Operations Research

(MOADE)
EXERCISES
Operations Research

1. DEWRIGHT COMPANY
Part I
The DEWRIGHT COMPANY is considering three new products to replace current models that are
being discontinued, so their OR department has been assigned the task of determining which
mix of these products should be produced. Management wants primary consideration given to
three factors: long-run profit, stability in the workforce, and the level of capital investment that
would be required now for new equipment.

In particular, management has established the goals of

(1) achieving a long-run profit (net present value) of at least $125 million from these
products,
(2) maintaining the current employment level of 4,000 employees, and
(3) holding the capital investment to less than $55 million.

However, management realizes that it probably will not be possible to attain all these goals
simultaneously, so it has discussed priorities with the OR department. This discussion has led to
setting penalty weights of 5 for missing the profit goal (per $1 million under), 2 for going over
the employment goal (per 100 employees), 4 for going under this same goal, and 3 for exceeding
the capital investment goal (per $1 million over). Each new product’s contribution to profit,
employment level, and capital investment level is proportional to the rate of production. These
contributions per unit rate of production are shown in Table 1, along with the goals and penalty
weights.
Table 1 - Data for the Dewright Co. nonpreemptive goal programming problem

Part II
Faced with the unpleasant recommendation to increase the company’s workforce by more than
20 percent, the management of the Dewright Company has reconsidered the original
formulation of the problem that was summarized in Table 1. This increase in workforce probably
would be a rather temporary one, so the very high cost of training 833 new employees would
be largely wasted, and the large (undoubtedly well publicized) layoffs would make it more
difficult for the company to attract high-quality employees in the future. Consequently,
management has concluded that a very high priority should be placed on avoiding an increase
in the workforce. Furthermore, management has learned that raising more than $55 million for
capital investment for the new products would be extremely difficult, so a very high priority also
should be placed on avoiding capital investment above this level. Based on these considerations,
management has concluded that a preemptive goal programming approach now should be
used, where the two goals just discussed should be the first-priority goals, and the other two
original goals (exceeding $125 million in long-run profit and avoiding a decrease in the

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Operations Research

employment level) should be the second priority goals. Within the two priority levels,
management feels that the relative penalty weights still should be the same as those given in
the rightmost column of Table 1. This reformulation is summarized in Table 2, where a factor of
M (representing a huge positive number) has been included in the penalty weights for the first-
priority goals to emphasize that these goals preempt the second-priority goals. (The portions of
Table 1 that are not included in Table 2 are unchanged.)
Table 2 - Revised formulation for the Dewright Co. preemptive goal programming problem

2. ADVERTISING AGENCY

The Leon Burnit Advertising Agency is trying to determine a TV advertising schedule for Priceler
Auto Company. Priceler has three goals:

• Goal 1 - Its ads should be seen by at least 40 million high-income men (HIM).
• Goal 2 - Its ads should be seen by at least 60 million low-income people (LIP).
• Goal 3 - Its ads should be seen by at least 35 million high-income women (HIW).

Leon Burnit can purchase two types of ads: those shown during football games and those shown
during soap operas. At most, $600,000 can be spent on ads. The advertising costs and potential
audiences of a one-minute ad of each type are shown in Table 3.

Table 3 - Cost and Number of Viewers of Ads for Priceler

a) Determine how many football ads and soap opera ads to purchase for Priceler.
b) Suppose Priceler determines that:
• Each million exposures by which Priceler falls short of the HIM goal costs Priceler a
$200,000 penalty because of lost sales.
• Each million exposures by which Priceler falls short of the LIP goal costs Priceler a
$100,000 penalty because of lost sales.
• Each million exposures by which Priceler falls short of the HIW goal costs Priceler a
$50,000 penalty because of lost sales.

Determine how many football ads and soap opera ads to purchase for Priceler.

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Operations Research

3. MONTEGA COUNTRY
Montega is a developing country which has 15,000,000 acres of publicly controlled agricultural
land in active use. Its government currently is planning a way to divide this land among three
basic crops (labeled 1, 2, and 3) next year. A certain percentage of each of these crops is exported
to obtain badly needed foreign capital (dollars), and the rest of each of these crops is used to
feed the populace. Raising these crops also provides employment for a significant proportion of
the population. Therefore, the main factors to be considered in allocating the land to these crops
are

(1) the amount of foreign capital generated,

(2) the number of citizens fed, and
(3) the number of citizens employed in raising these crops.

Table 4 shows how much each 1,000 acres of each crop contributes toward these factors, and
the last column gives the goal established by the government for each of these factors.

Table 4 – Crops contribution and goals

In evaluating the relative seriousness of not achieving these goals, the government has
concluded that the following deviations from the goals should be considered equally
undesirable: (1) each $100 under the foreign-capital goal, (2) each person under the citizens-fed
goal, and (3) each deviation of one (in either direction) from the citizens-employed goal.

a) Formulate a linear programming model for this problem.

b) Formulate a goal programming model for this problem.
c) Now suppose that the government concludes that the importance of the various goals
differs greatly so that a preemptive goal programming approach should be used. In
particular, the first-priority goal is citizens fed $1,750,000, the second priority goal is
foreign capital $70,000,000, and the third priority goal is citizens employed $200,000.
Use the goal programming technique to formulate one complete linear programming
model for this problem.
d) Use the streamlined procedure to solve the problem as formulated in part (c).
e) Use the sequential procedure to solve the problem as presented in part (c).

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Operations Research

4. CHEMCO PRODUCTS
Chemco is considering producing three products. The per-unit contribution to profit, labor
requirements, raw material used per unit produced, and pollution produced per unit of product
are given in Table 5. Currently, 1,300 labor hours and 1,000 units of raw material are available.
Chemco’s two objectives are to maximize profit and minimize pollution produced. Graph the
trade-off curve for this problem.

Table 5 – Data for Chemco

5. MACHINE REPLACEMENT
A company needs to replace a production machine. Several options were identified as suitable
to the replacement. The different options and its main characteristics are identified in Table 6.

Table 6 – Data for machine replacement

Price [€] Life span Maintenance Production rate

[years] Cost [€/year] [#/h]
Option 1 3500 10 300 1000
Option 2 2700 8 315 850
Option 3 3100 12 280 950
Option 4 4000 12 305 975

What would be your recommendation to the company?

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Operations Research

6. LOCATING A POWER PLANT

Given the continuously increasing consumption of electricity in Europe, it has been decided to
build a new hydro electrical power plant. Six national projects (sites) have been proposed by six
European countries, and six evaluation criteria have been defined by the European Commission.
The sites and the criteria are presented in Table 7.

Table 7 – Sites and criteria

Sites Criteria
Italy Manpower
Belgium Power (10MW)
Germany Construction cost (106EUR)
Sweden Operation cost (106EUR)
Austria Number of villages to evacuate
France Safety level

Some criteria are to maximize; others are to minimize. Preference functions and weights have
been associated to the criteria. In a first step, without well-established priorities, all the weights
have been set equal (𝑤𝑗 = 1, 𝑗 = 1, 2, … , 6). All the data are given in Table 8.

Table 8 – Power plant location – Data

Criteria Manpower Power Cost Operation Villages Safety

Min/Max Min Max Min Min Min Max
Type U-shape V-shape Linear Level Usual Gaussian
Thresholds 𝑞 = 10 𝑝 = 30 𝑞 = 50, 𝑝 = 500 𝑞 = 1, 𝑝 = 6 – 𝑠=5
Weights 1 1 1 1 1 1
Italy 80 90 600 5,4 8 5
Belgium 65 58 200 9,7 1 1
Germany 83 60 400 7,2 4 7
Sweden 40 80 1000 7,5 7 10
Austria 52 72 600 2,0 3 8
France 94 96 700 3,6 5 6

a) What is the PROMETHEE I ranking?

b) What is the PROMETHEE II ranking?

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