Develop Linear Programmed

for Company

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Table of contents

01. Executive Summery…………………………………………………4

02. Introduction………………………………………………………….5
03. Analysis & discussion

3.1 Define the problem……………………………………………..6

3.2 Formulate the LP model………………………………………..7

3.3 Developing the basic solution………………………………….8

3.4 Analyzing result and interpretation……………………………14

04. Conclusion…………………………………………………………15

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Executive Summary

This report addresses issues related to linear programming. DI Leather Company talks about
three types of shoes that can be worn by all ages. Throughout this assignment, we discuss
project analysis to select the most optimal product to maximize profits. This assignment
provides analytical information on the relevant product mix using linear programming, the
most popular evaluation method currently used for project evaluation. That is, three types of
DI Leather shoes have been introduced to the market. This report begins with a brief overview
of linear programs and simple methods. Then we applied the hypothesis we made and the
problem associated with it. Subsequent templates were developed for linear programming to
solve the problem. The problem is then solved using the Simplex method. At the end of this
assignment, our team has identified the optimal products that the company should use to
maximize profits through linear programming.

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1. Introduction

Businesses have different purposes. Many manufacturing companies try to maximize their
profits. That is, to minimize costs. Manufacturing companies use a variety of operational
research methods to achieve these goals. Of these, linear programming is the main one. The
company selected by our team is DI Leather Company. This business belongs to the category
of small businesses. Currently this business distributes products in our area. DI Leather
Company manufactures slippers for all ages.
Our team selected three main types of slippers manufactured by DI Leather Company for this
problem. There are shoe 1, shoe 2 and shoe 3. Liner programming is a mathematical modeling
technology. Linear programming uses two main methods of problem solving. The two methods
are graphical method and simplex method. Our team has used the simplex method to solve
these problems and find the optimal solution.
The simplex method process also includes the following. There for Formulate the LP model,
Converting LP model in to the standard model of simplex method Developing the basic
solution, Test the optimality, Identification of entering variable, Identification of leaving
variable, Developing a new solution.
To identify this problem, the company has three decision variables. There are X1, X2 and X3
(shoe 1, shoe 2 and shoe 3) and five constraint as Raw materials, Special Raw materials, Labor
cost, Machinery and Overhead cost. The purpose of this assignment is to determine the optimal
solution required to maximize the company's profits using the simplex method. And these
problems ultimately make businesses choose the most profitable product.

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2. Analysis & discussion

3.1. Define the problem

The DI Leather manufacturing company produces three shoes as shoes 1, shoes 2 and shoes 3.
The table given below included information related to the production cost of each type of
product and the selling prices of each product.
Shoes
Shoes 1 Shoes 2 Shoes 3

Selling price
1230 885 1650
(Rs)

Production cost

Raw materials 1
500 400 600
(Rs)
Special Raw
materials 140 70 210
(Rs)

Labor cost (Rs) 150 100 200

Machinery (Rs) 90 45 180

Overhead cost
300 200 400
(Rs)

The cost per raw material is Rs.100 and the cost per special material is Rs.70, while the cost
per labor hour is Rs.50 and the cost of machine hour per unit is Rs.45. The DI Leather company
has limited the number of raw materials used in the manufacturers of shoes to 1500 units and
the special raw materials to 1260 units per month. The company can used at least of 1500 labor
hours for their monthly production. It has 1170 machine hours and all those hours are used by
the company for production in this month. Meanwhile, company can use Rs. 300,000 total
overhead cost for this month.
This company does not necessarily have to produce every type of product. This company aims
to maximize profits as much as possible. Determine the optimal monthly production for each
type of product by using simplex Method, to achieve that goal.

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3.2 Formulate the LP model

Once the problem is identified, the LP model is formulating. This LP model has been prepared
using the table above. Here, three decision variables, 𝑋1, 𝑋2 and 𝑋3 are used in the LP model.
Also, the LP model consists of 5 constraints. LP model is formulated as follows.
X1 = Number of units to be produced from shoes 1

X2 = Number of units to be produced from shoes 2

X3 = Number of units to be produced from shoes 3

Profit
Profit per unit = selling price – production cost
Shoes 1 = 1230 – 1130 = 100
Shoes 2 = 885 – 815 = 70
Shoes 3 = 1650 – 1590 = 60
MAXIMIZE Z = 100X1 + 70X2 + 60X3
Subject to
5X1 + 4X2 + 6X3 <= 1500 (Raw materials)

2X1 + X2 + 3X3 <= 1260 (Special Raw materials)

3X1 + 2X2 + 4X3 >= 1500 (Labor hours)

2X1 + X2 + 4X3 = 1170 (Machine Hours)

3X1 + 2X2 + 4X3 <= 300000 (Overhead Cost)

X1, X2, X3 >= 0 (non-negativity)

Converting LP model in to the standard model of simplex method

After processing the above LP model, it converts it to the simplex method standard model. This
eliminates all the equalities and inequalities between the raw materials, additional materials,
labor hours, machine hours and overhead cost constraints of the LP model. The objective
function also changes. Here three main variables are used to eliminate equalities and
inequalities. Using the main variables Slack variables, surplus variables and artificial variables,
each of the above constraints is converted to the simplex method standard model as follows.
• As the constraint-1 is of type '≤' we should add slack variable S1
• As the constraint-2 is of type '≤' we should add slack variable S2

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 • As the constraint-3 is of type '≥' we should subtract surplus variable S3 and add artificial
variable A1
• As the constraint-4 is of type '=' we should add artificial variable A2
• As the constraint-5 is of type '=' we should add slack variable S2

After introducing slack, surplus, artificial variables

Maximize Z = 100 X1 + 70 X2 + 60 X3 + 0 S1 + 0 S2 + 0 S3 + 0 S4 - M A1 - M A2
subject to

5 X1 + 4 X2 + 6 X3 + S1 = 1500

2 X1 + X2 + 3 X3 + S2 = 1260

3 X1 + 2 X2 + 4 X3 - S3 + A1 = 1500

2 X1 + X2 + 4 X3 + A2 = 1170

3 X1 + 2 X2 + 4 X3 + S4 = 300000

X1, X2, X3, S1, S2, S3, S4, A1, A2 ≥ 0

and x1, x2, x3,S1,S2,S3,S4,A1,A2≥0

3.3 Developing the basic solution

Here I first identify the non-basic variables and basic variables in the new constraints created.

Developing the basic solution

• 5x1 + 4x2 + 6x3 + s1 = 1500

x1 , x2 , x3 = 0
S1 = 1500

• 2x1 + x2 + 3x3 + s2 = 1260

x1 , x2, x3 = 0
S2 = 1260

• 3x1 + 2x2 +4x3 –s2 + A1 = 1500

x1 , x2 , x3 ,s3 = 0
A1 = 1500

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 • 2x1 +x2+4x3+a2 =1170
x1,x2,x3 = 0
A2 = 1170

• 3x1 + 2x2 + 4x3 +S4 = 300000

x1,x2,x3 = 0
S4 = 300000

Table 01 Entering Variable

Pivot Element

100 70 60 0 0 0 0 -M -M
CJ
CB Basic Solution X1 X2 X3 S1 S2 S3 S4 A1 A2

0 S1 1500 5 4 6 1 0 0 0 0 0

0 S2 1260 2 1 3 0 1 0 0 0 0

-M A1 1500 3 2 4 0 0 -1 0 1 0

-M A2 1170 2 1 4 0 0 0 0 0 1

0 S4 300000 3 2 4 0 0 0 1 0 0

Zj -5M -3M -8M 0 0 M 0 -M -M

Cj-Zj 5M+100 3M+70 8M+60 0 0 -M 0 0 0

Leaving Variable

Positive maximum solution (Cj-Zj) is 8M+60 and this is not the optimal solution.
So, The entering variable is X3. (Largest value)
The pivot element is 6
The leaving variable is A2 (Lowest positive value)

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 ❖ Zj values

Solution = (1500×0) +(1260×0) +(1800×-M) +(1170×-M) +(30900×0) =-2670M

X1 = (5×0) +(2×0) +(3×-M) +(2×-M) +(3×0) =-5M
X2 = (4×0) +(1×0) +(2×-M) +(1×-M) +(2×0) =-3M
X3 = (6×0) +(3×0) +(4×-M) +(4×-M) +(4×0) =-8M
S1 = (1×0) +(0×0) +(0×-M) +(0×-M) +(0×0) =0
S2 = (0×0) +(1×0) +(0×-M) +(0×-M) +(0×0) =0
S3 = (0×0) +(0×0) +(-1×-M) +(0×-M) +(0×0) =M
S4 = (0×0) +(0×0) +(0×-M) +(0×-M) +(1×0) =0
A1 = (0×0) +(0×0) +(1×-M) +(0×-M) +(0×0) = -M
A2 = (0×0) +(0×0) +(0×-M) +(1×-M) +(0×0) = -M

➢ Test the optimality

Once Tableau 1 is developed, it is important to determine if it has the optimal solution. It should
look at the Cj-Zj row. If all its values are negative (-) or (0) zero, it is determined as the optimal
solution. But this is not the optimal solution for this company. This is because not all values of
the Cj-Zj row in this Tableau 1 are zero or negative. There are also positive values here. There
are positive values here so the profit can be increased even more. Therefore, I have to find the
optimal solution going forward. Positive maximum Cj-Zj is 8M+60 and its column index is 3.
Minimum ratio is 250 and its row index is 1

➢ Identification of entering variable

As I continue to find the optimal solution, l first need to identify the Tableau 1 entering variable.
The value that contributes the most to the objective is called the entering variable. The column
with the highest positive value in the Cj-Zj row should be identified as the entering variable.
Here X3 can be identified as the entering variable.

➢ Identification of leaving variable

Once the entering variable is identified, the leaving variable is identified. The values in the
solution column of the basic variables should be divided by the identified entering variable.
The lowest positive value of the received values are identified as the leaving variable. Here S1
is identified as the leaving variable

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 ❖ New values for X3
1500 5 4 6 1 0 0 0 0 0
= = = =1 =0 =0 =0 =0 =0
6 6 6 6 6 6 6 6
6 6
250 0.833 0.667
= 0.1667

❖ New values for other rows

Old value – (respective pivot element × entering variable)
S2 = 1260-(3×250) = 510
2-(3×0.8333) = -0.5
1-(3×0.6667) = -1
3-(3×1) = 0
0-(3×0.1667) = -0.5
1-(3×0) = 1
0-(3×0) = 0
0-(3×0) = 0
0-(3×0) = 0
0-(3×0) = 0

A1 = 1500 - (4*250) = 500

3 - (4*0.8333) = -0.3333
2 - (4*0.6667) = -0.6667
4 - (4*1) = 0
0 - (4*0.1667) = -0.6667
0 - (4*0) = 0
-1 - (4*0) = -1
0 - (4*0) = 0
1 - (4*0) = 1
0 - (4*0) = 0

A2 = 1170- (4 * 250) = 170

2 - (4 * 0.8333) = -1.3333
1 - (4 * 0.6667) = -1.6667
4 - (4 * 1) = 0

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 0 - (4 * 0.1667) = -0.6667
0 - (4 * 0) = 0
0 - (4 * 0) = 0
0 - (4 * 0) = 0
0 - (4 * 0) = 0
1 - (4 * 0) = 1

S4 = 300,000 - ( 4* 250) = 299,000

3 – (4 * 0.8333) = -0.3333
2 - (4 * 0.6667) = -0.6667
4 – (4 * 1 ) =0
0 – (4 * 0.1667) = -0.6667
0 – ( 4 * 0) =0
0 – ( 4 * 0) =0
1 – ( 4 * 0) =1
0 – ( 4 * 0) =0
0 – ( 4 * 0) =0

Table 02
100 70 60 0 0 0 0 -M -M
Cj
Basi Solutio
CB X1 X2 X3 S1 S2 S3 S4 A1 A2
c n

60 X3 250 0.8333 0.6667 1 0.1667 0 0 0 0 0

0 S2 510 -0.5 -1 0 -0.5 1 0 0 0 0

-M A1 500 -0.3333 -0.6667 0 -0.6667 0 -1 0 1 0

-M A2 170 -1.3333 -1.6667 0 -0.6667 0 0 0 0 1

0 S4 299000 -0.3333 -0.6667 0 -0.6667 0 0 1 0 0

Zj 1.6667M+50 2.3333M+40 60 1.3333M+10 0 M 0 -M -M

Zj-Cj -1.6667M+50 -2.3333M+40 0 -1.3333M+10 0 -M 0 0 0

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Zj Values

Solution = (250*60) + (510*0) +(500* -M) +(170 *-M) + (199,000 *0) = 15000-670M

X1 = (0.8333 * 60) + (-0.50 *0) + (-0.3333 * -M) + (-1.3333* –M) + (-0.3333* 0)

1.6667M +50

X2 = (0.6667*60) + (-1 * 0) +(-0.6667 * -M) +( -1.6667* –M)+(-1.6667 * -M)+(-0.6667*

0) =2.3333M +40

X3 = (1 * 60)+(0 *0)+(0 *M)+(0 * -M)+(0 * 0) = 60

S1 = (0.1667* 60)+(-0.5 * 0)+( -0.6667 *-M) +( -0.6667* -M)+(-0.6667* 0) =

0.3333M+10

S2 = (0 * 60)+(1 * 0)+(0 *-M)+(0 * -M)+(0 * 0) = 0

S3 = (0 * 60)+( 0 * 0)+(1 *-M)+(0 * -M)+(0 * 0) = M

S4 = (0 *60) +( 0 * 0)+(-1* -M)+(0 *-M)+ ( 1 * 0) = 0

A1 = (0 * 60) +(0 * 0)+(1 * -M)+(0 * -M)+(0 * 0) = -M

A2 = (0 *60)+(0 *0)+(0 * -M)+(1 * -M)+(0 * 0) = -M

Since all Cj-Zj≤0

Hence, optimal solution is arrived with value of variables as : X1=0, X2=0, X3 = 250

Maximize Z=15000

But this solution is not feasible because the final solution violates the 3rd constraint 3X1 +
2X2 + 4 X3 ≥ 1500 and the artificial variable A1 appears in the basis with positive value 500.

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3.4 Analyzing result and Interpretation

The company initially identified the problem of the types of shoes and number of shoes to be
manufactured to maximize profit. The DI Leather manufacturing company used the simplex
method to solve its profit maximization problem. The company hoped to find the optimal
solution through that. The company was able to obtain the optimal solution from the above
calculations. According to the above optimal solution, the company made 3 products as shoes
1 (X1) ,shoes 2 (X2) , shoes 3 (X3) and two of them contribute to maximizing the profitability
of the company. According to the above optimal solution, the company can maximize profits
by producing and selling 250 units of shoes (X3) per month. Accordingly, DI manufacturing
company can earn a profit of rs.15,000 per month. This is the maximum monthly profit the
company can make from these products.
Therefore DI manufacturing can solve the problem by producing 250 units from shoes 2 (X2).
At DI manufacturing company, this can be identified as the optimal solution.

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 3. Conclusion
By using linear programming techniques, the report examines the optimal production of DI
Leather Company. Therefore, the company can produce that optimal product to maximize the
company's profit. According to this analysis report, the company can maximize its profit by
producing that optimal product. In the end, the company manages to find the optimal product.
That is, by producing 250 shoes per month, the company is able to maximize the expected
profit. And the profit that the company can get is 15,000. This can be identified as the optimal
solution for DI Leather.

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