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2023 10 31 Session7

The document discusses a linear programming problem formulation and solution for the Red Brand Canners Case. It identifies the decision variables and objective function to maximize total contribution. The constraints are based on exhibits that specify the amount and costs of different grades of tomatoes that can be used for various products. The LP is solved graphically to find the optimal solution. Interpretation is provided for the solution values and reduced costs in the Excel solver output. Shadow prices are also explained.

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21 views31 pages

2023 10 31 Session7

The document discusses a linear programming problem formulation and solution for the Red Brand Canners Case. It identifies the decision variables and objective function to maximize total contribution. The constraints are based on exhibits that specify the amount and costs of different grades of tomatoes that can be used for various products. The LP is solved graphically to find the optimal solution. Interpretation is provided for the solution values and reduced costs in the Excel solver output. Shadow prices are also explained.

Uploaded by

sanjusnair.rkl
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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IQDM

Session 7
Quiz#1 Syllabus
and
Doubt-Clearing Session
Questions?
Red Brand Canners Case

• Case context?
Decision Questions

• How to apportion crop of tomatoes?

• Should we purchase additional Grade A


tomatoes?
LP Formulation
DVs already identified
• x1 = Amount of Grade A tomatoes
in whole canned tomatoes
• x2 = Amount of Grade B tomatoes
in whole canned tomatoes
• x3 = Amount of Grade A tomatoes
in tomato juice
• x4 = Amount of Grade B tomatoes
in tomato juice
• x5 = Amount of Grade A tomatoes
in tomato paste
• x6 = Amount of Grade B tomatoes
in tomato paste
Objective

• Maximize the total contribution


• Should we use Exhibit 2 for our formulation?

• Should we use Exhibit 3 for our formulation?

• Both?

• Neither?

• Any combination of the exhibits?


Fixed costs?

• Allocated Overhead

• …anything else?
• Exhibit 2:
– Where do the values corresponding to “Fruit”
come from?

• Exhibit 3:
– Values of Z and Y?
– Tomato cost?
– Marginal Profit?
Therefore?
Objective Function?
Case Context?
Objective Function
Constraints
Excel Solver
Decision Questions

• How to apportion crop of tomatoes?

• Should we purchase additional Grade A


tomatoes?
Excel Solver
Discussion/ Remarks/ Questions
Exercise Q1
• A company owns two flour mills viz. A and B, which have
different production capacities for high, medium and low
quality flour.

• The company has entered a contract to supply flour to a firm


every day with at least 8, 12 and 24 quintals of high, medium
and low quality respectively.

• It costs the company Rs.2000 and Rs.1500 per hour to run mill A
and B respectively.

• In one hour, Mill A produces 6, 2 and 4 quintals of high, medium


and low quality flour,
Mill B produces 2, 4 and 12 quintals of H, M & L .

Formulate as a linear program.


LP Formulation of Q1
• DVs: x & y = number of hours (per day) mills A and B are run

• Objective Function:

min z = 2000x + 1500y

• Subject to the constraints:

6x + 2y ≥ 8

2x + 4y ≥ 12

4x + 12y ≥ 24

x ≤ 24, y ≤ 24

x, y ≥ 0
Exercise Q2
Consider the following LP.

Maximize z = 600x + 500y

Subject to:

6x + 10y ≤ 300 --- (Constraint C1)

5x + 3y ≤ 300 --- (Constraint C2)

x, y ≥ 0
Solve Graphically
Max z = 600x + 500y
Feasible region has corner points
Subject to: (0, 0), (50, 0) and (0, 30).
6x + 10y ≤ 300
5x + 3y ≤ 300 100 Slope of iso-contribution line = -6/5.
x, y ≥ 0 Dotted line is an iso-contribution line.

C2
Optimal point: (50, 0)

Optimal value = 30000

30 C1

0 50 60
Feasible
Region
Fill all entries, Show all computations,
and Interpret Entries
Variable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$C$4 x 50 0 600 Infinity 300
$D$4 y 0 -500 500 500 Infinity

Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$E$7 Constraint C1 300 100 300 60 300
$E$8 Constraint C2 250 0 300 Infinity 50
• “Reduced cost” of x is 0 (as optimal value of x is nonzero).

• “Reduced cost” of y:
If y = 1, value of x at new optimal = (300 – 10)/6,
as C1 continues to be tight.

New optimal value = 600*(300 – 10)/6 + 500*1 = 29500

Reduced cost = Change in objective function value = -500


• C2 is slack. Therefore, shadow price = 0.

• This continues to hold if we keep increasing the constraint-RHS.


Therefore, allowable increase = infinity.

• Allowable decrease:
C2 becomes tight (at (50, 0)) when the RHS reduces by 50.
For any further decrease in the RHS, shadow price is not 0.
Shadow price of C1:

Increasing RHS of C1 by 1 gives us the new optimal point (301/6, 0).

New optimal value = 600*301/6 + 500*0 = 30100.

Shadow price
= Change in objective function value = 30100 – 30000 = 100.

This shadow price holds till RHS of C1 becomes 360


(when the new optimal is (60, 0) after which C2 becomes tight).
Therefore, allowable increase = 60.
Allowable decrease = 300 (till x = 0 becomes tight).
Questions?
Thank You

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