Problem Set 2: Linear Programming: Sensitivity Analysis

MBA-I: QAM
Instructor: Dr. Mukesh Kumar Mehlawat

Problem 1:
Consider the Union Airways problem presented in ppt (shared with you), including the data
given in Table. The Excel files include a spreadsheet that shows the formulation and optimal
solution for this problem. You are to use this spreadsheet and the Excel Solver to do parts (a)
to (e) below.
Management is about to begin negotiations on a new contract with the union that represents
the company’s customer service agents. This might result in some small changes in the daily
costs per agent given in Table for the various shifts. Several possible changes listed below are
being considered separately. In each case, management would like to know whether the change
might result in the solution in the spreadsheet no longer being optimal. Answer this question
in parts (a) to (e) by using the spreadsheet and Solver directly. If the optimal solution changes,
record the new solution.
(a) The daily cost per agent for Shift 2 changes from $160 to $165.
(b) The daily cost per agent for Shift 4 changes from $180 to $170.
(c) The changes in parts (a) and (b) both occur.
(d) The daily cost per agent increases by $4 for shifts 2, 4, and 5, but decreases by $4 for
shifts 1 and 3.
(e) The daily cost per agent increases by 2 percent for each shift.

Problem 2:
Reconsider the Union Airways problem and its spreadsheet model that was dealt with in
Problem 1 above.
Management now is considering increasing the level of service provided to customers by
increasing one or more of the numbers in the rightmost column of data Table for the minimum
number of agents needed in the various time periods. To guide them in making this decision,
they would like to know what impact this change would have on total cost.
Use the Excel Solver to generate the sensitivity report in preparation for addressing the
following questions.
(a) Which of the numbers in the rightmost column of Table can be increased without
increasing total cost? In each case, indicate how much it can be increased (if it is the only
one being changed) without increasing total cost.
(b) For each of the other numbers, how much would the total cost increase per increase of 1
in the number? For each answer, indicate how much the number can be increased (if it is
the only one being changed) before the answer is no longer valid.
(c) Do your answers in part (b) definitely remain valid if all the numbers considered in part
(b) are simultaneously increased by one?
(d) Do your answers in part (b) definitely remain valid if all 10 numbers are simultaneously
increased by one?
(e) How far can all 10 numbers be simultaneously increased by the same amount before your
answers in part (d) may no longer be valid?

Problem 3:
David, LaDeana, and Lydia are the sole partners and workers in a company which produces
fine clocks. David and LaDeana each are available to work a maximum of 40 hours per week
at the company, while Lydia is available to work a maximum of 20 hours per week. The
company makes two different types of clocks: a grandfather clock and a wall clock. To make
a clock, David (a mechanical engineer) assembles the inside mechanical parts of the clock
while LaDeana (a woodworker) produces the handcarved wood casings. Lydia is responsible
for taking orders and shipping the clocks. The amount of time required for each of these tasks
is shown below.

Each grandfather clock built and shipped yields a profit of $300, while each wall clock yields
a profit of $200. The three partners now want to determine how many clocks of each type
should be produced per week to maximize the total profit.
(a) Formulate a linear programming model for this problem.
(b) Use the Graphical Method and Sensitivity Analysis procedure to solve the model. Then
use this procedure to check if the optimal solution would change if the unit profit for
grandfather clocks is changed from $300 to $375 (with no other changes in the model).
Then check if the optimal solution would change if, in addition to this change in the unit
profit for grandfather clocks, the estimated unit profit for wall clocks also changes from
$200 to $175.
(c) Formulate and solve this model on a spreadsheet.
(d) Use the Excel Solver to check the effect of the changes specified in part (b).
(e) For each of the three partners in turn, use the Excel Solver to determine the effect on the
optimal solution and the total profit if that partner alone were to increase the maximum
number of hours available to work per week by 5 hours.
(f) Generate the Excel sensitivity report and use it to determine the allowable range for the
unit profit for each type of clock and the allowable range for the maximum number of
hours each partner is available to work per week.
(g) To increase the total profit, the three partners have agreed that one of them will slightly
increase the maximum number of hours available to work per week. The choice of which
one will be based on which one would increase the total profit the most. Use the
sensitivity report to make this choice. (Assume no change in the original estimates of
the unit profits.)
(h) Explain why one of the shadow prices is equal to zero (constraint associated with David).
(i) Can the shadow prices in the sensitivity report be validly used to determine the effect if
Lydia were to change her maximum number of hours available to work per week from
20 to 25? If so, what would be the increase in the total profit?
(j) Repeat part (i) if, in addition to the change for Lydia, David also was to change his
maximum number of hours available to work per week from 40 to 35.
(k) Use graphical analysis to verify your answer in part (j).
Problem 4:
Consider the following problem.

While doing sensitivity analysis, you learn that the estimates of the unit profits are accurate
only to within ±50 percent. In other words, the ranges of likely values for these unit profits are
$1 to $3 for activity 1 and $2.50 to $7.50 for activity 2.
(a) Formulate a spreadsheet model for this problem based on the original estimates of the unit
profits. Then use the Solver to find an optimal solution and to generate the sensitivity report.
(b) Use the spreadsheet and Solver to check whether this optimal solution remains optimal if
the unit profit for activity 1 changes from $2 to $1. From $2 to $3.
(c) Also check whether the optimal solution remains optimal if the unit profit for activity 1 still
is $2 but the unit profit for activity 2 changes from $5 to $2.50. From $5 to $7.50.
(d) Use the Graphical Method and Sensitivity Analysis procedure to estimate the allowable
range for the unit profit of each activity.

Problem 5:
Consider the following problem.

(a) Use the graphical method to solve this model.