TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES

Graded Required Submission | Problem Solving Exercises in MERC 113

Advanced Optimization Theory and Methods

Name of the Student : JIFFY M. DIOSO_________________________________

Program/Year Level : T.I.P. QC Graduate School/1st Year
Date: 21 October 2023

MODULE 3 | INTRODUCTION TO OPTIMIZATION USING THE LENS OF

OPERATIONAL RESEARCH/MANAGEMENT SCIENCE [PROBLEM SOLVING]

Problem 1. Linear Programming [30 points]

A company manufactures two types of anti-dandruff shampoo: Tea Tree Extract and Ginger
Extract.

The Tea Tree solution contains 2 liters of tea tree oil and 3 liters of floral fragrance. The Ginger
variant is composed of 3 liters of ginger extract and 1.5 liters of bamboo fragrance. The company
has a very optimistic management that hopes to get the maximum profit for the organization.

Each sachet of Tea Tree variant sell Php2.80, and the Ginger Variant sell for Php2.00 per sachet.
However, the company has limited resources.
• First, the company can buy only up to 400,000 liters of extracts (i.e., tea tree and ginger)
each month at Php0.20 per liter. It can buy only up to 300,000 liters of fragrance per
month at Php0.50 per liter.
• Second, a special machinery is required to make Tea Tree Variant, and this machine has a
capacity of 90,000 sachet per month.
• Third, the variable cost of blending and packing the shampoo is Php0.25 per sachet of for
Tea Tree and Php0.20 for Ginger.
Suppose you are the manager of the company, and your salary is based on sales, what would be
the ideal number of products to produce to maximize the company profit?

Instructions: 1) Identify if the problem is a Maximization or Minimization case; 2) Identify the

following: Decision Variables, Objective Function, Constraints (formulate), and state the non-
negativity constraints; 3) Formulate the problem using the opposite perspective (e.g., if
maximization, use other perspective in formulation; 4) Solve using Corner Point Method; 5)
Solving using Systems of Equation and compare results with Corner Point Method; 6) Show
graphical solution (properly labeled with all the elements).
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Problem 2. Decision-Making : Maximax, Maximin, Minimax Regret [20 points]

Fruit/Country Russia Namibia Belarus
Apricot 4075 5000 6100
Berry 0 5250 12080
Cantaloupe 2500 7000 10375
Damson Date 1500 6000 9500
Fruitas Inc. Philippines, the country's leading company that makes fresh fruit shakes on the spot
is planning to venture on the use of exotic fruits. Similarly, the alternatives are to be tested in the
following countries: Russia, Namibia, Belarus. The cost of investment in Millions of Php is
presented in the table. It is important to note however, that Russians are not very keen on Berry
flavor. This was highlighted in the market study commissioned by the company. If you are the
International Brand Ambassador of the company, what strategy will you suggest? Make a
recommendation for an optimistic management team, a pessimistic executive management
committee, and suggest which strategy will give Fruitas less regret. Briefly explain each of your
proposed alternative.

Instructions: Make a recommendation based on the result of the evaluation of alternatives.

______________________________________________________________________________

Answer/Discussion (use several pages as needed)

Problem 1:

Profit Extracts Fragrance Machinery Variable cost Total

(Php/sachet) (li) (li) (sachet/mo.) (php/sachet) Profit
Tea Tree 2.8 - 0.25
Solution 2.8 2 3 1 0.25 = 2.55
Ginger 2 - 0.2
Variant 2 3 1.5 0 0.2 =1.8
constraints 400 000 300 000 90 000

1. Maximization Case
2. For Maximization Perspective:
A. Decision Variables:
Let: T = number of sachets of Tea tree solution
G = number of sachets of Ginger Variant

B. max Z = profit – cost

= (2.8T + 2G) – (0.25T + 0.2G)
max Z = 2.55T + 1.8G

C. Constraints:
2T + 3G ≤ 400 000 (li)
3T + 1.5G ≤ 300 000 (li)

D. non-negativity
T, G ≥ 0

3. For Minimization Perspective:

A. Decision Variables:
Let: T = number of sachets of Tea tree solution
G = number of sachets of Ginger Variant
 B. min Z = 400000T + 300000G

C. Constraints:
2T + 3G ≥ 2.55 (php/sachet)
3T + 1.5G ≥ 1.8 (php/sachet)

D. non-negativity
T, G ≥ 0

4. Graphical Solution

2T + 3G = 400 000

@G=0, T=200000 : (200000,0)

@T=0, G=133333.3 : (0,133333.3)

3T + 1.5G = 300 000

@G=0, T=100000 : (100000,0)
@T=0, G=200000 : (0,200000)

max Z = 2.55T + 1.8G

@ (0,0) : Z = 2.5(0) + 1.8(0) = 0

@ (0,133333.3) : Z = 2.5(0) + 1.8(133333.3) = 240000
@ (50000,100000) : Z = 2.5(50000) + 1.8(100000) = 305000
@ (100000,0) : Z = 2.5(100000) + 1.8(0) = 250000

Therefore, profit is maximized at 50000 sachet of Tea tree oil and 100000 sachet of
Ginger variant
Problem 2:

A. For Optimistic (Maximax)

Invest in Berry, since the cost of investment is the highest/best among the best,
the return of investment/potential profits should/must be the highest/best or
maximized.

B. For Pessimistic (Maximin)

Invest in Apricot, since the cost of investment is among the worst, the losses is
minimized

C. For less Regret (Minimax)

Russia=4075, Namibia=7000, Balarus=12080

Fruit/Country Russia Namibia Belarus

Apricot 0 2000 5980
Berry 4075 1750 0
Cantaloupe 1575 0 1705
Damson Date 2575 1000 2580

Invest in Damson Date, since this is the worst among the best, this balances the
risk and profits by minimizing regret

Honor Pledge (kindly affix name and signature)

“I affirm that I have not given or received any unauthorized help on this assignment,
and that this work is my own.”