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Assignment 4

This document presents 4 problems involving linear programming models. Problem 1 involves determining the optimal production allocation between two plants to minimize costs while meeting demand. Problem 2 involves determining the optimal product mix to maximize profits given resource constraints. Problem 3 involves determining the optimal investment allocation to maximize returns given constraints on risk exposure, maturity, and tax status. Problem 4 involves determining the optimal product mix for a nut company to maximize profits given constraints on resources, product demand, and machine capacities.

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MUHAMMAD MUDASSAR YASEEN
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41 views

Assignment 4

This document presents 4 problems involving linear programming models. Problem 1 involves determining the optimal production allocation between two plants to minimize costs while meeting demand. Problem 2 involves determining the optimal product mix to maximize profits given resource constraints. Problem 3 involves determining the optimal investment allocation to maximize returns given constraints on risk exposure, maturity, and tax status. Problem 4 involves determining the optimal product mix for a nut company to maximize profits given constraints on resources, product demand, and machine capacities.

Uploaded by

MUHAMMAD MUDASSAR YASEEN
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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ASSIGNMENT 4

Problem 1: Aire-Co produces home dehumidifiers at two different plants in Atlanta and Phoenix. The per
unit cost of production in Atlanta and Phoenix is $400 and $360, respectively. Each plant can produce a
maximum of 300 units per month. Inventory holding costs are assessed at $30 per unit in beginning
inventory each month. Aire-Co estimates the demand for its product to be 300, 400, and 500 units,
respectively, over the next 3 months. Aire-Co wants to be able to meet this demand at minimum cost.

a. Formulate an LP model for this problem.

Problem 2: Valu-Com Electronics manufactures five different models of telecommunications interface


cards for PCs and laptops. As summarized in the following table, each of these devices requires differing
amounts of printed circuit board, resistors, memory chips, and assembly.

Per unit requirements

HyperLink FastLink SpeedLink MicroLink EtherLink

Printed Circuit Board 20 15 10 8 5


(Square inches)
Resistors 28 24 18 12 16

Memory Chips 8 8 4 4 6

Assembly Labor 0.75 0.6 0.5 0.65 1


(in hours)

The unit wholesale price and manufacturing cost for each model are as follows.

Per unit revenues and Costs

HyperLink FastLink SpeedLink MicroLink EtherLink

Wholesale Price $189 $149 $129 $169 $139

Manufacturing Cost $136 $101 $96 $137 $101

In its next production period, Valu-Com has 80,000 square inches of PC board, 100,000 resistors, 30,000
memory chips, and 5,000 hours of assembly time available. The company can sell all the product it can
manufacture, but the marketing department wants to be sure the company produces at least 500 units
of each product and at least twice as many FastLink cards as HyperLink cards while maximizing profit.

a. Formulate an LP model for this problem.


Problem 3: 22. A trust officer at the Blacksburg National Bank needs to determine how to invest
$100,000 in the following collection of bonds to maximize the annual return.

Bond Annual return Maturity Risk Tax-Free

A 9.5% Long High Yes

B 8.0% Short Low Yes

C 9.0% Long Low No

D 9.0% Long High Yes

E 9.0% Short High No

The officer wants to invest at least 50% of the money in short-term issues and no more than 50% in
high-risk issues. At least 30% of the funds should go in tax-free investments and at least 40% of the total
annual return should be tax free.

a. Formulate an LP model for this problem.

Problem 4: The Molokai Nut Company (MNC) makes four different products from macadamia nuts
grown in the Hawaiian Islands: chocolate-coated whole nuts (Whole), chocolate-coated nut clusters
(Cluster), chocolate-coated nut crunch bars (Crunch), and plain roasted nuts (Roasted). The company is
barely able to keep up with the increasing demand for these products. However, increasing raw material
prices and foreign competition are forcing MNC to watch its margins to ensure it is operating in the most
efficient manner possible. To meet marketing demands for the coming week, MNC needs to produce at
least 1,000 pounds of the Whole product, between 400 and 500 pounds of the Cluster product, no more
than 150 pounds of the Crunch product, and no more than 200 pounds of the Roasted product. Each
pound of the Whole, Cluster, Crunch, and Roasted product contains, respectively, 60%, 40%, 20%, and
100% macadamia nuts with the remaining weight made up of chocolate coating. The company has 1100
pounds of nuts and 800 pounds of chocolate available for use in the next week. The various products are
made using four different machines that hull the nuts, roast the nuts, coat the nuts in chocolate (if
needed), and package the products. The following table summarizes the time required by each product
on each machine. Each machine has 60 hours of time available in the coming week.

Minutes required per Pound

Machine Whole Cluster Crunch Roasted

Hulling 1.00 1.00 1.00 1.00

Roasting 2.00 1.50 1.00 1.75

Coating 1.00 0.70 0.20 0.00

Packaging 2.50 1.60 1.25 1.00

The selling price and variable cost associated with each pound of product is summarized in the following
table:
Per Pound revenue and Costs

Whole Cluster Crunch Roasted

Selling Price $5.00 $4.00 $3.20 $4.50

Variable Cost $3.15 $2.60 $2.16 $3.10

a. Formulate an LP model for this problem.

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