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/ 25
sgasoura University 4" Year Prod. Engineering
Analysis of Prod. Systems, (PRES411)
Nae Mid-Term Exam, Dec. 2019
calty of Engineering
‘od. & Mech. Design Eng, Dept.
Time: = 2hr.
Marks: 25
Answer the following questio1
Question 1:
(a) What the similarities and differences between the graphical and Simplex methods for solving
Linear Programming problems.
(b) Use the Simplex method to determine an optimal solution(s) for the following Linear
Programming problem. At each table of solution, list the values of the: objective function,
decision variables, and slack variables.
Max. Z= 4x, + 10x,
Subject to: 2x,+ x, S10
2x, + 5x2 $20
2x, + 3x, S18
where: XyX, 20
Question
A realtor has five purchasers for six sites. The i purchaser is willing to pay price Py; (in
millions of $) for the j site. The values of Py are given in Table 1.
Table 1
Site
Profit ($x10) 7 b 5 a a e
1 0 1 s {s | 10 [1
y 2 6 2 6 7 4 9
4 3 6{|s]|9j]9 {9 {7
3 4 [2 |4 {27 [7 [0
5 s | 5s | 6 [| w] 3 [ 10
a) The realtor wishes to know which site to offer to each purchaser at what price so as to
maximize his total receipts. Find the answer for him and find his total revenue,
) Formulate this problem as a linear programming problem.
Mid-APS, Dec.19 Page 1 of 2 uestion 3:
(illustrate your answers with neat scaled charts). |
(@) Explain what is meant by: “a low break-even point is highly desirable.” Discuss how a low
break-even point can be achieved.
(b) A firm is considering three production methods alternatives: A, B, and C. Alternative A
would have an annual fixed cost of $100,000 and variable costs of $22 per unit. Alternative B
would have annual fixed costs of $120,000 and variable costs of $20 per unit. Alternative C
would have fixed costs of $80,000 and variable costs of $30 per unit, Selling price is expected to
be $50 per unit.
i. Calculate the break-even point (in units and in dollars) for each alternative. Which
alternative has the lowest break-even quantity?
ii, Which alternative will produce the highest profits for an annual output of 10,000
units?
iii. Assuming that 10,000 units is the full capacity output, tabulate the margin of safety
for the three alternatives.
iv. Which altemative would require the lowest volume of output to generate an annual
profit of $50,000?
v. > For what range of annual production volume values is each method preferred?
Eidef Rens
Bost Wishes
M.S. Hossein
Mid-APS, Dec.19 Page 2 of ‘answer of Question J-a)
Tables 1-1 and 1-2 lists the similarities and differences between the graphical and Simplex methods
for solving Linear Programming problems.
Table 1-1 Similarities between the graphical and Simplex methods.
No. of Decision |e
Sinsilarity Graphical ‘Method
Simplex Method
Problem + Inboth approaches, the problem is formulated as a set of linear equalities|
Formulation and inequalities; with a minimization/maximization objective function.
Solution ® Both methods will yield the same optimal solution(s).
Table 1-2 Differences between the graphical and Simplex methods.
Differences Graphical Method ‘Simplex Method
‘Can be used only for any number
Can be used only for 2 decision
of decision variables
‘Variables variables.
«Must evaluate all comer points (if Kos @ lesser number of
the comer point method is used). 4
Solution Steps
Involves the use of surplus, slack,
© Represents the problem) and artificial | variables to
graphically. represent the problem.
‘Easier to be solved by hand Harder to be solved by hand.
Solution Easier to be automated and
‘Algorithm |» Harder to be automated and] programmed.
programmed.
‘Page 112 Answer of Question 1-b)
To solve the problem using the simplex method, the problem formulation must be modified first,
Constraints:
A slack variable is added to cach < inequality constraint to convert it into an equality.
Cl 2xy+ x, $10 > Ixy t+ % +5, =10
C2 2x, + 5x, 20 Any + Sxp +52 = 20
C3 2x, + 3x, 518 Ixy + 3x, +5, = 18
Objective Function:
Z—4x,- 10x, =0 — max
Non-Negative Variables:
420, 220
S$, 20, S220, S320
etic Socio:
Non-Basic Variables: x, = 0 x20
Basic Variables: S,=10 S2=20 S;=18
Solution Steps:
Based on the initial solution, the first Simplex table (Table 1-3) is constructed.
Table 1-3 Simplex method — 1* step.
By | a eee So Se Ss jens |
Sa 1 1 0 0 10 10
Sz 0 1 0 20 4
Ss 2 0 0 i 18
Zz -4 -10 0 0 0 0
From Table 1-1, the Departing Basic Variable is S2 and the Entering Basic Variable is x3. The
next step is shown in Table 1-4.
Page 2/12 ‘Table 1-4 Simplex method ~ 1" optimal soluti
BY. |) xy % Sy Sy Sys] RS. | Me
Sk ae 0 1-02. 0 3.75
2 04 1 0 0.2 0 10
S3 0.8 0 0 0.6 1 75
i x 0 0 0 2 0 40
‘val the values in the Z row of Table 1-5 are non-negative.
+ An optimal solution has been reached. The values of the: objective function, decision variables,
and slack variables for this solution are listed in Table 1-5,
Table 1-5 Objective Function and Variables for the 1* optimal solution.
Decision Variables: Objective Function:
x, =0 x, =4
Slack Variables: z=40
S,=6 Sa S3=6
Also
In Table 1-4, x4 is a non-basic variable with a coefficient of zero in theP row.
«The problem has an alternative solution. To reach this solution, x, is chosen as the Entering Basic
Variable (key column). The Departing Basic Variable is $3. The next step is shown in Table 1-6. The
values of the: objective function, decision variables, and slack variables for this solution are listed in
Table 1-7.
Table 1-6 Simplex method - 2" optimal solution.
BY | x x St Se Ss; | RES. ca
% 1 0. 0625 0125 0 | 375
0 1 025 025 oO | 25
Ss 0 0105) 0s 1 3
x 0 0 0 2 o | 40
ive Function and Variables for the 1* optimal solution.
Table 1-5 Objecti
Decision Variables:
x, = 3.75
Slack Variables:
S,=0 %=0
Objective Function:
z= 40
Page 3/12 Answer of Question 2-1)
Converting Maximization Problem into a Minimization Problem:
‘To solve the maximization problem, it must be converted into a. minimization problem first. This
is done by subtracting the cells in each row from the highest value in that row (see the Table 2-1),
‘The maximization assignment table is shown in Table 2-2.
Table 2-1. The minimization assignment table.
Profit ($ x 10%) a eet See
a b ce a € f ue
1 o 1 8 5 10 1 10
2 6 2 6 7 4 7 9
: 3 6 5 0 oo 7 9
4 2 4 27 7 io 12
5 $5 6.10 3 10 10
checking for balance:
+: number of Purchasers (5) < number of Sites (6)
+ A dummy row (purehaser) should be added to balance the problem (Table 2-2)
Table 2-2, Balanced maximization assignment table.
Site
p 6
rofit ($ x 108) -— . i
1 1079 33 5
‘i 2 a3 7 oe
3 oe ite ee
5 4 os of
é i
5 $5 4 9
fedummy-}— 0-1 =P mG
i T
Row and Column Reduction:
Since in Table 2-2, each row and each column has at least one zero, then the row and column
reduction steps can be skipped,
Optimality Test (Trial 1)
In Table 2-2, the minimum number of lines required to cover all the zero values (denoted x) is
determined and then compared to the matrix size (denoted n),
* 5> puxy
am
Non-negative Variables:
my20 Vis
ifthe i purchaser gets the j* site
Column Constrains:
6
dxy eh
5
Xa + X21 + X31 + X41 + X51 + Xr
X42 4 Xaq + X32 + X42 + X52 + Xo2
yg t X23 + X33 + X43 + X53 + X63 = 1
Xag t X24 + X34 + X44 + X54 + Xe,
as + X25 + X35 + X45 + X55 + Xo5
X16 + X26 + X36 + X46 + X56 + X66 =
Oxy, + Lxy2 + 1+ O65 + 0X66
Page 7/12, Answer of Question 3-a)
A low break-even point (see Figure 3-1) is highly desirable for several reasons, including:
* A lower break-even point leads to more profit.
* A lower break-even point means a high margin of safety. The greater the margin of safety, the
more comfortable the organization will be; as it will have a greater capacity to with stand
recessionary phases.
A low break-even point implies that the organization can survive even if it is operating at
lower level of activity
z
8
3
a
g Total costs
8 7
3
5 5
3 Variable costs
G3
Fixed costs
1 Margin of safety
— =]
4 8. 6 0 12
Number of covers (2000's)
Generally, there are three ways (see Figure 3-2) for an organization to lower its break-even point
Fo
One = Ze:
a) Reduce fixed costs (Figure 3-2 (a): such improvement requires better management to
reduce overhead, such as efficiency savings, reductions in advertising and marketing budge
subletting unused office space, etc.
) Reduce variable costs Figure 3-2 (b)): such improvement calls for a continuous search afte
better methods, better processes, better materials and their utilization,
Page 8/12 ¢) Increase selling price (Figure 3-2 (c): which requires good market knowledge and relible
information on competitor prices This inerease inthe selling price is limited by the competition
and the customer’s willingness to pay. Too much increase may cause shrinkage of sales volume.
Fixed costs
Cost and income
a, 7 ‘Quantity
(@) Reduce the fixed costs
Break-even point
i
&
a, a ‘Quantity
(b) Reduce the variable costs
Break-even point
Cost and income
a, & ‘Quantity
(0) Increase the sales income
-2 Ways to lower the break-even point.
Figure 3
Page 9/12 Answer of Question 3-b)
‘The problem data are summarized in Table 3-1.
‘Table 3-1 Problem data.
Alternative aoe Ve ® ee @ Selling rice )
A 100,000 2 50
B 120,000 20 50
c 80,000 30 50
i) The break-even point (in units and in dollars) for each alternative
BEP in Units: Qpep = 2% BEP in Dollars: Roep = TCpep = bQnep
Using the former equations, the break-even point (in units and in dollars) for each alternative are
listed in Table 3-2. Figure 3-3 show the break-even point for each alternative. The alternative has
the lowest break-even quantity is Alternative A.
ii) Profit at Q = 10,000 units per vear.
Z=Q(b-a)-F
‘Using the former equation, the profit attained by each alternative at an annual output of 10,000
units is listed in Table 3-2.
Margin of Safety percentage Qrutt — ver
putt
x 100
‘Using the former equation, the margin of safety for the three alternatives is listed in Table 3-2.
Table 3-2 Comparing the three alternatives,
sve BEPin Units | BEP in Dollars | Profit at Qu Margin of S oe
Attemative] *Orivea) | (Sivean) SWyear | percontace | = $50.00/"
(unit/yeas)
A 3,571 178,550 180,000 64.3% 5,357
B 4,000 200,000 180,000 60.0% 5,667
Cc 4,000 200,000 120,000 60.0% 6,500
a
Page 10/12 “Troucands
unityyear)
33 Breakee
Figure
Page 11/12 iv) The volume of output to generate an annual profit of $50.00
_o+F
arr
Using the former equation, volume of output to generate an annual profit of $50,000 for each
alternative is listed in Table 3-2. Figure 3-4 show the profit chart for the three atematives The
alternative that would require the lowest volume of output to generate an annual profit of $50,000 is
altemative A.
__Cis Best |
‘Thousands
$/year
Figure 3-4 Profit chart.
¥) For what range of annual production volume values is each method preferred?
‘The point at which the profit of alternative A is equivalent to alternative C can be calculate from
the equation:
Zn = Q(ay — b) — Fy = Ze = Q(ae ~ b) = Fe
Iy-Fe
=Q=
=a
2,500 unit/yr
From the profit chart in Figure 3-4, the ranges of annual production volume values in which each
method is preferred are listed in Table 3-3.
Table 3-3 Ranges of production and associated best alternative,
Production range (unit/year) Best Alternative
0 2,500 c
2,500 — 10,000 A
Page 12/12 Mansoura University
Faculty of Engineering
Prod. Eng. Dept.
4" Year Prod. Engineering
Analysis of Prod. Systems
Final Exam, January 2020
Marks: 70
Answer the following questions, assume any missing data if any :
Qk
Consider the following linear programming formulation:
Profit, P= 3.x, + 3x, + Maximum
Subject to: 41+ x2 $30
x23
x2 S12
xx 20
: O
