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Lecture 6-LINEAR PROGRAMMING

The document describes a manufacturing company, Hotori, that makes two products, Nike shoes and Puma shoes, using a limited supply of ash wood and skilled labor hours. It provides production details and calculates the contribution per unit for each product. Using the constraints of materials, labor, and demand, it solves the problem using linear programming to determine the optimal production quantities to maximize total contribution is 15,000 Nike shoes and 12,000 Puma shoes.

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0% found this document useful (0 votes)
73 views23 pages

Lecture 6-LINEAR PROGRAMMING

The document describes a manufacturing company, Hotori, that makes two products, Nike shoes and Puma shoes, using a limited supply of ash wood and skilled labor hours. It provides production details and calculates the contribution per unit for each product. Using the constraints of materials, labor, and demand, it solves the problem using linear programming to determine the optimal production quantities to maximize total contribution is 15,000 Nike shoes and 12,000 Puma shoes.

Uploaded by

ttongoona3
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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Key budget factors sometimes known

as a limiting factor or principal


budget factor.
 this a is, the factor which restricts
indefinite expansion or unlimited
profits.
Where multiple (constraint) exists, a
mathematical technique known as
linear programming can be used to
establish the optimal solution.
1. The objectives and constraints (limiting
factors) are expressed as linear
functions / equations or inequalities.
2. There must be restriction in availability
or use of resources which are to be
allocated amongst the various
competing activities.
3. Certainty: It is believed that all relevant
information relating to a problem
situation are known, for example, the
resources available
1. Determining the objective
variable and objective function
2. Constructing constraint
statements
3. Solve a multiple scarce resource
problem graphically
4. Establish feasible region
5. Determine optimal solution
Hototri manufactures and sells
two products Nike and Puma. The
products both use the same type
of good quality wood (ash) which
can be difficult to source in
sufficient quantity. The supply of
ash is restricted to 5,400 kg per
period. Ash costs $40 per kg.
 The products are made by skilled
craftsmen (highly skilled labour)
who are well known for their
workmanship. The skilled craftsmen
take years to train and are difficult
to recruit. Hotori’s craftsmen are
generally only able to work for
12,000 hours in a period. The
craftsmen are paid $18 per hour.
Hotori sells the products to
a large market. Demand for
nike and puma is strong, and
in any period, up to 15,000
nike and 12,000 puma could
be sold. The selling price for
nike is $41 and the selling
price for puma is $69.
 Manufacturing details for the two
products are as follows
Nike Puma
Craftsmen time per unit 0.5 hrs 0.75 hrs
Ash per product 270 g 270 g
Other variable cost $1.20 $4.70
(a) Calculate the contribution/unit
earned from each product.
(b) Determine the optimal production
plan for a typical period assuming
that Hotori is seeking to maximise
the contribution earned.
 nike puma
 Sellingprice (a) 41.00 69.00
 Less: variable costs
 Material cost (W1) 10.80 10.80
 Craftsmen costs (W2) 9.00 13.50
 Other variable cost 1.20 4.70
 Total variable costs (b) (21.00) (29.00)
 Contribution margin (a – b) 20.00 40.00
labour constrain (Craftsmen time)
 0.5N + 0.75P≤ 12,000
 Material constrain (Ash)
 0.27N + 0.27P ≤ 5,400
Demand (Market)
 N ≤ 15,000
 P ≤ 12,000
 Labour
 0.5 N + 0.75P=12000
N 0 24 000
P 16 000 0

 Materials
 0.27N +0.27=5400
N 0 20 000
P 20 000 0

Demand
 P=12 000 N=15 000
 P 000

 16

 24 N 000
 P 000

20

 20 N 000
 P 000

 15 N 000
 P 000

 12

 N 000
 C=20N+40 P
 POINTS UNITS CONTRIBUTION
A (0,12000) 480 000
B (6000,12 000) 600 000
C (12 000,18 000) 560 000
D (15000, 6000) 540 000
 E (15 000,0) 300 000
 A machine shop makes boxes (B) and tins (T).

Contribution per box is $5 and per tin is $7. A

box requires 3 hours of machine processing time,

16kg of raw materials and 6 labour hours. A tin

requires 10 hours of machine processing time,

4kg of raw materials and 6 labour hours.


 In a given month, 330 hours of machine

processing time are available, 400kg of raw

material and 240 labour hours. The

manufacturing technology used means that

at least 12 tins must be made every month.


 Determine the optimal production plan if the
firm is seeking to maximize contribution
 The constraints are:
 3B + 10T ≤ 330
 16B + 4T ≤ 400
 6B + 6T ≤ 240
 T ≥ 12
 The optimal solution is found to be to
manufacture 10 boxes and 30 tins.
 THE END

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