 units of Product B for a total contribution margin of $110.

Uploaded by

giezele ballatan
Copyright
© © All Rights Reserved
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Download as DOCX, PDF, TXT or read online on Scribd
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Linear Programming

- A mathematical technique that permits the determination of the best or optimum use of the available resources, namely
money, personnel, material, facilities and time
- It is a valuable aid to management because it provides a systematic and efficient procedure which can be used as a guide
in decision making. Managers are often faced with problems of selecting the most profitable or least costly way to use
available resources.
- The advantage of linear programming is its applicability to many types of problems and its usefulness for sensitivity
analysis. A major disadvantage is the restrictiveness of its linear assumptions, for example, that all costs are variable or
fixed.

This technique may be used to maximize revenue, contribution margin or profit function, or to maximize a cost function
subject to constraints. Specific applications include:
1. Determination of the product mix to maximize contribution margin
2. Selection of an investment mix
3. Determination of materials mix to minimize costs
4. Assignment of jobs to machines
5. Determination of transportation routes

Steps in the Formulation of Linear Progress


1. The first step is to define the decision variables
2. The next step is to express the objective function and constraints in terms of these decision variables

Computational Methods of Linear Programming


- To solve Linear Programming problems, several solution methods are available and they include:
1. Graphic Method
2. Algebraic Method
3. Simplex Method

The graphic method, although the easiest technique, is limited to problems with two variables.

The algebraic method is a trial-and-error technique. Pairs of constraints are solved algebraically to find their intersection.
The values of the decision variables are then substituted into the objective function and compared to find the best
combination.
1. The simplex method relies on an area of mathematics called matrix algebra. The equations that form the constraints are
arranged in a matrix of coefficients and manipulated as a group with matrix algebra.
2. Almost all practical applications of linear programming require the use of computers. Most computer facilities have a
linear programming package that uses the simplex algorithm to find the optimal solution.

Graphic Method
When a linear programming problem involves only two variables, a two-dimensional graph can be used to determine the
optimal solution. The steps are:
1. Determine the objective function
2. Determine basic relationships
3. Compute the optimum solution in the situation, especially the constraints as follows:
a. Change inequalities to equalities
b. Graph the equalities
c. Identify the correct side for the original inequalities
d. Identify the area of feasible solution. Feasible solutions are values of decision variables that satisfy all the constraints
simultaneously.
e. Determine the contribution margin at all the corners in the feasible region.

Illustrative Problem
A firm produces two products, A and B. Product A requires 2 hours of grinding and 4 hours of polishing. Product B
requires 5 hours of grinding and 2 hours of polishing. The manufacturer has 3 grinders and 2 polishers; therefore in a 40-
hour week there are 120 hours of grinding capacity and 80 hours of polishing capacity.

There is a ready market for both products and the contribution margin per unit of Product A and Product B are 3 and 4,
respectively.
Solution:
Product A Product B Capacity
Grinding 2 hours 5 hours 120 hours
Polishing 4 hours 2 hours 80 hours
CM Per Unit 3 4

A = number of units of Product A to be produced


B = number of units of Product B to be produced

Objective Function
Total CM = 3A + 4B

Explicit Constraints
2A + 5B ≤ 120 Grinding
4A + 2B ≤ 80 Polishing

4A + 2B = 80
2A + 5B = 120 Multiply by 2

4A + 2B = 80 Equation 1 less Equation 2


4A + 10B = 240
-8B = -160
-8 -8
B = 20 Substitute B = 20 in one of the equations

4A + 2 (20) = 80
4A = 80 – 40
4A = 40
4 4
A = 10

Allocation of hours
Product A Product B Total Hours
10 Units 20 Units
Grinding 20 hours 100 hours 120 hours
Polishing 40 hours 40 hours 80 hours

The firm should produce 10 units of A and 20 units of B.


Total CM = 3 (10) + 4 (20)
Total CM = 110

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