C h a p t e r 2

Linear Programming: Applications and

Model Formulation
“Whenever there is a hard job to be done I assign it to a lazy man; he is sure to find an easy
way of doing it.”
– Walter Chrysler

PREVIEW
Linear programming (LP) is a widely used mathematical modelling technique developed to help decision
makers in planning and decision-making regarding optimal use of scarce resources. This chapter is
devoted to illustrate the applications of LP programming in different functional areas of management and
how LP models are formulated.

LEARNING OBJECTIVES

After reading this chapter you should be able to

z identify situations in which linear programming technique can be applied.
z understand fundamental concepts and general mathematical structure of a linear programming model.
z express objective function and resource constraints in LP model in terms of decision variables and
parameters.
z appreciate the limitations and assumptions of linear programming technique with a view to interpret the
solution.

CHAPTER OUTLINE
2.1 Introduction 2.8 Examples of LP Model Formulation
2.2 Structure of Linear Programming Model • Conceptual Questions
2.3 Advantages of Using Linear Programming • Self Practice Problems
2.4 Limitations of Linear Programming • Hints and Answers
2.5 Application Areas of Linear Programming ‰ Chapter Summary
2.6 General Mathematical Model of Linear ‰ Chapter Concepts Quiz
Programming Problem ‰ Case Study
2.7 Guidelines on Linear Programming Model
Formulation
26 Operations Research: Theory and Applications

2.1 INTRODUCTION
The application of specific operations research techniques to determine the choice among several courses
of action, so as to get an optimal value of the measures of effectiveness (objective or goal), requires to
formulate (or construct) a mathematical model. Such a model helps to represent the essence of a system
that is required for decision-analysis. The term formulation refers to the process of converting the verbal
description and numerical data into mathematical expressions, which represents the relationship among
relevant decision variables (or factors), objective and restrictions (constraints) on the use of scarce resources
(such as labour, material, machine, time, warehouse space, capital, energy, etc.) to several competing activities
(such as products, services, jobs, new equipment, projects, etc.) on the basis of a given criterion of optimality.
The term scarce resources refers to resources that are not available in infinite quantity during the planning
period. The criterion of optimality is generally either performance, return on investment, profit, cost, utility,
Linear
Programming is a
time, distance and the like.
mathematical In 1947, during World War II, George B Dantzing while working with the US Air Force, developed LP
technique useful for model, primarily for solving military logistics problems. But now, it is extensively being used in all functional
allocation of ‘scarce’
or ‘limited’
areas of management, airlines, agriculture, military operations, education, energy planning, pollution control,
resources, to transportation planning and scheduling, research and development, health care systems, etc. Though these
several competing applications are diverse, all LP models have certain common properties and assumptions – that are essential
activities on the for decision-makers to understand before their use.
basis of a given
criterion of Before discussing the basic concepts and applications of linear programming, it is important to
optimality. understand the meaning of the words – linear and programming. The word linear refers to linear relationship
among variables in a model. That is, a given change in one variable causes a proportional change in another
variable. For example, doubling the investment on a certain project will also double the rate of return. The
word programming refers to the mathematical modelling and solving of a problem that involves the use
of limited resources, by choosing a particular course of action (or strategy) among the given courses of
action (or strategies) in order to achieve the desired objective.
The usefulness of this technique is enhanced by the availability of several user-friendly computer
software such as STORM, TORA, QSB+, LINDO, etc. However, there is no computer software for building
an LP model. Model building is an art that improves with practice. A variety of examples are given in this
chapter to illustrate the formulation of an LP model.

2.2 STRUCTURE OF LINEAR PROGRAMMING MODEL

2.2.1 General Structure of an LP Model

The general structure of an LP model consists of following three basic components (or parts).
Decision variables (activities) The evaluation of various courses of action (alternatives) and select the
best to arrive at the optimal value of objective function, is guided by the nature of objective function and
availability of resources. For this, certain activities (also called decision variables) usually denoted by
x1, x2, . . ., xn are conducted. The value of these variables (activities) represents the extent to which each
of these is performed. For example, in a product-mix manufacturing problem, an LP model may be used to
Four components of determine units of each of the products to be manufactured by using limited resources such as personnel,
any LP model are: machinery, money, material, etc.
(i) decision
variables, (ii) The value of certain variables may or may not be under the decision-maker’s control. If values are under
objective function, the control of the decision-maker, then such variables are said to be controllable, otherwise they are said
(iii) constraints, and to be uncontrollable. These decision variables, usually interrelated in terms of consumption of resources,
(iv) non-negativity
require simultaneous solutions. In an LP model all decision variables are continuous, controllable and non-
negative. That is, x1 ≥ 0, x2 ≥ 0, . . ., xn ≥ 0.

The objective function The objective function of each LP problem is expressed in terms of decision
variables to optimize the criterion of optimality (also called measure-of-performance) such as profit, cost,
revenue, distance etc. In its general form, it is represented as:
Optimize (Maximize or Minimize) Z = c1x1 + c2 x2 + . . . + cn x n,
where Z is the measure-of-performance variable, which is a function of x1, x2, . . ., xn. Quantities c1, c2, . . .,
cn are parameters that represent the contribution of a unit of the respective variable x1, x2, . . ., xn to the
 Linear Programming: Applications and Model Formulation 27

measure-of-performance Z. The optimal value of the given objective function is obtained by the graphical
method or simplex method.
The constraints There are always certain limitations (or constraints) on the use of resources, such as:
labour, machine, raw material, space, money, etc., that limit the degree to which an objective can be achieved.
Such constraints must be expressed as linear equalities or inequalities in terms of decision variables. The
solution of an LP model must satisfy these constraints.

2.2.2 Assumptions of an LP Model

In all mathematical models, assumptions are made for reducing the complex real-world problems into a
simplified form that can be more readily analyzed. The following are the major assumptions of an LP model:
Assumptions of an
1. Certainty: In LP models, it is assumed that all its parameters such as: availability of resources, profit LP model are:
(i) certainty,
(or cost) contribution per unit of decision variable and consumption of resources per unit of decision (ii) additivity,
variable must be known and constant. (iii) proportionality, &
(iv) divisibility
2. Additivity: The value of the objective function and the total amount of each resource used (or
supplied), must be equal to the sum of the respective individual contribution (profit or cost) of the
decision variables. For example, the total profit earned from the sale of two products A and B must
be equal to the sum of the profits earned separately from A and B. Similarly, the amount of a resource
consumed for producing A and B must be equal to the total sum of resources used for A and B
individually.

3. Linearity (or proportionality): The amount of each resource used (or supplied) and its contribution
to the profit (or cost) in objective function must be proportional to the value of each decision variable.
For example, if production of one unit of a product uses 5 hours of a particular resource, then making
3 units of that product uses 3×5 = 15 hours of that resource.

4. Divisibility (or continuity): The solution values of decision variables are allowed to assume
continuous values. For instance, it is possible to collect 6.254 thousand litres of milk by a milk dairy
and such variables are divisible. But, it is not desirable to produce 2.5 machines and such variables
are not divisible and therefore must be assigned integer values. Hence, if any of the variable can
assume only integer values or are limited to discrete number of values, LP model is no longer applicable.

2.3 ADVANTAGES OF USING LINEAR PROGRAMMING

Following are certain advantages of using linear programming technique:

1. Linear programming technique helps decision-makers to use their productive resources effectively.
2. Linear programming technique improves the quality of decisions. The decision-making approach of the
user of this technique becomes more objective and less subjective.
3. Linear programming technique helps to arrive at optimal solution of a decision problem by taking into
account constraints on the use of resources. For example, saying that so many units of any product
may be produced does not mean that all units can be sold.
4. Linear programming approach for solving decision problem highlight bottlenecks in the production
processes. For example, when a bottleneck occurs, machine cannot produce sufficient number of units
of a product to meet demand. Also, machines may remain idle.

2.4 LIMITATIONS OF LINEAR PROGRAMMING

In spite of having many advantages and wide areas of applications, there are some limitations associated
with this technique. These are as follows:
1. Linear programming assumes linear relationships among decision variables. However, in real-life problems,
decision variables, neither in the objective function nor in the constraints are linearly related.
28 Operations Research: Theory and Applications

2. While solving an LP model there is no guarantee that decision variables will get integer value. For
example, how many men/machines would be required to perform a particular job, a non-integer valued
solution will be meaningless. Rounding off the solution to the nearest integer will not yield an optimal
solution.
3. The linear programming model does not take into consideration the effect of time and uncertainty.
4. Parameters in the model are assumed to be constant but in real-life situations, they are frequently
neither known nor constant.
5. Linear programming deals with only single objective, whereas in real-life situations a decision problem
may have conflicting and multiple objectives.

2.5 APPLICATION AREAS OF LINEAR PROGRAMMING

Linear programming is the most widely used technique of decision-making in business and industry and
in various other fields. In this section, broad application areas of linear programming are discussed:

Applications in Agriculture
These applications fall into categories of farm economics and farm management. The former deals with inter-
regional competition, optimum allocation of crop production, efficient production patterns under regional
land resources and national demand constraints, while the latter is concerned with the problems of the
individual farm such as allocation of limited resources such as acreage, labour, water supply, working capital,
etc., so as to maximize the net revenue.

Applications in Military
Military applications include (i) selection of an air weapon system against the enemy, (ii) ensuring minimum
use of aviation gasoline (iii) updating supply-chain to maximize the total tonnage of bombs dropped on a
set of targets and takes care of the problem of community defence against disaster at the lowest possible
cost.
Production Management
Product Mix To determine the quantity of several different products to be produced, knowing their
per unit profit (cost) contribution and amount of limited production resources used. The objective is
to maximize the total profit subject to all constraints.
• Production Planning This deals with the determination of minimum cost production plan over the
planning period, of an item with a fluctuating demand, while considering the initial number of units in
inventory, production capacity, constraints on production, manpower and all relevant cost factors. The
objective is to minimize total operation costs.
• Assembly-line Balancing This problem is likely to arise when an item can be made by assembling
different components. The process of assembling requires some specified sequence(s). The objective
is to minimize the total elapse time.
• Blending Problems These problems arise when a product can be made from a variety of available
raw materials, each of which has a particular composition and price. The objective here is to determine
the minimum cost blend, subject to availability of the raw materials, and to minimum and maximum
constraints on certain product constituents.
• Trim Loss When an item is made to a standard size (e.g. glass, paper sheet), the problem of determining
which combination of requirements should be produced from standard materials in order to minimize
the trim loss, arises.
Financial Management
• Portfolio Selection This deals with the selection of specific investment activity among several other
activities. The objective here is to find the allocation which maximizes the total expected return or
minimizes risk under certain limitations.
• Profit Planning This deals with the maximization of the profit margin from investment in plant facilities
and equipment, cash in hand and inventory.
 Linear Programming: Applications and Model Formulation 29

Marketing Management
• Media Selection The linear programming technique helps in determining the advertising media mix so
as to maximize the effective exposure, subject to limitation of budget, specified exposure rates to different
market segments, specified minimum and maximum number of advertisements in various media.
• Travelling Salesman Problem The salesman’s problem is to find the shortest route from a given city
to each of the specified cities and then returning to the original point of departure, provided no city
would be visited twice during the tour. Such type of problems can be solved with the help of the
modified assignment technique.
• Physical Distribution Linear programming determines the most economic and efficient manner of
locating manufacturing plants and distribution centres for physical distribution.
Personnel Management
• Staffing Problem Linear programming is used to allocate optimum manpower to a particular job so
as to minimize the total overtime cost or total manpower.
• Determination of Equitable Salaries Linear programming technique has been used in determining
equitable salaries and sales incentives.
• Job Evaluation and Selection Selection of suitable person for a specified job and evaluation of job
in organizations has been done with the help of the linear programming technique.
Other applications of linear programming lie in the area of administration, education, fleet utilization,
awarding contracts, hospital administration, capital budgeting, etc.

2.6 GENERAL MATHEMATICAL MODEL OF

LINEAR PROGRAMMING PROBLEM
The general linear programming problem (or model) with n decision variables and m constraints can be
stated in the following form:
Optimize (Max. or Min.) Z = c1x1 + c2 x2 + . . . + cn xn
subject to the linear constraints,
a11 x 1 + a12 x 2 + . . . + a1 n x n ( ≤ , = , ≥ ) b1
a 21 x1 + a 22 x 2 + . . . + a 2 n x n ( ≤ , = , ≥ ) b2
# # # #
a m 1 x 1 + a m 2 x 2 + . . . + a mn x n ( ≤ , = , ≥ ) b m

and x1 , x 2 , . . ., x n ≥ 0
The above formulation can also be expressed in a compact form as follows.
n
Optimize (Max. or Min.) Z = Â cj xj (Objective function) (1)
j =1
subject to the linear constraints
n
 a ij xj ( £ , = , ≥ ) bi ; i = 1, 2 , . . ., m (Constraints) (2)
j =1

and xj ≥ 0 ; j = 1, 2 , . . ., n (Non-negativity conditions) (3)

where, the cj s are coefficients representing the per unit profit (or cost) of decision variable xj to the value
of objective function. The aij’s are referred as technological coefficients (or input-output coefficients).
These represent the amount of resource, say i consumed per unit of variable (activity) xj. These coefficients
can be positive, negative or zero. The bi represents the total availability of the ith resource. The term
resource is used in a very general sense to include any numerical value associated with the right-hand side
of a constraint. It is assumed that bi ≥ 0 for all i. However, if any bi < 0, then both sides of constraint
i is multiplied by –1 to make bi > 0 and reverse the inequality of the constraint.
In the general LP problem, the expression (≤, =, ≥) means that in any specific problem each constraint
may take only one of the three possible forms:
(i) less than or equal to (≤)
(ii) equal to (=)
(iii) greater than or equal to (≥)
30 Operations Research: Theory and Applications

2.7 GUIDELINES ON LINEAR PROGRAMMING MODEL FORMULATION

The effective use and application requires, as a first step, the mathematical formulation of an LP model.
Steps of LP model formulation are summarized as follows:
Step 1: Identify the decision variables
(a) Express each constraint in words. For this you should first see whether the constraint is of the form
≥ (at least as large as), of the form ≤ (no larger than) or of the form = (exactly equal to).
LP model
(b) Express verbally the objective function.
formulation requires: (c) Verbally identify the decision variables with the help of Step (a) and (b). For this you need to ask
(i) identification of yourself the question – What decisions must be made in order to optimize the objective function?
decision variables
Having followed Step 1(a) to (c) decide the symbolic notation for the decision variables and specify
and input data,
(ii) formulation of their units of measurement. Such specification of units of measurement would help in interpreting the final
constraints, and solution of the LP problem.
(iii) objective
function Step 2: Identify the problem data
To formulate an LP model, identify the problem data in terms of constants, and parameters associated with
decision variables. It may be noted that the decision-maker can control values of the variables but cannot
control values in the data set.
Step 3: Formulate the constraints
Convert the verbal expression of the constraints in terms of resource requirement and availability of each
resource. Then express each of them as linear equality or inequality, in terms of the decision variables
defined in Step 1.
Values of these decision variables in the optimal LP problem solution must satisfy these constraints
in order to constitute an acceptable (feasible) solution. Wrong formulation can either lead to a solution that
is not feasible or to the exclusion of a solution that is actually feasible and possibly optimal.
Step 4: Formulate the objective function
Identify whether the objective function is to be maximized or minimized. Then express it in the form of linear
mathematical expression in terms of decision variables along with profit (cost) contributions associated with
them.
After gaining enough experience in model building, readers may skip verbal description. The following
are certain examples of LP model formulation that may be used to strengthen the ability to translate a real-
life problem into a mathematical model.

2.8 EXAMPLES OF LP MODEL FORMULATION

In this section a number of illustrations have been presented on LP model formulation with the hope that
readers may gain enough experience in model building.

2.8.1 Examples on production

Example 2.1 A manufacturing company is engaged in producing three types of products: A, B and C. The
production department produces, each day, components sufficient to make 50 units of A, 25 units of B and
30 units of C. The management is confronted with the problem of optimizing the daily production of the
products in the assembly department, where only 100 man-hours are available daily for assembling the
products. The following additional information is available:

Type Profit Contribution per Assembly Time

of Product Unit of Product (Rs) per Product (hrs)

A 12 0.8
B 20 1.7
C 45 2.5

The company has a daily order commitment for 20 units of products A and a total of 15 units of
products B and C. Formulate this problem as an LP model so as to maximize the total profit.
 Linear Programming: Applications and Model Formulation 31

LP model formulation The data of the problem is summarized as follows:

Resources/Constraints Product Type Total

A B C
Production capacity (units) 50 25 30
Man-hours per unit 0.8 1.7 2.5 100
Order commitment (units) 20 15 (both for B and C)
Profit contribution (Rs/unit) 12 20 45

Decision variables Let x1, x2 and x3 = number of units of products A, B and C to be produced, respectively.
The LP model
Maximize (total profit) Z = 12x1 + 20x2 + 45x3
subject to the constraints
(i) Labour and materials
(a) 0.8x1 + 1.7x2 + 2.5x3 ≤ 100, (b) x 1 ≤ 50, (c) x 2 ≤ 25, (d) x3 ≤ 30
(ii) Order commitment
(a) x1 ≥ 20; (b) x2 + x3 ≥ 15
and x1, x2, x3 ≥ 0.

Example 2.2 A company has two plants, each of which produces and supplies two products: A and B.
The plants can each work up to 16 hours a day. In plant 1, it takes three hours to prepare and pack 1,000
gallons of A and one hour to prepare and pack one quintal of B. In plant 2, it takes two hours to prepare
and pack 1,000 gallons of A and 1.5 hours to prepare and pack a quintal of B. In plant 1, it costs Rs 15,000
to prepare and pack 1,000 gallons of A and Rs 28,000 to prepare and pack a quintal of B, whereas in plant
2 these costs are Rs 18,000 and Rs 26,000, respectively. The company is obliged to produce daily at least
10 thousand gallons of A and 8 quintals of B.
Formulate this problem as an LP model to find out as to how the company should organize its production
so that the required amounts of the two products be obtained at the minimum cost.
LP model formulation The data of the problem is summarized as follows:

Resources/Constraints Product Total

A B Availability (hrs)

Preparation time (hrs) Plant 1: 3 hrs/thousand gallons 1 hr/quintal 16

Plant 2: 2 hrs/thousand gallons 1.5 hr/quintal 16
Minimum daily production 10 thousand gallons 8 quintals
Cost of production (Rs) Plant 1: 15,000/thousand gallons 28,000/quintals
Plant 2: 18,000/thousand gallons 26,000/quintals

Decision variables Let

x1, x2 = quantity of product A (in ’000 gallons) to be produced in plant 1 and 2, respectively.
x3, x4 = quantity of product B (in quintals) to be produced in plant 1 and 2, respectively.

The LP model
Minimize (total cost) Z = 15,000x1 + 18,000x2 + 28,000x3 + 26,000x4
subject to the constraints
(i) Preparation time
(a) 3x1 + 2x2 ≤ 16, (b) x3 + 1.5x4 ≤ 16
(ii) Minimum daily production requirement
(a) x1 + x2 ≥ 10, (b) x3 + x4 ≥ 8
and x1, x2, x3, x4 ≥ 0.
32 Operations Research: Theory and Applications

Example 2.3 An electronic company is engaged in the production of two components C1 and C2 that are
used in radio sets. Each unit of C1 costs the company Rs 5 in wages and Rs 5 in material, while each of
C2 costs the company Rs 25 in wages and Rs 15 in material. The company sells both products on one-
period credit terms, but the company’s labour and material expenses must be paid in cash. The selling price
of C1 is Rs 30 per unit and of C2 it is Rs 70 per unit. Because of the company’s strong monopoly in these
components, it is assumed that the company can sell, at the prevailing prices, as many units as it produces.
The company’s production capacity is, however, limited by two considerations. First, at the beginning of
period 1, the company has an initial balance of Rs 4,000 (cash plus bank credit plus collections from past
credit sales). Second, the company has, in each period, 2,000 hours of machine time and 1,400 hours of
assembly time. The production of each C1 requires 3 hours of machine time and 2 hours of assembly time,
whereas the production of each C2 requires 2 hours of machine time and 3 hours of assembly time. Formulate
this problem as an LP model so as to maximize the total profit to the company.
LP model formulation The data of the problem is summarized as follows:

Resources/Constraints Components Total Availability

C1 C2

Budget (Rs) 10/unit 40/unit Rs 4,000

Machine time 3 hrs/unit 2 hrs/unit 2,000 hours
Assembly time 2 hrs/unit 3 hrs/unit 1,400 hours
Selling price Rs 30 Rs 70
Cost (wages + material) price Rs 10 Rs 40

Decision variables Let x1 and x2 = number of units of components C1 and C2 to be produced, respectively.
The LP model
Maximize (total profit) Z = Selling price – Cost price
= (30 – 10) x1 + (70 – 40) x2 = 20x1 + 30x2
subject to the constraints
(i) The total budget available
10x1 + 40x2 ≤ 4,000
(ii) Production time
(a) 3x1 + 02x2 ≤ 2,000; (b) 2x1 + 03x2 ≤ 1,400
and x1, x2 ≥ 0.
Example 2.4 A company has two grades of inspectors 1 and 2, the members of which are to be assigned
for a quality control inspection. It is required that at least 2,000 pieces be inspected per 8-hour day. Grade
1 inspectors can check pieces at the rate of 40 per hour, with an accuracy of 97 per cent. Grade 2 inspectors
check at the rate of 30 pieces per hour with an accuracy of 95 per cent.
The wage rate of a Grade 1 inspector is Rs 5 per hour while that of a Grade 2 inspector is Rs 4 per
hour. An error made by an inspector costs Rs 3 to the company. There are only nine Grade 1 inspectors
and eleven Grade 2 inspectors available to the company. The company wishes to assign work to the
available inspectors so as to minimize the total cost of the inspection. Formulate this problem as an LP model
so as to minimize the daily inspection cost. [Delhi Univ., MBA, 2004, 2006]
LP model formulation The data of the problem is summarized as follows:
Inspector

Grade 1 Grade 2
Number of inspectors 9 11
Rate of checking 40 pieces/hr 30 pieces/hr
Inaccuracy in checking 1 – 0.97 = 0.03 1 – 0.95 = 0.05
Cost of inaccuracy in checking Rs 3/piece Rs 3/piece
Wage rate/hour Rs 5 Rs 4
Duration of inspection = 8 hrs per day
Total pieces which must be inspected = 2,000
 Linear Programming: Applications and Model Formulation 33

Decision variables Let x1 and x2 = number of Grade 1 and 2 inspectors to be assigned for inspection,
respectively.
The LP model
Hourly cost of each inspector of Grade 1 and 2 can be computed as follows:
Inspector Grade 1 : Rs (5 + 3 × 40 × 0.03) = Rs 8.60
Inspector Grade 2 : Rs (4 + 3 × 30 × 0.05) = Rs 8.50
Based on the given data, the LP model can be formulated as follows:
Minimize (daily inspection cost) Z = 8 (8.60x1 + 8.50x2) = 68.80x1 + 68.00x2
subject to the constraints
(i) Total number of pieces that must be inspected in an 8-hour day
8 × 40x1 + 8 × 30x2 ≥ 2000
(ii) Number of inspectors of Grade 1 and 2 available
(a) x1 ≤ 9, (b) x2 ≤ 11
and x1, x2 ≥ 0.
Example 2.5 An electronic company produces three types of parts for automatic washing machines. It
purchases casting of the parts from a local foundry and then finishes the part on drilling, shaping and
polishing machines.
The selling prices of parts A, B and C are Rs 8, Rs 10 and Rs 14 respectively. All parts made can be
sold. Castings for parts A, B and C, respectively cost Rs 5, Rs 6 and Rs 10.
The shop possesses only one of each type of casting machine. Costs per hour to run each of the three
machines are Rs 20 for drilling, Rs 30 for shaping and Rs 30 for polishing. The capacities (parts per hour)
for each part on each machine are shown in the table:
Machine Capacity per Hour
Part A Part B Part C
Drilling 25 40 25
Shaping 25 20 20
Polishing 40 30 40

The management of the shop wants to know how many parts of each type it should produce per hour
in order to maximize profit for an hour’s run. Formulate this problem as an LP model so as to maximize total
profit to the company. [Delhi Univ., MBA, 2001, 2004, 2007]
LP model formulation Let x1, x2 and x3 = numbers of type A, B and C parts to be produced per hour,
respectively.
Since 25 type A parts per hour can be run on the drilling machine at a cost of Rs 20, then
Rs 20/25 = Re 0.80 is the drilling cost per type A part. Similar reasoning for shaping and polishing gives
 20 30 30 
Profit per type A part = (8 – 5) –  + +  = 0.25
 25 25 40 
 20 30 30 
Profit per type B part = (10 – 6) –  + +  =1
 40 20 30 
 20 30 30 
Profit per type C part = (14 – 10) –  + +  = 0.95
 25 20 40 
On the drilling machine, one type A part consumes 1/25th of the available hour, a type B part consumes
1/40th, and a type C part consumes 1/25th of an hour. Thus, the drilling machine constraint is
x1 x2 x3
+ + ≤1
25 40 25
Similarly, other constraints can be established.
The LP model
Maximize (total profit) Z = 0.25 x1 + 1.00 x2 + 0.95 x3
subject to the constraints
x1 x2 x3 x1 x2 x3
(i) Drilling machine: + + ≤ 1, (ii) Shaping machine: + + ≤ 1,
25 40 25 25 20 20
34 Operations Research: Theory and Applications

x1 x2 x3
(iii) Polishing machine: + + ≤ 1,
40 30 40
and x1 , x 2 , x 3 ≥ 0 .
Example 2.6 A pharmaceutical company produces two pharmaceutical products: A and B. Production of
both these products requires the same process – I and II. The production of B also results in a by-product
C at no extra cost. The product A can be sold at a profit of Rs 3 per unit and B at a profit of Rs 8 per
unit. Some quantity of this by-product can be sold at a unit profit of Rs 2, the remainder has to be destroyed
and the destruction cost is Re 1 per unit. Forecasts show that only up to 5 units of C can be sold. The
company gets 3 units of C for each unit of B produced. The manufacturing times are 3 hours per unit for
A on process I and II, respectively, and 4 hours and 5 hours per unit for B on process I and II, respectively.
Because the product C is a by product of B, no time is used in producing C. The available times are 18
and 21 hours of process I and II, respectively. Formulate this problem as an LP model to determine the
quantity of A and B which should be produced, keeping C in mind, to make the highest total profit to the
company. [Delhi Univ., MBA (HCA), 2001, 2008]
LP model formulation The data of the problem is summarized as follows:
Constraints/Resources Time (hrs) Required by Availability

A B C
Process I 3 4 – 18 hrs
Process II 3 5 – 21 hrs
By-product ratio from B – 1 3 5 units (max. units that
Profit per unit (Rs) 3 8 2 can be sold)

Decision variables Let

x1, x2 = units of product A and B to be produced, respectively
x3, x4 = units of product C to be produced and destroyed, respectively.
The LP model
Maximize (total profit) Z = 3x1 + 8x2 + 2x3 – x4
subject to the constraints
(i) Manufacturing constraints for product A and B
(a) 3x1 + 4x2 ≤ 18, (b) 3x1 + 5x2 ≤ 21
(ii) Manufacturing constraints for by-product C
(a) x3 ≤ 5, (b) – 3x2 + x3 + x4 = 0
and x1, x2, x3, x4 ≥ 0.
Example 2.7 A tape recorder company manufactures models A, B and C, which have profit contributions
per unit of Rs 15, Rs 40 and Rs 60, respectively. The weekly minimum production requirements are 25 units
for model A, 130 units for model B and 55 units for model C. Each type of recorder requires a certain amount
of time for the manufacturing of the component parts for assembling and for packing. Specifically, a dozen
units of model A require 4 hours for manufacturing, 3 hours for assembling and 1 hour for packaging. The
corresponding figures for a dozen units of model B are 2.5, 4 and 2 and for a dozen units of model C are
6, 9 and 4. During the forthcoming week, the company has available 130 hours of manufacturing, 170 hours
of assembling and 52 hours of packaging time. Formulate this problem as an LP model so as to maximize
the total profit to the company.
LP model formulation The data of the problem is summarized as follows:

Resources/Constraints Models Total Availability

A B C (hrs)

Production requirement (units) 25 130 55

Manufacturing time (per dozen) 4 2.5 6 130
Assembling time (per dozen) 3 4 9 170
Packaging time (per dozen) 1 2 4 52
Contribution per unit (Rs) 15 40 60
 Linear Programming: Applications and Model Formulation 35

Decision variables Let x1, x2 and x3 = units of model A, B and C to be produced per week,
respectively.
The LP model
Maximize (total profit) = 15x1 + 40x2 + 60x3
subject to the constraints
(i) Minimum production requirement:
(a) x1 ≥ 25, (b) x2 ≥ 130, (c) x3 ≥ 55
4 x1 2.5 x2 6 x3
(ii) Manufacturing time : + + ≤ 130
12 12 12
3 x1 4 x2 9 x3
(iii) Assembling time : + + ≤ 170
12 12 12
x1 2 x2 4 x3
(iv) Packaging time : + + ≤ 52
12 12 12
and x1, x2, x3 ≥ 0.
Example 2.8 Consider the following problem faced by a production planner of a soft drink plant. He has
two bottling machines A and B. A is designed for 8-ounce bottles and B for 16-ounce bottles. However,
each can also be used for both types of bottles with some loss of efficiency. The manufacturing data is
as follows:
Machine 8-ounce Bottles 16-ounce Bottles
A 100/minute 40/minute
B 60/minute 75/minute
The machines can be run for 8 hours per day, 5 days per week. The profit on an 8-ounce bottle is
Rs 1.5 and on a 16-ounce bottle is Rs 2.5. Weekly production of the drink cannot exceed 3,00,000 bottles
and the market can absorb 25,000, 8-ounce bottles and 7,000, 16-ounce bottles per week. The planner wishes
to maximize his profit, subject of course, to all the production and marketing restrictions. Formulate this
problem as an LP model to maximize total profit.
LP model formulation The data of the problem is summarized as follows:

Constraints Production Availability

8-ounce Bottles 16-ounce Bottles
Machine A time 100/minute 40/minute 8 × 5 × 60 = 2,400 minutes
Machine B time 60/minute 75/minute 8 × 5 × 60 = 2,400 minutes
Production 1 1 3,00,000 units/week
Marketing 1 – 25,000 units/week
– 1 7,000 units/week
Profit/unit (Rs) 1.5 2.5

Decision variables Let x1 and x2 = units of 8-ounce and 16-ounce bottles to be produced weekly,
respectively
The LP model
Maximize (total profit) Z = 1.5x1 + 2.5x2
subject to the constraints
x1 x x x
(i) Machine time : (a) + 2 ≤ 2, 400 and (b) 1 + 2 ≤ 2, 400
100 40 60 75
(ii) Production : x1 + x2 ≤ 3,00,000
(iii) Marketing : (a) x1 ≤ 25,000, (b) x2 ≤ 7,000
and x1, x2 ≥ 0.
Example 2.9 A company engaged in producing tinned food has 300 trained employees on its rolls, each
of whom can produce one can of food in a week. Due to the developing taste of public for this kind of food,
the company plans to add to the existing labour force, by employing 150 people, in a phased manner, over
the next five weeks. The newcomers would have to undergo a two-week training programme before being
36 Operations Research: Theory and Applications

put to work. The training is to be given by employees from among the existing ones and it is a known fact
that one employee can train three trainees. Assume that there would be no production from the trainers and
the trainees during training period, as the training is off-the-job. However, the trainees would be remunerated
at the rate of Rs 300 per week, the same rate would apply as for the trainers.
The company has booked the following orders to supply during the next five weeks:
Week : 1 2 3 4 5
No. of cans : 280 298 305 360 400
Assume that the production in any week would not be more than the number of cans ordered for, so that
every delivery of the food would be ‘fresh’.
Formulate this problem as an LP model to develop a training schedule that minimizes the labour cost
over the five-week period. [Delhi Univ., MBA, 2003, 2005]

LP model formulation The data of the problem is summarized as given below:

(i) Cans supplied Week : 1 2 3 4 5
Number : 280 298 305 360 400
(ii) Each trainee has to undergo a two-week training.
(iii) One employee is required to train three trainees.
(iv) Every trained worker produces one can/week but there would be no production from trainers and
trainees during training.
(v) Number of employees to be employed = 150
(vi) The production in any week is not to exceed the cans required.
(vii) Number of weeks for which newcomers would be employed: 5, 4, 3, 2, 1.
Observations based on given data are as follows:
(a) Workers employed at the beginning of the first week would get salary for all the five weeks; those
employed at the beginning of the second week would get salary for four weeks and so on.
(b) The value of the objective function would be obtained by multiplying it by 300 because each
person would get a salary of Rs 300 per week.
(c) Inequalities have been used in the constraints because some workers might remain idle in some
week(s).
Decision variables Let x1, x2, x3, x4 and x5 = number of trainees appointed in the beginning of
week 1, 2, 3, 4 and 5, respectively.
The LP model
Minimize (total labour force) Z = 5x1 + 4x2 + 3x3 + 2x4 + x5
subject to the constraints
(i) Capacity
x x x
(a) 300 − 1 ≥ 280 , (b) 300 − 1 − 2 ≥ 298
3 3 3
x x x x
(c) 300 + x1 − 2 − 3 ≥ 305 , (d) 300 + x1 + x 2 − 3 − 4 ≥ 360
3 3 3 3
x x
(e) 300 + x1 + x 2 + x 3 − 4 − 5 ≥ 400
3 3
(ii) New recruitment
x1 + x2 + x3 + x4 + x5 = 150
and x1, x2, x3, x4, x5 ≥ 0.
Example 2.10 XYZ company assembles and markets two types of mobiles – A and B. Presently 200
mobiles of each type are manufactured per week. You are advised to formulate the production schedule
which will maximize the profits in the light of the following information:

Type Total Component Cost Man-Hours of Average Man-Minutes of Selling Price Per
Per Mobile (Rs) Assembly Time Per Inspection and Correction Mobile (Rs)
Mobile
A 2000 12 10 6000
B 1600 6 35 4800
 Linear Programming: Applications and Model Formulation 37

The company employs 100 assemblers who are paid Rs 50 per hour actually worked and who will work
up to a maximum of 48 hours per week. The inspectors, who are presently four, have agreed to a plan,
whereby they average 40 hours of work per week each. However, the four inspectors have certain other
administrative duties which have been found to take up an average of 8 hours per week between them.
The inspectors are each paid a fixed wage of Rs 12000 per week.
Each mobile of either type requires one camera of same type. However, the company can obtain a
maximum supply of 600 cameras per week. Their cost has been included in the component's cost, given
for each mobile in the table above. The other cost incurred by the company are fixed overheads of Rs
20,000 per week.
LP model formulation Computation of contribution from radio types A and B is as follows:
A B
Component cost : 2000 1600
Labour cost in assembly (Rs 50 per hour) : 600 300
Labour cost for inspection
1200 1
× = Re 0.50 per minute 5.00 17.5
40 60
Total variable cost 2605.00 1917.50
Selling price 6000 4800
Contribution (selling price – cost price) 3395 2882.50
Decision variables Let x1 and x2 = number of units of radio types A and B to be produced, respectively.
The LP model
Maximize (total contribution) Z = 3395x1 + 2882.5x2 – 20,000
subject to the constraints
 25 
(i) 12x1 + 6x2 ≤ 48 × 100, (ii) 10x1 + 35x2 ≤ 4 ×  40 −  × 60 = 7,600
 3 
(iii) x1 + x2 ≤ 600
and x1, x2 ≥ 0.
Example 2.11 A plastic products manufacturer has 1,200 boxes of transparent wrap in stock at one factory
and another 1,200 boxes at its second factory. The manufacturer has orders for this product from three
different retailers, in quantities of 1,000, 700 and 500 boxes, respectively. The unit shipping costs (in rupees
per box) from the factories to the retailers are as follows:

Retailer I Retailer II Retailer III

Factory A 14 11 13
Factory B 13 13 12

Determine a minimum cost shipping schedule for satisfying all demands from current inventory.
Formulate this problem as an LP model.
LP model formulation Given that the total number of boxes available at factory A and B = total number
of boxes required by retailers 1, 2 and 3.
Decision variables Let x1, x2 and x3 = number of boxes to be sent from factory A to retailer 1; factory B
to retailer 2 and factory C to retailer 3, respectively.

Number of Boxes to be Sent

Retailer 1 Retailer 2 Retailer 3
Factory A x1 x2 1,200 – (x1 + x2)
Factory B 1,000 – x1 700 – x2 500 – [(1,000 – x1) + (700 – x2)]

The LP model
Minimize (total distance) Z = 14x1 + 13x2 + 11 (1,200 – x1 – x2) + 13 (1,000 – x1) +
13 (700 – x2) + 12 (x1 – x2 – 700) = 2x1 + x2 + 26,900
38 Operations Research: Theory and Applications

subject to the constraints

(i) x1 + x2 ≤ 1,200, (ii) x1 ≤ 1,000, (iii) x2 ≤ 700;
and x1, x2 ≥ 0.
Example 2.12 A company produces two types of sauces: A and B. Both these sauces are made by
blending two ingredients – X and Y. A certain level of flexibility is permitted in the formulae of these
products. Indeed, the restrictions are that (i) B must contain no more than 75 per cent of X, and
(ii) A must contain no less than 25 per cent of X, and no less than 50 per cent of Y. Up to 400 kg of X
and 300 kg of Y could be purchased. The company can sell as much of these sauces as it produces at
a price of Rs 18 for A and Rs 17 for B. The X and Y cost Rs 1.60 and 2.05 per kg, respectively.
The company wishes to maximize its net revenue from the sale of these sauces. Formulate this problem
as an LP model.
LP model formulation Let x1, x2 = kg of sauces A and B to be produced, respectively.
y1, y2 = kg of ingredient X used to make sauces A and B, respectively.
y3, y4 = kg of ingredient Y used to make sauces A and B, respectively.
The LP model
Maximize Z = 18x1 + 17x2 – 1.60 (y1 + y2) – 2.05 (y3 + y4)
subject to the constraints
(i) y1 + y3 – x1 = 0, (ii) y2 + y4 – x2 = 0
(iii) y1 + y2 ≤ 400  (iv) y1 – 0.25 x1 ≥ 0 
 (Purchase)  (Sauce A)
y3 + y4 ≤ 300  y2 – 0.50 x2 ≥ 0 
(v) y2 – 0.75x2 ≥ 0 (Sauce B)
and x1, x2, y1, y2, y3, y4 ≥ 0.
Example 2.13 A complete unit of a certain product consists of four units of component A and three units
of component B. The two components (A and B) are manufactured from two different raw materials of which
100 units and 200 units, respectively, are available. Three departments are engaged in the production process
with each department using a different method for manufacturing the components per production run and
the resulting units of each component are given below:

Department Input of Raw Materials Output of Components

per Run (units) per Run (units)
I II A B
1 7 5 6 4
2 4 8 5 8
3 2 7 7 3

Formulate this problem as an LP model to determine the number of production runs for each department
which will maximize the total number of complete units of the final product.
LP model formulation Let x1, x2 and x3 = number of production runs for departments 1, 2 and 3,
respectively.
Since each unit of the final product requires 4 units of component A and 3 units of component B,
therefore maximum number of units of the final product cannot exceed the smaller value of
RS Total number of units of A produced ; Total number of units of B produced UV
T 4 3 W
RS 6 x + 5 x + 7 x and 4 x + 8 x + 3 x UV
1 2 3 1 2 3
or
T 4 3 W
Also if y is the number of component units of final product, then we obviously have
6 x1 + 5 x 2 + 7 x 3 4 x1 + 8 x 2 + 3 x 3
≥ y and ≥ y
4 3
The LP model

Maximize Z = Min
RS 6 x 1 + 5 x2 + 7 x3
;
4 x1 + 8 x 2 + 3 x 3 UV
T 4 3 W
 Linear Programming: Applications and Model Formulation 39

subject to the constraints

i(i) Raw material
(a) 7x1 + 4x2 + 2x3 ≤ 100 (Material I ), (b) 5x1 + 8x2 + 7x3 ≤ 200 (Material II)
(ii) Number of component units of final product
(a) 6x1 + 5x2 + 7x3 – 4y ≥ 0, (b) 4x1 + 8x2 + 3x3 – 4y ≥ 0
and x1, x2, x3 ≥ 0.
Example 2.14 ABC company manufactures three grades of paint: Venus, Diana and Aurora. The plant
operates on a three-shift basis and the following data is available from the production records:

Requirement Grade Availability

of Resource Venus Diana Aurora (capacity/month)
Special additive (kg/litre) 0.30 0.15 0.75 600 tonnes
Milling (kilolitres per machine shift) 2.00 3.00 5.00 100 machine shifts
Packing (kilolitres per shift) 12.00 12.00 12.00 80 shifts

There are no limitations on the other resources. The particulars of sales forecasts and the estimated
contribution to overheads and profits are given below:
Venus Diana Aurora
Maximum possible sales
per month (kilolitres) 100 400 600
Contribution (Rs/kilolitre) 4,000 3,500 2,000
Due to the commitments already made, a minimum of 200 kilolitres per month, of Aurora, must be
supplied the next year.
Just when the company was able to finalize the monthly production programme for the next 12 months,
it received an offer from a nearby competitor for hiring 40 machine shifts per month of milling capacity for
grinding Diana paint that could be spared for at least a year. However, due to additional handling at the
competitor’s facility, the contribution from Diana would be reduced by Re 1 per litre.
Formulate this problem as an LP model for determining the monthly production programme to maximize
contribution. [Delhi Univ., MBA, 2006]
LP model formulation Let
x1 = quantity of Venus (kilolitres) produced in the company
x2 = quantity of Diana (kilolitres) produced in the company
x3 = quantity of Diana (kilolitres) produced by hired facilities
x4 = quantity of Aurora (kilolitres) produced in the company
The LP model
Maximize (total profit) Z = 4,000x1 + 3,500x2 + (3,500 – 1,000)x3 + 2,000x4
subject to the constraints
(i) Special additive : 0.30x1 + 0.15x2 + 0.15x3 + 0.75x4 ≤ 600
x1 x 2 x 4
(ii) Own milling facility : + + ≤ 100
2 3 5
x3
(iii) Hired milling facility : ≤ 40
3
x1 x2 + x3 x4
(iv) Packing : + + ≤ 80
12 12 12
(v) Marketing:
(i) x1 ≤ 100 (Venus); (ii) x2 + x3 ≤ 400 (Diana); (iii) 200 ≤ x4 ≤ 600 (Aurora)
and x1, x2, x3, x4 ≥ 0.
Example 2.15 Four products have to be processed through a particular plant, the quantities required for
the next production period are:
Product 1 : 2,000 units Product 2 : 3,000 units
Product 3 : 3,000 units Product 4 : 6,000 units
There are three production lines on which the products could be processed. The rates of production
in units per day and the total available capacity in days are given in the following table. The corresponding
cost of using the lines is Rs 600, Rs 500 and Rs 400 per day, respectively.
40 Operations Research: Theory and Applications

Production Line Product Maximum

(days) 1 2 3 4 Line
1 150 100 500 400 20
2 200 100 760 400 20
3 160 80 890 600 18

Total 2,000 3,000 3,000 6,000

Formulate this problem as an LP model to minimize the cost of operation.
LP model formulation Let xij = number of units of product i (i = 1, 2, 3, 4) produced on production
line j ( j = 1, 2, 3)
The LP model
4 4 4
Minimize (total cost) Z = 600 Σ x i 1 + 500 Σ x i 2 + 400 Σ x i 3
i =1 i =1 i =1
subject to the constraints
3 3
(i) Production: (a) Σ xi1 = 2,000, (b) Σ x i 2 = 3, 000
i =1 i =1
3 3
(c) Σ xi 3 = 3,000, (d) Σ x i 4 = 6 , 000
i =1 i =1
(ii) Line capacity
x11 x12 x13 x14 x 21 x 22 x 23 x 24
(a) + + + ≤ 20 , (b) + + + ≤ 20
150 100 500 400 200 100 760 400
x 31 x 32 x 33 x 34
(c) + + + ≤ 18
160 80 890 600
and xij ≥ 0 for all i and j.
Example 2.16 XYZ company produces a specific automobile spare part. A contract that the company has
signed with a large truck manufacturer calls for the following 4-month shipping schedule.

Month Number of Parts

to be Shipped
January 3,000
February 4,000
March 5,000
April 5,000

The company can manufacture 3,000 parts per month on a regular time basis and 2,000 parts per month
on an overtime basis. Its production cost is Rs 15,000 for a part produced during regular time and 25,000
for a part produced during overtime. Its monthly inventory holding cost is Rs 500. Formulate this problem
as an LP model to minimize the overall cost.
LP model formulation Let xijk = number of units of automobile spare part manufactured in month
i (i = 1, 2, 3, 4) using shift j ( j = 1, 2) and shipped in month
k (k = 1, 2, 3, 4)
The LP model
Minimize (total cost) Z = Regular time production cost + Overtime production cost
+ One-month inventory cost + Two-month inventory cost
+ Three-month inventory cost
= 15,000(x111 + x112 + x113 + x114 + x212 + x213 + x214 + x313 + x314 + x414 )
+ 25,000(x121 + x122 + x123 + x124 + x222 + x223 + x224 + x323 + x324 + x424 )
+ 500(x112 + x122 + x213 + x223 + x314 + x324) + 1,000(x113 + x123 + x214
+ x224 ) + 1,500(x114 + x124 )
 Linear Programming: Applications and Model Formulation 41

subject to the constraints

(i) Monthly regular time production
(a) x111 + x112 + x113 + x114 ≤ 3,000, (b) x212 + x213 + x214 ≤ 3,000
(c) x313 + x314 ≤ 3,000, (d) x414 ≤ 3,000
(ii) Monthly overtime production constraints
(a) x121 + x122 + x123 + x124 ≤ 2,000, (b) x222 + x223 + x224 ≤ 2,000
(c) x323 + x324 ≤ 2,000, (d) x424 ≤ 2,000
(iii) Monthly demand constraints
(a) x111 + x121 = 3,000, (b) x112 + x122 + x212 + x222 = 4,000
(c) x113 + x123 + x213 + x223 + x313 + x323 = 5,000
(d) x114 + x124 + x214 + x224 + x314 + x324 + x414 + x424 = 5,000
and xijk ≥ 0 for all i, j and k.

2.8.2 Examples on Marketing

Example 2.17 An advertising company wishes to plan an advertising campaign for three different media:
television, radio and a magazine. The purpose of the advertising is to reach as many potential customers
as possible. The following are the results of a market study:
Television
Prime Day Prime Time Radio Magazine
(Rs) (Rs) (Rs) (Rs)
Cost of an advertising unit 40,000 75,000 30,000 15,000
Number of potential customers reached per unit 4,00,000 9,00,000 5,00,000 2,00,000
Number of women customers reached per unit 3,00,000 4,00,000 2,00,000 1,00,000

The company does not want to spend more than Rs 8,00,000 on advertising. It is further required that
(i) at least 2 million exposures take place amongst women,
(ii) the cost of advertising on television be limited to Rs 5,00,000,
(iii) at least 3 advertising units be bought on prime day and two units during prime time; and
(iv) the number of advertising units on the radio and the magazine should each be between 5 and 10.
Formulate this problem as an LP model to maximize potential customer reach.
LP model formulation Let x1, x2, x3 and x4 = number of advertising units bought in prime day and
time on television, radio and magazine, respectively.
The LP model
Maximize (total potential customer reach) Z = 4,00,000x1 + 9,00,000x2 + 5,00,000x3 + 2,00,000x4
subject to the constraints
(i) Advertising budget: 40,000x1 + 75,000x2 + 30,000x3 + 15,000x4 ≤ 8,00,000
(ii) Number of women customers reached by the advertising campaign
3,00,000x1 + 4,00,000x2 + 2,00,000x3 + 1,00,000x4 ≥ 20,00,000
(iii) Television advertising : (a) 40,000x1 + 75,000x2 ≤ 5,00,000; (b) x1 ≥ 3; (c) x2 ≥ 2
(iv) Radio and magazine advertising : (a) 5 ≤ x3 ≤ 10; (b) 5 ≤ x4 ≤ 10
and x1, x2, x3, x4 ≥ 0.
Example 2.18 A businessman is opening a new restaurant and has budgeted Rs 8,00,000 for advertisement,
for the coming month. He is considering four types of advertising:
(i) 30 second television commercials
(ii) 30 second radio commercials
(iii) Half-page advertisement in a newspaper
(iv) Full-page advertisement in a weekly magazine which will appear four times during the coming month.
The owner wishes to reach families (a) with income over Rs 50,000 and (b) with income under Rs 50,000.
The amount of exposure of each media to families of type (a) and (b) and the cost of each media is shown
below:
42 Operations Research: Theory and Applications

Media Cost of Advertisement Exposure to Families with Exposure to Families with

(Rs) Annual Income Over Annual Income Under
Rs 50,000 (a) Rs 50,000 (b)
Television 40,000 2,00,000 3,00,000
Radio 20,000 5,00,000 7,00,000
Newspaper 15,000 3,00,000 1,50,000
Magazine 5,000 1,00,000 1,00.000

To have a balanced campaign, the owner has determined the following four restrictions:
(i) there should be no more than four television advertisements
(ii) there should be no more than four advertisements in the magazine
(iii) there should not be more than 60 per cent of all advertisements in newspaper and magazine put together
(iv) there must be at least 45,00,000 exposures to families with annual income of over Rs 50,000.
Formulate this problem as an LP model to determine the number of each type of advertisement to be
given so as to maximize the total number of exposures.
LP model formulation Let x1, x2, x3 and x4 = number of television, radio, newspaper, magazine
advertisements to be pursued, respectively.
The LP model
Maximize (total number of exposures of both groups) Z
= (2,00,000 + 3,00,000) x1 + (5,00,000 + 7,00,000) x2 + (3,00,000 + 1,50,000) x3
+ (1,00,000 + 1,00,000) x4
= 5,00,000 x1 + 12,00,000 x2 + 4,50,000 x3 + 2,00,000 x4
subject to the constraints
(i) Available budget : 40,000x1 + 20,000x2 + l5,000x3 + 5,000x4 ≤ 8,00,000
(ii) Maximum television advertisement : x1 ≤ 4
(iii) Maximum magazine advertisement
x4 ≤ 4 (because magazine will appear only four times in the next month)
(iv) Maximum newspaper and magazine advertisement
x3 + x4
≤ 0.60 or – 0.6x – 0.6x + 0.4x + 0.4x ≤ 0
x +x +x +x
1 2 3 4
1 2 3 4

(v) Exposure to families with income over Rs 50,000

2,00,000x1 + 5,00,000x2 + 3,00,000x3 + 1,00,000x4 ≥ 45,00,000
and x1, x2, x3, x4 ≥ 0.
Example 2.19 An advertising agency is preparing an advertising campaign for a group of agencies. These
agencies have decided that different characteristics of their target customers should be given different importance
(weightage). The following table gives the characteristics with their corresponding importance (weightage).

Characteristics Weightage (%)

Age 25–40 years 20
Annual income Above Rs 60,000 30
Female Married 50

The agency has carefully analyzed three media and has compiled the following data:

Data Item Media

Women’s Magazine (%) Radio (%) Television (%)
Reader characteristics
(i) Age: 25–40 years 80 70 60
(ii) Annual income: Above Rs 60,000 60 50 45
(iii) Females/Married 40 35 25
Cost per advertisement (Rs) 9,500 25,000 1,00,000
Minimum number of advertisement allowed 10 5 5
Maximum number of advertisement allowed 20 10 10
Audience size (1000s) 750 1,000 1,500
 Linear Programming: Applications and Model Formulation 43

The budget for launching the advertising campaign is Rs 5,00,000. Formulate this problem as an LP
model for the agency to maximize the total expected effective exposure.
LP model formulation Let x1, x2 and x3 = number of advertisements made using advertising media:
women’s magazines, radio and television, respectively.
The effectiveness coefficient corresponding to each of the advertising media is calculated as follows:

Media Effectiveness Coefficient

Women’s magazine 0.80 (0.20) + 0.60 (0.30) + 0.40 (0.50) = 0.54

Radio 0.70 (0.20) + 0.50 (0.30) + 0.35 (0.50) = 0.46
Television 0.60 (0.20) + 0.45 (0.30) + 0.25 (0.50) = 0.38

The coefficient of the objective function, i.e. effective exposure for all the three media employed, can
be computed as follows:
Effective exposure = Effectiveness coefficient × Audience size
where effectiveness coefficient is a weighted average of audience characteristics. Thus, the effective exposure
of each media is as follows:
Women’s magazine = 0.54 × 7,50,000 = 4,05,000
Radio = 0.46 × 10,00,000 = 4,60,000
Television = 0.38 × 15,00,000 = 5,70,000
The LP model
Maximize (effective exposure) Z = 4,05,000x1 + 4,60,000x2 + 5,70,000x3
subject to the constraints
(i) Budget: 9,500x1 + 25,000x2 + 1,00,000x3 ≤ 5,00,000
(ii) Minimum number of advertisements allowed
(a) x1 ≥ 10; (b) x2 ≥ 5; and (c) x3 ≥ 5
(iii) Maximum number of advertisements allowed constraints
(a) x1 ≤ 20; (b) x2 ≤ 10; and (c) x3 ≤ 10
and x1, x2, x3 ≥ 0.

2.8.3 Examples on Finance

Example 2.20 An engineering company planned to diversify its operations during the year
2005-06. The company allocated capital expenditure budget equal to Rs 5.15 crore in the year 2005 and
Rs 6.50 crore in the year 2006. The company had to take five investment projects under consideration. The
estimated net returns at that present value and the expected cash expenditures on each project in those
two years are as follows.
Assume that the return from a particular project would be in direct proportion to the investment in it,
so that, for example, if in a project, say A, 20% (of 120 in 2005 and of 320 in 2006) was invested, then the
resulting net return in it would be 20% (of 240). This assumption also implies that individuality of the project
should be ignored. Formulate this capital budgeting problem as an LP model to maximize the net return.

Project Estimated Net Returns Cash Expenditure

(in ’000 Rs) (in ’000 Rs)
Year 2005 Year 2006
A 240 120 320
B 390 550 594
C 80 118 202
D 150 250 340
E 182 324 474

LP model formulation Let x1, x2, x3, x4 and x5 = proportion of investment in projects A, B, C, D and
E, respectively.
The LP model
Maximize (net return) = 240x1 + 390x2 + 80x3 + 150x4 + 182x5
44 Operations Research: Theory and Applications

subject to the constraints

(i) Capital expenditure budget
(a) 120x1 + 550x2 + 118x3 + 250x4 + 324x5 ≤ 515 [For year 2005]
(b) 320x1 + 594x2 + 202x3 + 340x4 + 474x5 ≤ 650 [For year 2006]
(ii) 0-1 integer requirement constraints
(a) x1 ≤ 1, (b) x2 ≤ 1, (c) x3 ≤ 1, (d) x4 ≤ 1, (e) x5 ≤ 1
and x1, x2, x3, x4, x5 ≥ 0
Example 2.21 XYZ is an investment company. To aid in its investment decision, the company has developed
the investment alternatives for a 10-year period, as given in the following table. The return on investment
is expressed as an annual rate of return on the invested capital. The risk coefficient and growth potential
are subjective estimates made by the portfolio manager of the company. The terms of investment is the
average length of time period required to realize the return on investment as indicated.

Investment Length of Annual Rate of Risk Coefficient Growth Potential

Alternative Investment Return (Year) Return (%)
A 4 3 1 0
B 7 12 5 18
C 8 9 4 10
D 6 20 8 32
E 10 15 6 20
F 3 6 3 7
Cash 0 0 0 0

The objective of the company is to maximize the return on its investments. The guidelines for selecting
the portfolio are:
(i) The average length of the investment for the portfolio should not exceed 7 years.
(ii) The average risk for the portfolio should not exceed 5.
(iii) The average growth potential for the portfolio should be at least 10%.
(iv) At least 10% of all available funds must be retained in the form of cash, at all times.
Formulate this problem as an LP model to maximize total return.
LP model formulation Let xj = proportion of funds to be invested in the jth investment alternative
( j = 1, 2, . . ., 7)
The LP model
Maximize (total return) Z = 0.03x1 + 0.12x2 + 0.09x3 + 0.20x4 + 0.15x5 + 0.06x6 + 0.00x7
subject to the constraints
(i) Length of investment : 4x1 + 7x2 + 8x3 + 6x4 + 10x5 + 3x6 + 0x7 ≤ 7
(ii) Risk level : x1 + 5x2 + 4x3 + 8x4 + 6x5 + 3x6 + 0x7 ≤ 5
(iii) Growth potential : 0x1 + 0.18x2 + 0.10x3 + 0.32x4 + 0.20x5 + 0.07x6 + 0x7 ≥ 0.10
(iv) Cash requirement : x7 ≥ 0.10
(v) Proportion of funds : x1 + x2 + x3 + x4 + x5 + x6 + x7 = 1
and x1, x2, x3, x4, x5, x6, x7 ≥ 0.
Example 2.22 An investor has three investment opportunities available to him at the beginning of each
years, for the next 5 years. He has a total of Rs 5,00,000 available for investment at the beginning of the
first year. A summary of the financial characteristics of the three investment alternatives is presented in the
following table:

Investment Allowable Size of Return (%) Timing of Return Immediate

Alternative Initial Investment Reinvestment Possible?
(Rs)
1 1,00,000 19 1 year later yes
2 unlimited 16 2 years later yes
3 50,000 20 3 years later yes
 Linear Programming: Applications and Model Formulation 45

The investor wishes to determine the investment plan that will maximize the amount of money which
can be accumulated by the beginning of the 6th year in the future. Formulate this problem as an LP model
to maximize total return. [Delhi Univ., MBA, 2002, 2008]
LP model formulation Let
xij = amount to be invested in investment alternative, i (i = 1, 2, 3) at the beginning of the year
j ( j =1, 2, . . ., 5)
yj = amount not invested in any of the investment alternatives in period j
The LP model
Minimize (total return) Z = 1.19x15 + 1.16x24 + 1.20x33 + y5
subject to the constraints
i(i) Yearly cash flow
(a) x11 + x21 + x31 + y1 = 5,00,000 (year 1)
(b) − y1 − 119. x11 + x12 + x22 + x32 + y2 = 0 (year 2)
(c) – y2 – 1.16x21 – 1.19x12 + x23 + x23 + x33 + y3 = 0
(d) – y3 – 1.20x31 – 1.16x22 – 1.19x13 + x14 + x24 + x34 + y4 = 0 (year 4)
(e) – y4 – 1.20x32 – 1.16x23 – 1.19x14 + x15 + x25 + x35 + y5 = 0 (year 5)
(ii) Size of investment
x11 ≤ 1,00,000 , x12 ≤ 1,00,000 , x13 ≤ 1,00,000 , x14 ≤ 1,00,000 , x15 ≤ 1,00,000
x31 ≤ 50,000 , x32 ≤ 50,000 , x33 ≤ 50,000 , x34 ≤ 50,000 , x35 ≤ 50,000
and xij , y j ≥ 0 for all i and j.
Remark To formulate the first set of constraints of yearly cash flow, the following situation is adopted:
Investment alternatives Investment alternatives
=
x12 + x22 + x32 + y2 y1 + 1.19 x11
or – y1 – 1.19x11 + x12 + x22 + x32 + y2 = 0.
Example 2.23 A leading CA is attempting to determine the ‘best’ investment portfolio and is considering
six alternative investment proposals. The following table indicates point estimates for the price per share,
the annual growth rate in the price per share, the annual dividend per share and a measure of the risk
associated with each investment.
Portfolio Data
Shares Under Consideration A B C D E F
Current price per share (Rs) 80.00 100.00 160.00 120.00 150.00 200.00
Projected annual growth rate 0.08 0.07 0.10 0.12 0.09 0.15
Projected annual dividend per share (Rs) 4.00 4.50 7.50 5.50 5.75 0.00
Projected risk return 0.05 0.03 0.10 0.20 0.06 0.08

The total amount available for investment is Rs 25 lakh and the following conditions are required to
be satisfied:
(i) The maximum rupee amount to be invested in alternative F is Rs 2,50,000.
(ii) No more than Rs 5,00,000 should be invested in alternatives A and B combined.
(iii) Total weighted risk should not be greater than 0.10, where
(Amount invested in alternative j ) (Risk of alternative j )
Total weighted risk =
Total amount invested in all the alternatives
(iv) For the sake of diversity, at least 100 shares of each stock should be purchased.
(v) At least 10 per cent of the total investment should be in alternatives A and B combined.
(vi) Dividends for the year should be at least 10,000.
Rupee return per share of stock is defined as the price per share one year hence, less current price
per share plus dividend per share. If the objective is to maximize total rupee return, formulate this problem
as an LP model for determining the optimal number of shares to be purchased in each of the shares under
consideration. You may assume that the time horizon for the investment is one year.
46 Operations Research: Theory and Applications

LP model formulation Let x1, x2, x3, x4, x5 and x6 = number of shares to be purchased in each of
the six investment proposals A, B, C, D, E and
F, respectively.
Rupee return per share = Price per share one year hence – Current price per share + Dividend
per share
= Current price per share × Projected annual growth rate (i.e. Projected
growth each year + Dividend per share).
Thus, we compute the following data:

Investment Alternatives : A B C D E F
No. of shares purchased : x1 x2 x3 x4 x5 x6
Projected growth for each share (Rs) : 6.40 7.00 16.00 14.40 13.50 30.00
Projected annual dividend per share (Rs) : 4.00 4.50 7.50 5.50 5.75 0.00
Return per share (Rs) : 10.40 11.50 23.50 19.90 19.25 30.00

The LP model
Maximize (total return) R = 10.40x1 + 11.50x2 + 23.50x3 + 19.90x4 + 19.25x5 + 30.00x6
subject to the constraints
(i) 80x1 + l00x2 + 160x3 + 120x4 + 150x5 + 200x6 ≤ 25,00,000 (total fund available)
(ii) 200x6 ≤ 2,50,000 [from condition (i)]
(iii) 80x1 + l00x2 ≤ 5,00,000 [from condition (ii)]
80 x1 ( 0.05) + 100 x 2 ( 0.03) + 160 x 3 ( 0.10 ) + 120 x 4 ( 0.02 ) + 150 x 5 ( 0.06 ) + 200 x 6 ( 0.08 )
(iv) ≤1
80 x1 + 100 x 2 + 160 x 3 + 120 x 4 + 150 x 5 + 200 x 6
4x1 + 3x2 + 16x3 + 24x4 + 9x5 + 16x6 ≤ 8x1 + l0x2 + 16x3 + 12x4 + 15x5 + 20x6
– 4x1 – 7x1 + 0x3 + 12x4 – 6x5 – 4x6 ≤ 0
(v) x1 ≥ 100, x2 ≥ 100, x3 ≥ 100, x4 ≥ 100, x5 ≥ 100, x6 ≥ 100 [from condition (iv)]
(vi) 80x1 + l00x2 ≥ 0.10 (80x1 + l00x2 + 160x3 + 120x4 + 150x5 + 200x6) [from condition (v)]
80x1 + l00x2 ≥ 8x1 + l0x2 + 16x3 + 12x4 + 15x5 + 20x6
72x1 + 90x2 – 16x3 – 12x4 – 15x5 – 20x6 ≥ 0
(vii) 4x1 + 4.5x2 + 7.5x3 + 5.5x4 + 5.75x5 ≥ 10,000 [from condition (vi)]
and xj ≥ 0; j = 1, 2, 3, 4, 5 and 6.
Example 2.24 A company must produce two products over a period of three months. The company can
pay for materials and labour from two sources: company funds and borrowed funds.
The firm has to take three decisions:
(a) How many units of product 1 should it produce?
(b) How many units of product 2 should it produce?
(c) How much money should it borrow to support the production of the products?
The firm must take these decisions in order to maximize the profit contribution, subject to the conditions
stated below:
(i) Since the company’s products enjoy a seller’s market, the company can sell as many units as it
can produce. The company would therefore like to produce as many units as possible, subject
to its production capacity and financial constraints. The capacity constraints, together with cost
and price data, are shown in the following table:
Capacity, Price and Cost Data
Product Selling Price Cost of Production Required Hours per Unit in
(Rs per Unit) (Rs per Unit) Department

A B C
1 14 10 0.5 0.3 0.2
2 11 8 0.3 0.4 0.1
Available hours per production period of three months : 500.00 400.00 200.00
(ii) The available company funds during the production period will be Rs 3 lakh.
 Linear Programming: Applications and Model Formulation 47

(iii) A bank will give loans up to Rs 2 lakh per production period at an interest rate of 20 per cent
per annum provided that company’s acid (quick) test ratio is at 1 to 1 while the loan is outstanding.
Take a simplified acid-test ratio given by
Surplus cash on hand after production + Accounts receivable
Bank borrowings + Interest occurred thereon
(iv) Also make sure that the needed funds are made available for meeting production costs. Formulate
this problem as an LP model.
LP model formulation Let x1, x2 = number of units of products 1 and 2 produced, respectively.
x3 = amount of money borrowed.
The LP model
Profit contribution per unit of each product = (Selling price – Variable cost of production)
Maximize Z = Total profit by producing two products – Cost of borrowed money
= (14 – 10)x1 + (11 – 8)x2 – 0.05x3 = 4x1 + 3x2 – 0.05x3
(since the interest rate is 20 per cent per annum, it will be 5 per cent for a period
of three months)
subject to the constraints
(i) The production capacity constraints for each department
(a) 0.5x1 + 0.3x2 ≤ 500, (b) 0.3x1 + 0.4x2 ≤ 400, (c) 0.2x1 + 0.lx2 ≤ 200
(ii) The funds available for production are the sum of Rs 3,00,000 in cash that the firm has and
borrowed funds maximum up to Rs 2,00,000. Consequently, production is limited to the extent
that the funds are available to pay for production costs. Thus, we write the constraint as:
Funds required for production ≤ Funds available
10x1 + 8x2 ≤ 3,00,000 + x3
10x1 + 8x2 – x3 ≤ 3,00,000
(iii) Borrowed funds constraint [from condition (iii) of the problem]
x1 ≤ 2,00,000
(iv) Acid-test condition constraint
Surplus cash on hand after production + Accounts receivable
≥1
Bank borrowings + Interest accrued thereon
(3,00,000 + x3 − 10 x1 − 8 x2 ) + 14 x1 + 11x2
≥1
x3 + 0.2 x3
3, 00, 000 + x3 + 4 x1 + 3 x2 ≥ x3 + 0.2 x3
or − 4 x1 − 3 x 2 + 0.2 x 3 ≤ 3, 00 , 000
and x1, x2, x3 ≥ 0.
Example 2.25 The most recent audited summarized balance sheet of Shop Financial Service is given below:
The company intends to enhance its investment in the lease portfolio by another Rs 1,000 lakh. For
this purpose, it would like to raise a mix of debt and equity in such a way that the overall cost of raising
additional funds is minimized. The following constraints apply to the way the funds can be mobilized:
(i) Total debt divided by net owned funds, cannot exceed 10.
(ii) Amount borrowed from financial institutions cannot exceed 25 per cent of the net worth.
(iii) Maximum amount of bank borrowings cannot exceed three times the net owned funds.
Balance Sheet as on 31 March 2008
Liabilities (Rs lakh) Assets (Rs lakh)
Equity Share Capital 65 Fixed Assets:
Reserves & Surplus 110 Assets on Lease
(Original Cost: Rs 550 lakhs) 375
Term Loan from IFCI 80 Other Fixed Assets 50
Public Deposits 150 Investments (on wholly owned subsidiaries) 20
Bank Borrowings 147 Current Assets:
Other Current Liabilities 50 Stock on Hire 80
602 Receivables 30
Other Current Assets 35
Miscellaneous Expenditure (not written off) 12
602
48 Operations Research: Theory and Applications

(iv) The company would like to keep the total public deposit limited to 40 per cent of the total debt.
The post-tax costs of the different sources of finance are as follows:
Equity Term Loans Public Deposits Bank Borrowings
2.5% 8.5% 7% 10%
Formulate this problem as an LP model to minimize cost of funds raised.
Note: (a) Total Debt = Term loans from Financial Institutions + Public deposits + Bank borrowings
(b) Net worth = Equity share capital + Reserves and surplus
(c) Net owned funds = Net worth – Miscellaneous expenditures
LP model formulation Let x1, x2, x3 and x4 = quantity of additional funds (in lakh) raised on account
of additional equity, term loans, public deposits, bank
borrowings, respectively.
The LP model
Minimize (cost of additional funds raised) Z = 0.025x1 + 0.085x2 + 0.07x3 + 0.1x4
subject to the constraints
Total Debt Existing debt+Additional total debt
(i) ≤ 10 or ≤ 10
Net owned funds (Equity share capital + Reserve & surplus
+ Additional equity − Misc. exp.)
80 + 150 + 147 + x2 + x3 + x4 x2 + x3 + x4 + 377
≤ 10 or ≤ 10
(65 + 110 + x1 ) − 12 x1 + 163
x2 + x3 + x4 + 377 ≤ 10 x1 + 1,630 or –10x1 + x2 + x3 + x4 ≤ 1,253.
(ii) Amount borrowed (from financial institutions) ≤ 25% of net worth
or (Existing long-term loan from financial institutions + Additional loan)
≤ 25% (Existing equity capital + Reserve & surplus + Addl. equity capital)
80 + x2 ≤ 0.25 (175 + x1)
320 + 4x1 ≤ 175 + x1
– x1 + 4x2 ≤ – 145 or x1 – 4x2 ≥ 145.
(iii) Maximum bank borrowings ≤ 3 (Net owned funds)
or (Existing bank borrowings + Addl. bank borrowings ≤ 3 (Existing equity capital + Reserves
& surplus + Addl. equity capital – Misc. exp.)
(147 + x4) ≤ 3 (65 + 110 + x1 – 12)
x4 – 3x1 ≤ 525 – 36 – 147
–3x1 + x4 ≤ 342.
(iv) Total public deposit ≤ 40% of total debt.
or (Existing public deposits + Addl. public deposits) ≤ 0.40 (Existing total debt + Addl. total
debt)
or 150 + x3 ≤ 0.40 (80 + 150 + 147 + x2 + x3 + x4) or 150 + x3 ≤ 0.40 (x2 + x3 + x4 + 377)
1,500 + l0x3 ≤ 4x2 + 4x3 + 4x4 + 1,508 or – 4x2 + 6x3 – 4x4 ≤ 8.
(v) Addl. equity capital + Addl. term loan + Addl. public deposits + Addl. bank borrowings = 1,000
(since the company wants to enhance the investment by Rs 1,000 lakh)
or x1 + x2 + x3 + x4 = 1,000
and x1, x2, x3, x4 ≥ 0.
Example 2.26 Renco-Foundries is in the process of drawing up a Capital Budget for the next three years.
It has funds to the tune of Rs 1,00,000 that can be allocated among projects A, B, C, D and E. The net cash
flows associated with an investment of Re 1 in each project are provided in the following table.
Cash Flow at Time

Investment in 0 1 2 3
A – Re 1 + Re 0.5 + Re 1 Re 0
B Re 0 – Re 1 + Re 0.5 + Re 1
C – Re 1 + Rs 1.2 Re 0 Re 0
D – Re 1 Re 0 Re 0 Rs 1.9
E Re 0 Re 0 – Re 1 Rs 1.5

Note: Time 0 = present, Time 1 = 1 year from now. Time 2 = 2 years from now. Time 3 = 3 years from now.
 Linear Programming: Applications and Model Formulation 49

For example, Re 1 invested in investment B requires a Re 1 cash outflow at time 1 and returns Re 0.50
at time 2 and Re 1 at time 3.
To ensure that the firm remains reasonably diversified, the firm will not commit an investment exceeding
Rs 75,000 for any project. The firm cannot borrow funds and therefore, the cash available for investment
at any time is limited to the cash in hand. The firm will earn interest at 8 per cent per annum by parking
the un-invested funds in money market investments. Assume that the returns from investments can be
immediately re-invested. For example, the positive cash flow received from project C at time 1 can immediately
be re-invested in project B. Formulate this problem as an LP model so as to maximize cash on hand at
time 3. [CA, 2000; Delhi Univ., MBA, 2007]
LP model formulation Let x1, x2, x3, x4 and x5 = Amount of rupees invested in investments A, B,
C, D and E, respectively.
si = Money invested in money market instruments at
time i (for i = 0, 1, 2).
Firm earns interest at 8 per cent per annum by parking the un-invested funds in money market
instruments, hence Rs s0, Rs s1 and Rs s2 which are invested in these instruments at times 0, 1 and 2 will
become 1.08s0, 1.08s1 and 1.08s2 at times 1, 2 and 3, respectively.
Note: Cash available for investment in time t = cash on hand at time t.
From the given data, it can be computed that at time 3:
Cash on hand = x1 × 0 + x2 × 1 + x3 × 0 + 1.9x4 + 1.5x5 + 1.08s2
= Rs (x2 + 1.9x4 + 1.5x5 + 1.08s2)
The LP model
Maximize (Cash on hand at time 3) Z = x2 + 1.9x4 + 1.5x5 + 1.08s2
subject to the constraints
At time 0: Total fund of Rs 1,00,000 is available for investing on projects A, C and D. That is
x1 + x2 + x3 + s0 = 1,00,000
At time 1: Rs 0.5x1, Rs 1.2x3, and Rs 1.08s0 will be available as a result of investment made at time 0. Since
Rs x2 and s1 are invested in project B and money market instruments, respectively at time 1,
therefore we write
0.5x1 + 1.2x3 + 1.08s0 = x2 + s1
At time 2: Rs x1; Rs 0.5x2 and Rs 1.08 s1 will be available for investment. As Rs x5 and Rs s2 are invested
at time 2. Thus
x1 + 0.5x2 + 1.08s1 = x5 + s2
Also, since the company will not commit an investment exceeding Rs 75,000 in any project,
therefore the constraint becomes: xi ≤ 75,000 for i = 1, 2, 3, 4, 5.
and x1, x2, x3, x4, x5, s0, s1, s2 ≥ 0.

2.8.4 Examples on Agriculture

Example 2.27 A cooperative farm owns 100 acres of land and has Rs 25,000 in funds available
for investment. The farm members can produce a total of 3,500 man-hours worth of labour during September –
May and 4,000 man-hours during June – August. If any of these man-hours are not needed, some members of
the firm would use them to work on a neighbouring farm for Rs 2 per hour during September – May and Rs 3 per
hour during June – August. Cash income can be obtained from the three main crops and two types of livestock:
dairy cows and laying hens. No investment funds are needed for the crops. However, each cow will require an
investment outlay of Rs 3,200 and each hen will require Rs 15.
In additon each cow will also require 15 acres of land, 100 man-hours during the summer. Each cow
will produce a net annual cash income of Rs 3,500 for the farm. The corresponding figures for each hen
are: no acreage, 0.6 man-hours during September – May; 0.4 man-hours during June – August, and an
annual net cash income of Rs 200. The chicken house can accommodate a maximum of 4,000 hens and the
size of the cattle-shed limits the members to a maximum of 32 cows.
Estimated man-hours and income per acre planted in each of the three crops are:
Paddy Bajra Jowar
Man-hours
September-May 40 20 25
June-August 50 35 40
Net annual cash income (Rs) 1,200 800 850
50 Operations Research: Theory and Applications

The cooperative farm wishes to determine how much acreage should be planted in each of the crops
and how many cows and hens should be kept in order to maximize its net cash income. Formulate this
problem as an LP model to maximize net annual cash income.
LP model formulation The data of the problem is summarized as follows:
Constraints Cows Hens Crop Extra Hours Total
Paddy Bajra Jowar Sept–May June–Aug Availability

Man-hours
Sept–May 100 0.6 40 20 25 1 – 3,500
June–Aug 50 0.4 50 35 40 – 1 4,000
Land 1.5 – 1 1 1 – – 100
Cow 1 – – – – – – 32
Hens – 1 – – – – – 4,000
Net annual cash
income (Rs) 3,500 200 1,200 800 850 2 3

Decision variables Let

x1 and x2 = number of dairy cows and laying hens, respectively.
x3, x4 and x5 = average of paddy crop, bajra crop and jowar crop, respectively.
x6 = extra man-hours utilized in Sept–May.
x7 = extra man-hours utilized in June–Aug.
The LP model
Maximize (net cash income) Z = 3,500x1 + 200x2 + 1,200x3 + 800x4 + 850x5 + 2x6 + 3x7
subject to the constraints
(i) Man-hours: 100x1 + 0.6x2 + 40x3 + 20x4 + 25x5 + x6 = 3,500 (Sept-May duration)
50x1 + 0.4x2 + 50x3 + 35x4 + 40x5 + x7 = 4,000 (June-Aug duration)
(ii) Land availability: 1.5x1 + x3 + x4 + x5 ≤ 100
(iii) Livestock: (a) x1 ≤ 32 (dairy cows), (b) x2 ≤ 4,000 (laying hens)
and x1, x2, x3, x4, x5, x6, x7 ≥ 0.

Example 2.28 A certain farming organization operates three farms of comparable productivity. The output
of each farm is limited both by the usable acreage and by the amount of water available for irrigation. The
data for the upcoming season is as shown below:

Farm Usable Acreage Water Available

(in cubic feet)
1 400 1,500
2 600 2,000
3 300 900

The organization is considering planting crops which differ primarily in their expected profit per acre
and in their consumption of water. Furthermore, the total acreage that can be devoted to each of the crops
is limited by the amount of appropriate harvesting equipment available.

Crop Maximum Water Consumption Expected Profit

Acreage (in cubic feet) per Acre (Rs)
A 700 5 4,000
B 800 4 3,000
C 300 3 1,000

In order to maintain a uniform workload among the three farms, it is the policy of the organization that
the percentage of the usable acreage planted be the same for each farm. However, any combination of the
crops may be grown at any of the farms. The organization wishes to know how much of each crop should
be planted at the respective farms in order to maximize expected profit.
Formulate this problem as an LP model in order to maximize the total expected profit.
 Linear Programming: Applications and Model Formulation 51

LP model formulation The data of the problem is summarized below:

Crop Farm Crop Expected

Requirement Profit per Acre
1 2 3
(in acres) (Rs)

A x 11 x 12 x 13 700 4,000
B x 21 x 22 x 23 800 3,000
C x 31 x 32 x 33 300 1,000
Usable acreage 400 600 300
Water available per acre 1,500 2,000 900

Decision variables Let xij = number of acres to be allocated to crop i (i = 1, 2, 3) to farm j ( j = 1, 2)

The LP model
Maximize (net profit) Z = 4,000(x11 + x12 + x13) + 3,000(x21 + x22 + x23) + l,000(x31 + x32 + x33)
subject to the constraints
(i) Crop requirement
(a) x11 + x12 + x13 ≤ 700, (b) x21 + x22 + x23 ≤ 800, (c) x31 + x32 + x33 ≤ 300
(ii) Available acreage
(a) x11 + x21 + x31 ≤ 400, (b) x12 + x22 + x32 ≤ 600, (c) x13 + x23 + x33 ≤ 300
(iii) Water available (in acre feet)
(a) 5x11 + 4x21 + 3x31 ≤ 1,500, (b) 5x12 + 4x22 + 3x32 ≤ 2,000, (c) 5x13 + 4x23 + 3x33 ≤ 900
(iv) Social equality
x11 + x 21 + x 31 x + x 22 + x 32 x12 + x 22 + x 32 x13 + x 23 + x 33
(a) = 12 , (b) = ,
400 600 600 300
x13 + x 23 + x 33 x + x 21 + x 31
(c) = 11
300 400
and xij ≥ 0 for all i and j.

2.8.5 Examples on Transportation

Example 2.29 ABC manufacturing company wishes to develop its monthly production schedule for the
next three months. Depending upon the sales commitments, the company can either keep the production
constant, allowing fluctuation in inventory; or its inventories can be maintained at a constant level, with
fluctuating production. Fluctuating production makes overtime work necessary, the cost of which is estimated
to be double the normal production cost of
Rs 12 per unit. Fluctuating inventories Month Production Capacity (units) Sales
Regular Overtime (units)
result in an inventory carrying cost of Rs
2 per unit/month. If the company fails to 1 50 30 60
fulfil its sales commitment, it incurs a 2 50 0 120
shortage cost of Rs 4 per unit/month. The 3 60 50 40
production capacities for the next three
months are in the table:
Formulate this problem as an LP model to minimize the total production cost.
[Delhi Univ., MBA, 2008]
LP model formulation The data of the problem is summarized as follows:

Month Production Capacity Sales

Regular Overtime
1 50 30 60
2 50 0 120
3 60 50 40
52 Operations Research: Theory and Applications

Normal production cost : Rs 12 per unit Overtime cost : Rs 24 per unit

Carrying cost : Rs 12 per unit per month Shortage cost : Rs 14 per unit per month
Assume five sources of supply: three regular and two overtime (because the second months overtime
production is zero) production capacities. The demand for the three months will be the sales during these months.
All supplies against the order have to be made and can be made in the subsequent month if it is not possible
to make them during the month of order, with additional cost equivalent to shortage cost, i.e. in month 2. The
cumulative production of months 1 and 2 in regular and overtime is 130 units while the orders are for 180 units. This
balance can be supplied during month 3 at an additional production cost of Rs 4.
The given information can now be presented in matrix form as follows:
M1 M2 M3 Production (supply)
M1 12 14 16 50
M2 16 12 14 50
M3 20 16 12 60
M1(OT) 24 26 28 30
M2(OT) 32 28 24 50
Sales (demand) 60 120 40
Decision variables Let xij = amount of commodity sent from source of supply i (i = 1, 2, . . ., 5) to
destination j ( j = 1, 2, 3)
The LP model
Minimize (total cost) Z = 12x11 + l4x12 + 16x13 + 16x21 + l2x22 + 14x23 + 20x31 + 16x32 + 12x33 + 24x41
+ 26x42 + 28x43 + 32x51 + 28x52 + 24x53
subject to the constraints
(i) Production (supply) constraints
(a) x11 + x12 + x13 = 50, (b) x21 + x22 + x23 = 50, (c) x31 + x32 + x33 = 60,
(d) x41 + x42 + x43 = 30, (e) x51 + x52 + x53 = 30
(ii) Sales (demand) constraints
(a) x11 + x21 + x31 + x41 + x51 = 160, (b) x12 + x22 + x32 + x42 + x52 = 120,
(c) x13 + x23 + x33 + x43 + x53 = 140
and xij ≥ 0 for all i and j.
Example 2.30 A trucking firm has received an order to move 3,000 tonnes of industrial material to a
destination 1,000 km away. The firm has available, at the moment, a fleet of 150 class-A 15-tonne trailer
trucks and another fleet of 100 class-B 10-tonne trailer trucks. The operating costs of these trucks are
Rs 3 and Rs 4 per tonne per km, respectively. Based on past experience, the firm has a policy of retaining
at least one class-A truck with every two class-B trucks in reserve. It is desired to know how many of
these two classes of vehicles should be despatched to move the material at minimal operating costs.
Formulate this problem as an LP model.
LP model formulation Let x1 and x2 = number of class A and B trucks to be despatched, respectively.
The LP model
Minimize (total operating cost) Z = 3x1 + 4x2
subject to the constraints
15x1 + 10x2 ≤ 3,000
x1 ≤ 149 UV (due to the policy of retaining at least one class-
x 2 ≤ 98 W A truck with every two class-B truck in reserve)
and x1 , x 2 ≥ 0 .
Example 2.31 A ship has three cargo loads – forward, after and centre. Their capacity limits are:

Weight (kg) Volume (cu cm)

Forward 2,000 1,00,000
Centre 3,000 1,35,000
After 1,500 30,000
 Linear Programming: Applications and Model Formulation 53

The following cargos are offered to be carried in the ship. The ship owner may accept all or any part
of each commodity:

Commodity Weight (kg) Volume (cu cm) Profit (in Rs) per kg
A 6,000 60 60
B 4,000 50 80
C 2,000 25 50

In order to preserve the trim of the ship, the weight in each cargo must be proportional to the capacity
in kg. The cargo is to be distributed in a way so as to maximize profit. Formulate this problem as an LP
model.
LP model formulation xiA, xiB and xiC = weight (in kg) of commodities A, B and C to be
accommodated in the direction i(i = 1, 2, 3 – forward, centre
and after), respectively.
The LP model
Maximize (total profit) Z = 60 ( x1A + x2 A + x3 A ) + 80 ( x1B + x2 B + x3B ) + 50 ( x1C + x2C + x3C )
subject to the constraints
x1B + x2B + x3B ≤ 4,000; x1B + x2B + x3B ≤ 4,000;
x1B + x2B + x3B ≤ 4,000; x1A + x1B + x1C ≤ 2,000
x1A + x2B + x3C ≤ 4,000; x3A + x3B + x3C ≤ 1,500
60x1A + 50x1B + 25x1C ≤ 1,00,000
60x2A + 50x2B + 25x2C ≤ 1,35,000
60x3A + 50x3B + 25x3C ≤ 1,30,000
and xiA , xiB , xiC ≥ 0, for all i.

2.8.6 Examples on Personnel

Example 2.32 Evening shift resident doctors in a government hospital work five consecutive days and
have two consecutive days off. Their five days of work can start on any day of the week and their schedule
rotates indefinitely. The hospital requires the following minimum number of doctors to work on the given
days:
Sun Mon Tues Wed Thus Fri Sat
35 55 60 50 60 50 45
No more than 40 doctors can start their five working days on the same day. Formulate this problem
as an LP model to minimize the number of doctors employed by the hospital.
[Delhi Univ., MBA (HCA), 2006]
LP model formulation Let xj = number of doctors who start their duty on day j ( j = 1, 2, . . ., 7) of
the week.
The LP model
Minimize (total number of doctors) Z = x1 + x2 + x3 + x4 + x5 + x6 + x7
subject to the constraints
(i) x1 + x4 + x5 + x6 + x7 ≥ 35, (ii) x2 + x5 + x6 + x7 + x1 ≥ 55
(iii) x3 + x6 + x7 + x1 + x2 ≥ 60, (iv) x4 + x7 + x1 + x2 + x3 ≥ 50
(v) x5 + x1 + x2 + x3 + x4 ≥ 60, (vi) x6 + x2 + x3 + x4 + x5 ≥ 50
(vii) x7 + x3 + x4 + x5 + x6 ≥ 45, (viii) x j ≤ 40
and x j ≥ 0 for all j.
Example 2.33 A machine tool company conducts on-the-job training programme for machinists. Trained
machinists are used as teachers for the programme, in the ratio of one for every ten trainees. The training
programme lasts for one month. From past experience it has been found that out of the ten trainees hired,
only seven complete the programme successfully and the rest are released.
Trained machinists are also needed for machining. The company’s requirement for machining for the
next three months is as follows: January 100, February 150 and March 200. In addition, the company requires
250 machinists by April. There are 130 trained machinists available at the beginning of the year. Pays per
month are:
54 Operations Research: Theory and Applications

Each trainee : Rs 4,400

Each trained machinist
(machining and teaching) : Rs 4,900
Each trained machinist idle : Rs 4,700
Formulate this problem as an LP model to minimize the cost of hiring and training schedule and the
company’s requirements.
LP model formulation Let
x1, x2 = trained machinist teaching and idle in January, respectively
x3, x4 = trained machinist teaching and idle in February, respectively
x5, x6 = trained machinist teaching and idle in March, respectively
The LP model
Minimize (total cost) Z = Cost of training programme (teachers and trainees) + Cost of idle machinists
+ Cost of machinists doing machine work (constant)
= 4,400 (10x1 + 10x3+ 10x5) + 4,900 (x1 + x3 + x5) + 4,700 (x2 + x4 + x6)
subject to the constraints
(i) Total trained machinists available at the beginning of January
= Number of machinists doing machining + Teaching + Idle
130 = 100 + x1 + x2 or x1 + x2 = 30
(ii) Total trained machinists available at the beginning of February
= Number of machinists in January + Joining after training programme
130 + 7x1 = 150 + x3 + x4 or 7x1 – x3 – x4 = 20
In January there are 10x1 trainees in the programme and out of those only 7x1 will become trained
machinists.
(iii) Total trained machinists available at the beginning of March
= Number of machinists in January + Joining after training
= programme in January and February
130 + 7x1 + 7x3 = 200 + x5 + x6
7x1 + 7x3 – x5 – x6 = 70
(iv) Company requires 250 trained machinists by April
130 + 7x1 + 7x3 + 7x5 = 250
7x1 + 7x3 + 7x5 = 120
and x1, x2, x3, x4, x5, x6 ≥ 0.
Example 2.34 The super bazzar in a city daily needs anything between 22 to 30 workers in the bazzar
depending on the time of day. The rush hours are between noon and 2 pm. The table indicates the number
of workers needed at various hours when the bazzar is open.
The super bazzar now employs 24 full-time workers, but also needs a few part-time workers. A part-
time worker must put in exactly 4 hours per day, but can start any time between 9 am and 1 pm. Full- time
workers work from 9 am to 5 pm but are allowed an hour for lunch (half of the full-timers eat at 12 noon,
the other half at 1 am). Full-timers thus provide 35 hours per week of productive labour time.
The management of the super bazzar limits part-time
hours to a maximum of 50 per cent of the day’s total Time Period Number of Workers
requirement. Needed
Part-timers earn Rs 28 per day on the average, while 9 AM – 11 A M 22
full-timers earn Rs 90 per day in salary and benefits on the 11 AM – 1 P M 30
average. The management wants to set a schedule that 1 PM – 3 P M 25
would minimize total manpower costs. 3 PM – 5 P M 23
Formulate this problem as an LP model to minimize total
daily manpower cost.
LP model formulation Let
y = full-time workers
xj = part-time workers starting at 9 am, 11 am and 1 pm, respectively ( j = 1, 2, 3)
 Linear Programming: Applications and Model Formulation 55

The LP model
Minimize (total daily manpower cost) Z = 90y + 28(x1 + x2 + x3)
subject to the constraints
1
(i) y + x1 ≥ 22 [9 am – 11 am], (ii) y + x1 + x 2 ≥ 30 [11 am – 1 pm],
2
1
(iii) y + x 2 + x 3 ≥ 25 [1 pm – 3 pm], (iv) y + x 3 ≥ 23 [3 pm – 5 pm],
2
(v) y ≤ 24 [Full-timers available], (iv) 4 ( x1 + x2 + x3 ) ≤ 0.50 (22 + 30 + 25 + 23)
[Part-timers’ hours cannot exceed 50% of total hours required each day which is the sum of the
workers needed each hour]
and y, xj ≥ 0 for all j.
Example 2.35 The security and traffic force, on the eve of Republic
Time Number of Officers
Day, must satisfy the staffing requirements as shown in the table.
Required
Officers work 8-hour shifts starting at each of the 4-hour intervals
as shown below. How many officers should report for duty at the 0:01 – 4:00 5
beginning of each time period in order to minimize the total number 4:01 – 8:00 7
of officers needed to satisfy the requirements? 8:01 – 12:00 15
Formulate this problem as an LP model so as to determine the 12:01 – 16:00 7
16:01 – 20:00 12
minimum number of officers required on duty at beginning of each
20:01 – 24:00 9
time period.
LP model formulation xi = number of officers who start in shift i (i = 1, 2, 3, . . ., 6)
The LP model
Minimize (number of officers required on duty) Z = x1 + x2 + x3 + x4 + x5 + x6
subject to the constraints
(i) x1 + x2 ≥ 7 , (ii) x2 + x3 ≥ 15 , (iii) x3 + x4 ≥ 7 ,
(iv) x4 + x5 ≥ 12 , (v) x5 + x6 ≥ 9 , (vi) x6 + x1 ≥ 5
and x j ≥ 0, for all j.

CONCEPTUAL QUESTIONS

1. (a) What is linear programming? What are its major assumptions (b) Discuss and describe the role of linear programming in
and limitations? [Delhi Univ., MBA, Nov. 2005] managerial decision-making, bringing out limitations, if any.
1. (b) Two of the major limitations of linear programming are: [Delhi Univ., MBA, 2003]
assumption of ‘additivity’ and ‘single objective’. Elaborate by 7. Regardless of the way one defines linear programming, certain
giving appropriate examples. [Delhi Univ., MBA, Nov. 2009 ] basic requirements are necessary before this technique can be
2. Linear programming has no real-life applications’. Do you agree employed to business problems. What are these basic
with this statement? Discuss. [Delhi Univ., MBA, 2004 ] requirements in formulation? Explain briefly.
3. In relation to the LP problem, explain the implications of the 8. Discuss in brief linear programming as a technique for resource
following assumptions of the model: utilization. [Delhi Univ., MBA (HCA), 2004]
(i) Linearity of the objective function and constraints, 9. What are the four major types of allocation problems that can
(ii) Continuous variables, be solved using the linear programming technique? Briefly explain
(iii) Certainty. each with an example.
4. What is meant by a feasible solution of an LP problem? 10. Give the mathematical and economic structure of linear
programming problems. What requirements should be met in
5. ‘Linear programming is one of the most frequently and
order to apply linear programming?
successfully applied operations research technique to managerial
decisions.’ Elucidate this statement with some examples. 11. Discuss and describe the role of linear programming in managerial
[Delhi Univ., MBA, 2008] decision-making bringing out limitations, if any.
6. (a) What are the advantages and limitations of LP models? [Delhi Univ., MBA, 2004, 2009]
56 Operations Research: Theory and Applications

SELF PRACTICE PROBLEMS

Problems on Production 5. Consider a small plant which makes two types of automobile
parts, say A and B. It buys castings that are machined, bored
1. A company sells two different products A and B, making a profit and polished. The capacity of machining is 25 per hour for A
of Rs 40 and Rs 30 per unit, respectively. They are both produced and 24 per hour for B, capacity of boring is 28 per hour for
with the help of a common production process and are sold in A and 35 per hour for B, and the capacity of polishing is 35
two different markets. The production process has a total capacity per hour for A and 25 per hour for B. Castings for part A cost
of 30,000 man-hours. It takes three hours to produce a unit of Rs 2 and sell for Rs 5 each and those for part B cost Rs 3
A and one hour to produce a unit of B. The market has been and sell for Rs 6 each. The three machines have running costs
surveyed and company officials feel that the maximum number of Rs 20, Rs 14 and Rs 17.50 per hour. Assuming that any
of units of A that can be sold is 8,000 units and that of B is combination of parts A and B can be sold, formulate this problem
12,000 units. Subject to these limitations, products can be sold as an LP model to determine the product mix which would
in any combination. Formulate this problem as an LP model to maximizes profit.
maximize profit. 6. On October 1, a company received a contract to supply 6,000
2. The manager of an oil refinery must decide on the optimal mix units of a specialized product. The terms of contract require
of two possible blending processes of which the input and output that 1,000 units of the product be shipped in October; 3,000
per production run are given as follows: units in November and 2,000 units in December. The company
can manufacture 1,500 units per month on regular time and
Process Input (units) Output 750 units per month in overtime. The manufacturing cost per
(units) Crude A Crude B Gasoline X Gasoline Y item produced during regular time is Rs 3 and the cost per item
produced during overtime is Rs 5. The monthly storage cost
1 5 3 5 8 is Re 1. Formulate this problem as an LP model so as to
2 4 5 4 4 minimize total costs. [Delhi Univ., MBA, 1999]
The maximum available amount of crude A and B are 7. A wine maker has a stock of three different wines with the
200 units and 150 units, respectively. Market requirements following characteristics:
show that at least 100 units of gasoline X and 80 units of Wine Proofs Acids% Specific Gravity Stock (gallons)
gasoline Y must be produced. The profit per production run
from process 1 and process 2 are Rs 300 and Rs 400, A 27 0.32 1.70 20
respectively. Formulate this problem as an LP model to B 33 0.20 1.08 34
maximize profit.
C 32 0.30 1.04 22
3. A firm places an order for a particular product at the beginning
of each month and that product is received at the end of the A good dry table wine should be between 30 and 31 degree
month. The firm sells during the month from the stocks and it proof, it should contain at least 0.25% acid and should have
can sell any quantity. a specific gravity of at least 1.06. The wine maker wishes to
The prices at which the firm buys and sells vary every month. blend the three types of wine to produce as large a quantity
The following table shows the projected buying and selling prices as possible of a satisfactory dry table wine. However, his stock
for the next four months: of wine A must be completely used in the blend because further
storage would cause it to deteriorate. What quantities of wines
Month Selling Price (Rs) Purchase Price (Rs) B and C should be used in the blend. Formulate this problem
(During the Month) (Beginning of the Month) as an LP model.
April – 75 8. ABC foods company is developing a low-calorie high-protein
May 90 75 diet supplement called Hi-Pro. The specifications of Hi-Pro have
June 60 60 been established by a panel of medical experts. These
July 75 – specifications along with the calorie, protein and vitamin content
of three basic foods, are given in the following table:
As on April 1 the firm has no stocks on hand, and does not
wish to have any stocks at the end of July. The firm has a Nutritional Units of Nutritional Elements Basic Foods
warehouse of limited size, which can hold a maximum of 150 Elements (Per 100 gm Serving of Hi-Pro
units of the product. Basic Foods) Specifications
Formulate this problem as an LP model to determine the 1 2 3
number of units to buy and sell each month so as to maximize
the profits from its operations. [Delhi Univ., MBA, 2007] Calories 350 250 200 300
Proteins 250 300 150 200
4. A manufacturer produces three models (I, II and III) of a certain
Vitamin A 100 150 75 100
product. He uses two types of raw materials (A and B) of
Vitamin C 75 125 150 100
which 4,000 and 6,000 units, respectively, are available. The
Cost per
raw material requirements per unit of the three models are as
serving (Rs) 1 . 5 0 2.00 1.20
follows:
The labour time of each unit of model I is twice that of model What quantities of foods 1, 2, and 3 should be used? Formulate
II and three times that of model III. The entire labour force of this problem as an LP model to minimize cost of serving.
the factory can produce equivalent of 2,500 units of model I. [Delhi Univ., MBA (HCA), 2009]
A market survey indicates that the minimum demand of the 9. Omega leather goods company manufactures two types of
three models is: 500, 500 and 375 units, respectively. However, leather soccer balls X and Y. Each type of ball requires work
the ratios of the number of units produced must be equal to by two types of employees – semi-skilled and skilled. Basically,
3 : 2 : 5. Assume that the profit per unit of models I, II and the semi-skilled employees use machines, while the skilled
III are Rs 60, 40 and 100, respectively. Formulate this problem employees stitch the balls. The available time (per week) for
as an LP model to determine the number of units of each manufacturing each type of employee and the time requirement
product which will maximize profit. for each type of ball are given below:
 Linear Programming: Applications and Model Formulation 57

B. One unit of food F2 contains six units of Vitamin A and three

Type of Employee Manufacturing Time Time Available units of Vitamin B, One unit of food F1 and F2 cost Rs 4 and
Requirement (hr) (hr/week) 5, respectively. The minimum daily requirement (for a person)
of Vitamins A and B is 80 and 100 units, respectively. Assuming
Ball X Ball Y
that anything in excess of the daily minimum requirement of A
and B is not harmful. Formulate this problem as an LP model
Semi-skilled 2 3 80
to find out the optimum mixture of food F1 and F2 at the minimum
Skilled 4 6 150
cost which meets the daily minimum requirement of Vitamins
The cost of an hour of semi-skilled labour is Rs 5.50 and that A and B. [Delhi Univ., MBA (HCA), 2009]
of an hour of skilled labour is Rs 8.50. To meet the weekly 13. The Omega Data Processing Company performs three types
demand requirements, at least 15 balls of type X and at least of activities: payrolls, account receivables, and inventories. The
10 balls of type Y must be manufactured. Formulate this problem profit and time requirements for keypunch, computation and
as an LP model so as to minimize cost of production. office printing for a ‘standard job’ are shown in the following
10. A pharmaceutical company has developed a new pill to be table:
taken by smokers that will nauseate them if they smoke. This
new pill is a combination of four ingredients that are costly and Job Profit/Standard Time Requirement (Min.)
in limited supply. The available supply and costs are as follows: Job (Rs) Keypunch Computation Print

Ingredient Supply Cost Payroll 275 1,200 20 100

Availability (kg) (Rs/kg) A/c Receivable 125 1,400 15 60
1 22 28 Inventory 225 800 35 80
2 18 25 Omega guarantees overnight completion of all standard jobs.
3 20 52 Any job scheduled during the day can be completed during the
4 24 26 day or night. Any job scheduled during the night, however,
must be completed during the night. The capacity for both day
Blending requirements for this new pill are as follows: and night are shown in the following table:
(i) Ingredient 1 must be at least 45 per cent of the total
Capacity (Min.) Keypunch Computation Print
quantity, but cannot exceed 60 per cent of the total.
(ii) Ingredients 2 and 3 must each comprise at least 10 per Day 4,200 150 400
cent of the mixture, but their combined percentage cannot Night 9,200 250 650
exceed 25 per cent of the total quantity.
(iii) Ingredient 4 must not be more than 50 per cent of the total Formulate this problem as an LP model to determine the ‘mix’
quantity. Additionally, at least 25 kg of the pill must be of standard jobs that should be accepted during the day and
produced. night. [Delhi Univ., MBA, 2008]

Formulate this problem as an LP model to determine 14. PQR coffee company mixes South Indian, Assamese and
optimum blending of ingredients. imported coffee for making two brands of coffee: plains X and
[Delhi Univ., MBA (HCA), 2008] plains XX. The characteristics used in blending the coffee include
strength, acidity and caffeine. The test results of the available
11. A paint manufacturing company manufactures paints at two of
supplies of South Indian, Assamese and imported coffee are
its plants. Firm orders have been received from three large
shown in the following table:
contractors. The firm has determined that the following shipping
cost data is appropriate for these contractors with respect to Price per kg Strength Acidity Per cent Supply
its two plants: (Rs) Index Index Caffeine Available
Shipping Cost/Gallon (Rs) (kg)
Contractor Order Size
(gallon) From Plant 1 From Plant 2 South Indian, 30 6 4.0 2.0 40,000
Assamese, 40 8 3.0 2.5 20,000
A 1,750 1.80 2.00 Imported, 35 5 3.5 1.5 15,000
B 1,500 2.60 2.20
The requirements for plains X and plains XX coffees are given
C 1,500 2.10 2.25
in the following table:
Each gallon of paint must be blended and tinted. The
Plains Price Minimum Maximum Maximum Quantity
company’s costs with respect to these two operations at both
Coffee per kg Strength Acidity Per Demanded
of the plants are as follows:
(Rs) Caffeine (kg) Cent
Plant/Operation Hours Cost/hour Hours X 45 6.5 3.8 2.2 35,000
Required (Rs) Available XX 55 6.0 3.5 2.0 25,000
per Gallon
Assume that 35,000 kg of plains X and 25,000 kg of plains XX,
Blending 0.10 3.80 300 are to be sold. Formulate this problem as an LP model to
Tinting Plant 1 0.25 3.20 360 maximize sales.
Blending 0.15 4.00 600 15. A manufacturer of metal office equipments makes desks, chairs,
Tinting Plant 2 0.20 3.10 720 cabinets and book cases. The work is carried out in the three
Formulate this problem as an LP model. major manufacturing departments: Metal stamping, Assembly
and Finishing. Exhibits, A, B the and C give the requisite data
12. Vitamins A and B are found in foods F1 and F2. One unit of food
of the problem.
F1 contains three units of Vitamin A and four units of Vitamin
58 Operations Research: Theory and Applications

Exhibit A
Model Foundry Machine-shop Contribution per
Department Time Required per Unit Available Model (Rs)
of Product (hrs) Products Time per X 100 200 120
Desk Chair Cabinet Bookcase Week (hrs) Y 240 150 90
Stamping 4 2 3 3 1,800 In addition, the material required for model X was in short supply
Assembly 10 6 8 7 1,200 and sufficient only for 140 units per week, guaranteed for the
Finishing 10 8 8 8 1,800 year. Formulate this problem as an LP model to determine the
Exhibit B optimal combination of output.
19. A company manufacturing television and radio sets has four
Department Cost (Rs) of Operation per Unit of Product major departments: chassis, cabinet, assembly and final testing.
The monthly capacities of these are as follows:
Desk Chair Cabinet Bookcase
Television Radio
Stamping 15 8 12 12
Assembly 30 18 24 21 Chassis 1,500 or 4,500
Finishing 35 28 25 21 Cabinet 1,000 or 8,000
Assembly 2,000 or 4,000
Exhibit C: Selling price (Rs) per unit of product Testing 3,000 or 9,000
Desk : 175 Chair : 95
Cabinet : 145 Bookcase : 130 The contribution of a television set is Rs 500 and that of a radio
set Rs 250. Assume that the company can sell any quantity
In order to maximize weekly profits, what should be all
of either product. Formulate this problem as an LP model to
production programme? Assuming that the items produced can
determine the optimal combination of television and radio sets.
be sold, which department needs to be expanded for increasing
profits? Formulate this problem as an LP model. 20. A company wants to plan production for the ensuing year so
as to minimize the combined cost of production and inventory
16. The PQR stone company sells stone procured from any of
storage. In each quarter of the year, demand is anticipated to
three adjacent quarries. The stone sold by the company
be 65, 80, 135 and 75 respectively. The product can be
conforms to the following specification:
manufactured during regular time at a cost of Rs 16 per unit
Material X equal to 30%
produced, or during overtime at a cost of Rs 20 per unit. The
Material Y equal to or less than 40%
table given below gives data pertinent to production capacities.
Material Z between 30% and 40%
The cost of carrying one unit in inventory per quarter is Rs 2.
Stone from quarry A costs Rs 10 per tonne and has the following
The inventory level at the beginning of the first quarter is zero.
properties:
Material X : 20%, Material Y : 60%, Material Z : 20%
Quarter Capacities (units) Quarterly
Stone from quarry B costs Rs 12 per tonne and has the following
Regular Time Overtime Demand
properties:
Material X : 40%, Material Y : 30%, Material Z : 30% 1 80 10 65
Stone from quarry C costs Rs 15 per tonne and has the following 2 90 10 80
properties: 3 95 20 135
Material X : 10%, Material Y : 40%, Material Z : 50% 4 70 10 75
From what quarries should the PQR stone company procure
rocks in order to minimize cost per tonne of rock? Formulate Formulate this problem as an LP model so as to minimize
this problem as an LP model. [Delhi Univ., MBA, 2006] the production plus storage costs for the entire year.
17. A manufacturer produces three models (I, II and III) of a certain [Delhi Univ., MBA, 2005]
product. He uses two types of raw material: A and B of which Problems on Marketing
4,000 and 6,000 units are available, respectively. The raw material
requirements per unit of the three models are given below: 21. Suppose a media specialist has to decide how to allocate
advertising in three media vehicles. Let xi be the number of
Raw Material Requirements per Unit of Given Model messages carried in the media, i = 1, 2, 3. The unit costs of
a message in the three media are Rs 1,000, Rs 750 and
I II III Rs 500. The total budget available for the campaign is Rs
A 2 3 5 2,00,000 period of a year. The first media is a monthly magazine
B 4 2 7 and it is desired to advertise not more than one insertion in one
issue. At least six messages should appear in the second
The labour time for each unit of model I is twice that of model II media. The number of messages in the third media should
and three times that of model III. The entire labour force of the strictly lie between 4 and 8. The expected effective audience
factory can produce the equivalent of 2,500 units of model I. for unit message in the media vehicles is shown below:
A market survey indicates that the minimum demand for the
three models is 500, 500 and 375 units, respectively. However, Vehicle Expected Effective Audience
the ratios of the number of units produced must be equal to
3 : 2 : 5. Assume that the profit per unit of models I, II and 1 80,000
III is Rs 60, Rs 40 and Rs 100, respectively. Formulate this 2 60,000
problem as an LP model to determine the number of units of 3 45,000
each product that will the maximize amount of profit. Formulate this problem as an LP model to determine the
18. A company manufactures two models of garden rollers: X and optimum allocation that would maximize total effective audience.
Y. When preparing the 2008 budget, it was found that the 22. An advertising company is planning an advertisement campaign
limitations on capacity were represented by the following weekly for a new product recently introduced in the market. It is decided
production maxima: to insert advertisements in three leading magazines. The
 Linear Programming: Applications and Model Formulation 59

company has made a careful analysis of three available media, The relative importance of the three characteristics is:
and has compiled the following set of relevant data: Homeowner, 0.4; Income, 0.2; Gardener, 0.4. The advertising
budget is Rs 2,00,000. Formulate this problem as an LP model
Data Item Magazines to find the most effective number of exposures in each
magazine.
1 2 3
Problems on Finance
Reader characteristics
(a) Age: 25–35 yrs 70% 80% 40% 25. A gambler plays a game that requires dividing bet money among
(b) Education level: Graduation four different choices. The game has three outcomes. The
and above 80% 60% 50% following table gives the corresponding gain (or loss) per rupee
(c) Income: Rs 5,000 and above 60% 70% 40% deposited in each of the four choices for the three outcomes:
Minimum number of advertisements 2 0 10 5
Outcome Gain (or loss) Deposited in
Maximum number of advertisements 5 0 40 30
per Rupee Given Choice
Cost per advertisement (Rs) 1,000 700 500
Readership 3,20,000 5,00,000 2,00,000 1 2 3 4

Additionally, the company has specified that the relative 1 – 3 4 – 7 15

importance of the reader characteristics should be weighted as 2 5 – 3 9 4
follows: 3 3 – 9 10 – 8

Reader Characteristics Weightage Assume that the gambler has a total of Rs 500 with which he
may play only once. The exact outcome of the game is not
Age: 25–35 yrs 0.4 known in advance and in the face of this uncertainty the gambler
Graduate and above 0.4 decides to make the allocation that would maximize the minimum
Income ≥ Rs 5,000 0.2 return. Formulate this problem as an LP model.
26. An investor has money-making activities A1, A2, A3 and A4. He
At this point in time the company has Rs 5,00,000 to spend.
has only one lakh rupees to invest. In order to avoid excessive
Formulate this problem as an LP model to maximize the effective
investment, no more than 50 per cent of the total investment
exposure level.
can be placed in activity A2 and/or activity A3. Activity A1 is
23. The owner of Metro Sports wishes to determine the number of very conservative, while activity A4 is speculative. To avoid
advertisements to be placed in the selected three monthly excessive speculation, at least Re 1 must be invested in activity
magazines A, B and C. His objective is to advertise in such A1 for every Rs 3 invested in activity A4. The data on the return
a way that total exposure to principal buyers of expensive on investment is as follows:
sports goods is maximized. The percentage of readers for
each magazine is known. Exposure to any particular magazine Activity Anticipated Return on Investment (%)
is the number of advertisements placed multiplied by the number
of principal buyers. The following data may be used: A1 10
A2 12
Magazines A3 14
A B C A4 16

Readers 1 lakh 0.6 lakh 0.4 lakh The investor wishes to know how much to invest in each in order
Principal buyers 10 % 15 % 7% activity to maximize the total return on the investment. Formulate
Cost per advertisement (Rs) 5,000 4,500 4,250 this problem as an LP model.
27. The board of directors of a company has given approval for
The budget amount is at the most Rs 2,00,000 for the
the construction of a new plant. The plant will require an
advertisements. The owner has already decided that magazine
investment of Rs 50 lakh. The required funds will come from
A should have no more than six advertisements and that B and
the sale of a proposed bond issue and by taking loans from
C each should have at least two advertisements. Formulate
two financial corporations. For the company, it will not be
this problem as an LP model to determine the number of
possible to sell more than Rs 20 lakh worth of bonds at the
advertisements that should be placed in each magazine.
proposed rate of 12%. Financial corporation A will give loan up
24. The XYZ company is preparing a proposal for an advertising to Rs 30 lakh at an interest rate of 16% but insists that the
campaign for a client who is a publisher of law books. An amount of bond debt plus the amount owned to financial
optimal allocation of advertising funds to maximize the total corporation B be no more than twice the amount owed to
number of exposures has to be made for the client. The relevant financial corporation A. Financial corporation B will loan the
characteristics of the three alternative publications are shown same amount as that loaned by financial corporation A but it
in the following table: would do so at an interest rate of 18%. Formulate this problem
as an LP model to determine the amount of funds to be obtained
Home Home and Care from each source in a manner that minimizes the total annual
Beautiful Garden (Rs) interest charges.
(Rs) (Rs)
28. An investor wishes to diversify his portfolio and make due
Cost/advertisement 600 800 450 allowance for long-term potentialities, but at the same time
Max. number of ads 12 24 12 wishes to maximize his current dividend income. He has
Min. number of ads 3 6 2 considered various securities in which he might invest, and
Characteristics has classified them into four types:
Homeowner 80% 70% 20% Type A : Relatively high element of risk, with commensurately
Income: Rs 10,000 or more 70% 80% 60% high dividend and considerable growth potential.
Occupation: gardener 15% 20% 40% Type B : Speculative stock with considerable risk, high
Audience size 6,00,000 8,00,000 3,00,000 dividends, but less growth potential than type A.
60 Operations Research: Theory and Applications

Type C : Stock with little risk, considerable growth potential, 32. A transport company is considering the purchase of new
but relatively low dividend income at present. vehicles for transportation between Delhi airport and hotels in
Type D : Stock with little risk, not much growth potential, and the city. There are three vehicles under consideration – station
fairly high dividends. wagons, mini buses and large buses. The purchase price would
Because of the element of risk, the investor wishes to restrict be Rs 2,45,000 for each station wagon, Rs 3,50,000 for a mini
purchases of types A and B to not more than 30% of his bus and Rs 5,00,000 for a large bus. The board of directors
investment. has authorized a maximum amount of Rs 50,00,000 for these
To enhance prospects for long-term growth of his invest- purchases. Because of the heavy air travel involved, the new
ments, he wishes to have at least 40% of his total outlay in vehicles would be utilized at maximum capacity, regardless of
types A and C. Within these restrictions, he wishes to maximize the type of vehicles purchased. The expected net annual profit
his current dividend income. Total investment is Rs 1,00,000. would be Rs 15,000 for the station wagon, Rs 35,000 for the
Dividend returns on the four types of investments are A: 6%, mini bus, and Rs 45,000 for the large bus. The company has
B: 7%, C: 3%, D: 5%. Formulate this problem as an LP model hired 30 new drivers for the new vehicles. They are qualified
to suggest the total investment to be allocated. drivers for all the three types of vehicles. The maintenance
29. The Agro Promotion Bank is trying to select an investment department has the capacity to handle an additional 80 station
portfolio for a cotton farmer. The bank has chosen a set of five wagons. A mini bus is equivalent to 5/3 station wagons and
investment alternatives, with subjective estimates of rates of each large bus is equivalent to two station wagons in terms of
return and risk as follows: their use of the maintenance department. Formulate this problem
as an LP model to determine optimal number of each type of
Investment Annual Rate of Return Risk vehicle to be purchased in order to maximize profit.
Tax-free municipal bonds 6.0 1.3 [Delhi Univ., MBA, Oct. 2000]
Corporate bonds 8.0 1.5 33. The managers of several cattle feed lots are interested in
High grade common stock 5.0 1.9 determining how many of each of several types of livestock
Mutual fund 7.0 1.7 feeds should be purchased in order to satisfy the nutritional
Real estate 15.0 2.7 requirements for their livestock. They wish to purchase such
food in a manner that minimizes the cost of feeding their
The bank officer incharge of the portfolio would like to maximize livestock. Relevant costs and nutritional data are as below:
the average annual rate of return on the portfolio. However, the
wealthy investor has specified that the average risk of the
Required Units of Nutritional Element Minimum
portfolio should not exceed 2.0. The investor and does not
Nutrient Nutrient
want more than 20% of the investment to be put into real estate. Alfa Corn Soyabean Sorghum Requirements
Formulate this problem as an LP model.
30. Raj, a retired government officer, has recently received his A 40 50 30 60 500
retirement benefits, viz., provident fund, gratuity, etc. He is B 30 60 35 40 750
contemplating how much money he should invest in various C 25 30 25 50 600
alternatives open to him so as to maximize return on his
Cost per
investment. The investment alternatives are: government
unit (Rs) 1.00 1.25 0.95 1.35
securities, fixed deposits of a public limited company, equity
shares, time deposits in a bank, and house construction. He Formulate this problem as an LP model.
has made a subjective estimate of the risk involved on a five-
34. Old hens can be bought at Rs 100 each and young ones at
point scale. The data on the return on investment, the number
Rs 250 each. The old hens lay 3 eggs per week and the young
of years for which the funds will be blocked to earn this return
ones 5 eggs per week, each egg being worth 50 paise. A hen
on investment and the subjective risk involved are as follows:
costs Rs 20 per week to be fed. There are only Rs 8,000
Return (%) Number Risk available to be spent on purchasing the hens and at the most
of Years 20 hens can be accommodated in the space. Formulate this
problem as an LP model to determine each kind of hen that
Government securities 16 15 1 should be bought in order to yield the maximum profit per week.
Company deposits 13 13 3 35. A pension fund manager is considering investing in two shares
Time deposits 10 15 2 A and B. It is estimated that:
Equity share 20 16 5
House construction 25 10 1 (i) Share A will earn a dividend of 12 per cent per annum
and share B, 4 per cent per annum.
He is wondering as to what percentage of funds he should (ii) Growth in the market value in one year of share A will
invest in each alternative so as to maximize the return on be 10 paise per Re l invested and in B, 40 paise per
investment. He has decided that the risk should not be more Re 1 invested.
than 4, and funds should not be locked up for more than 15 He requires to invest the maximum total sum which will give:
years. He would necessarily invest at least 25% in house (i) dividend income of at least Rs 600 per annum; and
construction. Formulate this problem as an LP model. (ii) growth in one year of at least Rs 1,000 on the initial
31. A dealer of used scooters wishes to stock up his lot to maximize his investment.
profit. He can select scooters A, B and C which are valued on Formulate this problem as an LP model to compute the minimum
wholesale at Rs 5,000, Rs 7,000 and Rs 8,500 respectively. These sum in order to be invested to meet the manager’s objective.
can be sold at Rs 6,000, Rs 8,500 and Rs 10,500, respectively. For 36. A scrap metal dealer has received an order from a customer
each type of scooter, the probabilities of sale are: for at least 2,000 kg of scrap metal. The customer requires
Type of scooter : A B C that at least 1,000 kg of the shipment of the metal be high
Prob. of sale in 90 days : 0.7 0.8 0.6 quality copper that can be melted down and further used to
produce copper tubings. Furthermore, the customer will not
For every two scooters of B-type he should buy one scooter
accept delivery of the order if it contains more than 175 kg of
of type A or type C. If he has Rs 1,00,000 to invest, what
metal that he deems unfit for commercial use, i.e. metal that
should he buy in order to maximize his expected gain. Formulate
contains an excessive amount of impurity and cannot be melted
this problem as an LP model.
down and defined profitably.
 Linear Programming: Applications and Model Formulation 61

The dealer can purchase scrap metal from two different year. The company wants to minimize the total cost of using
suppliers in unlimited quantities with the following percentage 50 machines over a two-year period. The objective is to
(in terms of weight) of high quality copper and unfit scrap: minimize the costs of purchasing machines or leasing machines
during the years 1 and 2, and to minimize the interest payments
Supplier A Supplier B on funds borrowed to obtain the machines. Formulate this
Copper 25% 75% problem as a linear programming problem.
Unfit scrap 5% 10% [Delhi Univ., MBA, 2009]
38. A trucking company with Rs 40,00,000 to spend on new
The cost per kg of metal purchased from supplier A and supplier equipment is contemplating three types of vehicles. Vehicle A
B is Re 1 and Rs 4, respectively. Formulate this problem as has a 10 tonne payload and is expected to average 35 km per
an LP model so as to determine the optimal quantities of metal hour. It costs Rs 80,000. Vehicle B has a 20-tonne payload
that the dealer should purchase from each of the two suppliers and is expected to average 30 km per hour. It costs Rs
in order to minimize total the purchase cost. 1,30,000. Vehicle C is a modified form of vehicle B; it carries
[Delhi Univ., MBA, 2008] sleeping quarters for one driver and then reduces its capacity
37. A company needs 50 new machines. The machines have an to 18 tonnes and raises the cost to Rs 1,50,000. Vehicle A
economic life of two years and can be purchased for Rs 4,500 requires a crew of one average man, and if driven on three
or be leased for Rs 2,800 per year. The purchased machines, shifts per day, could be run for an average of 18 hours per
at the end of two years, have no salvage value. Company has day. Vehicles B and C require a crew of two men each, while
Rs 1,00,000 in uncommitted funds that can be used for the B would be driven 18 hours per day with three shifts, C however
purchase or the lease of machines at the beginning of year 1. would average 21 hours per day. The company has 150 drivers
The company can obtain a loan of upto Rs 2,00,000 at 18 available each day and would find it very difficult to obtain
per cent interest per year. According to the terms of loans, the further crews. Maintenance facilities are such that the total
company has to repay the amount borrowed plus the interest number of vehicles must not exceed 30. How many vehicles
at the end of each year. Each machine can earn Rs 3,000 per of each type should be purchased if the company wishes to
year. The earnings from the first year can be used to lease maximize its capacity in tonne-kms per day? Formulate this
costs and the repayment of debt at the start of the second problem as an LP model. [Delhi Univ., MBA, 2009]

HINTS AND ANSWERS

1. Let x1, x2 = number of units of products A and B to be produced,

respectively.
subject to 2 x1 + 3 x 2 + 5 x 3 ≤ 4 , 000 UV
Max Z = 40x1 + 30x2
4 x1 + 2 x 2 + 7 x 3 ≤ 6 , 000 W
(Raw material requirement)
subject to 3x1 + x2 ≤ 3,000 (Man-hours)
1 1
x1 ≤ 8,000 ; x2 ≤ 1,200 (Marketing) x1 + x + x ≤ 2 ,500 (Production limitation)
2 2 3 3
and x1, x2 ≥ 0.
2. Let x1, x2 = number of productive runs of process 1 and 2,
x1 ≥ 500; x 2 ≥ 500; x 3 ≥ 375 (Market demand)
respectively. 1 1 1 1
x1 = x 2 ; x 2 = x 3 (Ratios of production)
Max Z = 300x1 + 400x2 3 2 2 5
5. Let x1 and x2 = parts of A and B per hour manufactured,
subject to 5 x1 + 4 x 2 ≤ 200 UV (Max amount of crude A respectively.
3 x1 + 5 x 2 ≤ 150 W and B)  20 14 17.50 
Max Z = (5 x1 + 6 x2 ) −  + + + 2.00  x1
5 x1 + 4 x 2 ≥ 100 U (Market requirement of  25 28 35 
8 x1 + 4 x 2
V
≥ 80 W gasoline X and Y)  20 14 17.50 
− + + + 3.00  x2
and x1, x2 ≥ 0.  24 35 25 
3. Let xi = number of units purchased per month = 1.20x1 + 1.40x2
(i = 1, 2, 3 – April, May, June) x x x x x x
subject to (i) 1 + 2 ≤ 1; (ii) 1 + 2 ≤ 1; (iii) 1 + 2 ≤ 1
yi = number of units sold per month 25 24 28 35 35 25
(i = 1, 2, 3 – May, June, July) (Manufacturing capacity)
Max Z = (90y1 + 60y2 + 75y3) – (75x1 + 75x2 + 60x3) and x 1 , x 2 ≥ 0.
subject to y1 ≤ x1 ≤ 150 6. Let xijk = number of units manufactured in month
y2 ≤ x1 + x2 – y1 ≤ 150 i (1, 2, 3 – Oct., Nov., Dec.) during shift
y3 ≤ x1 + x2 + x3 – y1 – y2 ≤ 150 j ( j = 1, 2 – regular, overtime) and shipped in month
x1 + x2 + x3 = y1 + y2 + y3 k (k = 1, 2, 3 – Oct., Nov., Dec.)
and xi , yi ≥ 0 for all i. Min Z = 3x111 + 5x121 + 4x112 + 6x122 + 5x113 + 7x123
4. Let x1, x2 and x3 = number of units of models I, II and III, + 3x212 + 5x222 + 4x213 + 6x223 + 3x313 + 5x323
respectively to be manufactured subject to x 111 + x 112 + x 113 ≤ 1,500 U|
Max Z = 60x1 + 40x2 + 100x3 x 212 + x 213 ≤ 1,500 V (Regular time)
x 313 ≤ 1,500 |W
62 Operations Research: Theory and Applications

x 121 + x122 + x 123 ≤ 750 U| x1 + x2 + x3 + x4 ≥ 25 (Total requirement)

x 222 + x 223 ≤ 750 V (Overtime) and x1, x2, x3, x4 ≥ 0.

750 |W
11. Let xij = gallons of paint manufactured at plant i (i = 1, 2) and
x 323 ≤
shipped to contractor j ( j = 1, 2, 3) Min (production
x111 + x121 = 1,000 cost + shipping cost)
x121 + x122 + x212 + x222 = 3,000 Z = (x11 + x12 + x13) {(0.10) (3.80) + (0.25) (3.20)}
x113 + x123 + x213 + x223 + x313 + x323 = 2,000 + (x21 + x22 + x23) {(0.15) (4.00) + (0.20) (3.10)}
and xijk ≥ 0 for all i, j, k. + 1.80x11 + 2.00x21 + 2.60x12 + 2.20x22 + 2.10x13
+ 2.25x23
7. Let x1, x2 = number of gallons of wine B and C in the blend,
respectively. = 2.98x11 + 3.78x12 + 3.28x13 + 3.22x21 + 3.42x22
Max Z = 20 + x1 + x2 + 3.47x23

subject to 30 ≤
( 20 × 27 ) + 33 x1 + 32 x 2
≤ 31
subject to x11 + x 21 = 750 U|
20 + x1 + x 2 x12 + x 22 = 1,500 V (Order size)
(Resultant degrees proof of blend) x13 + x 23 = 1,500 |W
( 20 × 0.32 ) + 0.2 x1 + 0.3 x 2 ( x 11 + x 12 + x 13 )( 0.10 ) ≤ 300 Plant 1 
≥ 0.25 (Acidity)
20 + x1 + x 2  (Blending)
( x 21 + x 22 + x 23 )( 0.15) ≤ 600 Plant 2 
( 20 × 1.07 ) + 1.08 x1 + 1. 04 x 2 ( x11 + x 12 + x13 )( 0 .25 ) ≤ 360 Plant 1 
≥ 1.06 (Specific gravity)  (Tinting)
20 + x 1 + x 2 ( x 21 + x 22 + x 23 )( 0. 20 ) ≤ 720 Plant 2 
and xij ≥ 0 for all i and j.
x1 ≤ 34 (Quality)
12. Let x1 and x2 = number of vitamin units purchased of food F1
and x1 , x 2 ≥ 0 .
and F2, respectively.
8. Let x1, x2 and x3 = quantity of foods 1, 2 and 3 to be used,
Min Z = 4x1 + 5x2
respectively.
subject to (i) 3x1 + 6x2 ≥ 80; (ii) 4x1 + 3x2 ≥ 100
Min Z = 1.50x1 + 2.00x1 + 1.20x3
and x1, x2 ≥ 0.
subject to x1 + y1 ≤ 12,
13. Let xij = number of jobs accepted during day and night
350 x1 + 250 x2 + 200 x3 ≥ 300
Max Z = 275 (x11 + x12) + 125 (x21 + x22) + 225 (x31 + x32)
250 x1 + 300 x2 + 150 x3 ≥ 200
subject to 1,200 (x11 + x12) + 1,400 (x21 + x22)
100 x1 + 150 x2 + 75 x3 ≥ 100
+ 800 (x31 + x32) ≤ 13,400
75 x1 + 125 x2 + 150 x3 ≥ 100
100 (x11 + x12) + 60 (x21 + x22)
and x1, x2 , x3 ≥ 0.
+ 80 (x31 + x32) ≤ 1,050
9. Let x1 and x2 = number of soccer balls of types X and Y,
1,200x12 + 1,400x22 + 800x32 ≤ 9,200
respectively.
100x12 + 60x22 + 80x32 ≤ 650
Min Z = (2 hrs) (Rs 5.50/hr) x1 + (4 hrs) (Rs 8.50/hr) x1
+ (3 hrs) (Rs 5.50/hr) x2 and xij ≥ 0 for all i and j.
+ (6 hrs) (Rs 8.50/hr) x2 = 45x1 + 67.50x2 14. For plain coffee X
subject to 2x1 + 3x2 ≤ 180 (Semi-skilled hours) x11, x12 and x13 = quantity (in kg) of the three coffees,
4x1 + 6x2 ≤ 150 (Skilled hours) respectively.
x1 ≤ 115 (Ball X) For plain coffee XX
x2 ≤ 110 (Ball Y) x21, x22 and x23 = quantity (in kg) of the three coffees,
and x1, x2 ≥ 110. respectively.
10. Let xj = number of kg of ingredient j ( j = 1, 2, 3, 4) used in
Max Z = 45 (30x11 + 40x12 + 35x13)
the mixture
+ 55 (30x21 + 40x22 + 35x23)
Min Z = 28x1 + 25x2 + 52x3 + 26x4
subject to x1 ≤ 22 ; x 2 ≤ 18 UV (Supplies)
subject 6x11 + 8 x12 + 5 x13 ≥ 6.5
4 x11 + 3 x12 + 3.5 x13 ≤ 3.8



x 3 ≤ 20 ; x 4 ≤ 24 W  (Plain coffee X)
2 x11 + 2.5 x12 + 1.5 x13 ≤ 2.2 
0 .55 x 1 − 0.45 x 2 − 0.45 x 3 − 0 .45 x 4 ≥ 0 U| x11 + x12 + x13 = 35,000 
0 .40 x1 − 0.60 x 2 − 0.60 x 3 − 0.60 x 4 ≥0 || U|
− 0.10 x 1 + 0 .90 x 2 + 0 .90 x 3 − 0.10 x 4 ≥0 V 6 x 21 + 8 x 22 + 5 x 23 ≥ 6. 0
≤ 0| 4 x 21 + 3 x 22 + 3.5 x 23 ≤ 3.5 |V (Plain coffee XX)
− 0.25 x1 + 0. 75 x 2 + 0 .75 x 3 − 0. 25 x 4
− 0.50 x1 − 0 .50 x 2 − 0 .50 x 3 + 0.50 x 4 ≤ 0 |W
| 2 x 21 + 2 .5 x 22 + 1.5 x 23 ≤ 2 .0 |
(Mixing requirements) x 21 + x 22 + x 23 = 25, 000 |W
 Linear Programming: Applications and Model Formulation 63

x11 + x21 ≤ 40,000; x12 + x22 ≤ 20,000 ; subject to (1/1,500) x1 + (1/4,500) x2 ≤ 1,

x13 + x23 ≤ 15,000 (1/1,000) x1 + (1/8,000) x2 ≤ 1,
(1/2,000) x1 + (1/4,000) x2 ≤ 1,
and xij ≥ 0 for all i and j.
(1/3,000) x1 + (1/9,000) x2 ≤ 1,
15. Let x1, x2, x3 and x4 = quantities of four products to be
and x1, x2 ≥ 0.
manufactured, respectively.
21. Let x1, x2 and x3 = number of messages carried in media 1, 2
Max Z = [175 – (15 + 30 + 35)] x1 + [95 – (8 + 18 + 28)] x2 and 3, respectively.
+ [145 – (12 + 24 + 25)] x3 + [130 – (12 + 21 + 21)] x4 Max Z = 80,000x1 + 60,000x2 + 45,000x3
Max Z = 95x1 + 41x2 + 84x3 + 76x4 subject to 1, 000 x1 + 750 x 2 + 500 x 3 ≤ 2 , 00 , 000
subject to 4 x1 + 2 x2 + 3x3 + 3x4 ≤ 800, x1 ≤ 12 ; x 2 ≥ 6 , 4 ≤ x 3 ≤ 8 ,
10 x1 + 6 x 2 + 8 x 3 + 7 x 4 ≤ 1, 200 and x1 , x 2 ≥ 0 .
10 x1 + 8 x2 + 8 x3 + 8 x4 ≤ 800 22. Let x1, x2 and x3 = number of advertisements in magazine 1, 2
and x1 , x 2 , x 3 , x 4 ≥ 0 and 3, repectively.
16. The data of the problem can be summarized as given below: Max Z = 3,20,000 (0.7 × 0.4 + 0.8 × 0.4 + 0.6 × 0.2) x1
+ 5,00,000 (0.8 × 0.4 + 0.6 × 0.4 + 0.7 × 0.2) x2
Quarry A Quarry B Quarry C Specifications
+ 2,00,000 (0.4 × 0.4 + 0.5 × 0.4 + 0.4 × 0.2) x3
Material X 20% 40% 10% = 30% = 2,30,400x1 + 35,000x2 + 88,000x3
Material Y 60% 30% 40% ≤ 40%
subject to 1,000 x1 + 700 x2 + 500 x3 ≤ 5,00,000
Material Z 20% 30% 50% between 30%
and 40% 20 ≤ x1 ≤ 50; 10 ≤ x1 ≤ 40; 5 ≤ x3 ≤ 30
Cost/tonne (Rs) 10% 12% 15% and x j ≥ 0 for all j.
Let x1, x2, and x3 = number of tonnes procured from 23. Let x1, x2 and x3 = number of insertions in magazines A, B and
quarry A, B and C, respectively. C, respectively.
Min (total cost) Z = 10x1 + 12x2 + 15x3 Max (total exposure) Z = (10% of 1,00,000)x1
subject to 2x1 + 4x2 + 4x3 = 3 (Material X) + (15% of 60,000)x2 + (7% of 40,000)x3
6x1 + 3x2 + 4x3 ≤ 4 (Material Y) subject to 5, 000 x1 + 4 ,500 x 2 + 4 , 250 x 3 ≤ 1, 00 , 000
2x1 + 3x2 + 5x3 ≤ 4 x 1 ≤ 6; x 2 ≥ 2 ; x 3 ≥ 2
(Material Z)
2x1 + 3x2 + 5x3 ≥ 3 and x1 , x 2 , x 3 ≥ 0.
17. Let x1, x2 and x3 = number of units of types I, II and III model, 24. Let xj = number of advertisements in media j ( j = 1, 2, 3).
respectively. Media Effectiveness coefficient
Max (total profit) Z = 60x1 + 40x2 + 1,000x3 1 0.80 (0.4) + 0.70 (0.2) + 0.15 (0.4) = 0.52
2 0.70 (0.4) + 0.80 (0.2) + 0.20 (0.4) = 0.52
subject to 2x1 + 3x2 + 5x3 ≤ 4,000 (Raw material A)
3 0.20 (0.4) + 0.60 (0.2) + 0.40 (0.4) = 0.36
4x1 + 2x2 + 7x3 ≤ 6,000 (Raw material B)
Max Z = 0.52 (6,00,000)x1 + 0.52 (8,00,000)x2
x2 x3
x1 + + ≤ 2,500 (Labour force) + 0.36 (3,00,000)x3
2 3 subject to 600 x1 + 800 x 2 + 450 x 3 ≤ 2 , 00 , 000
x1 x2 x2 x3 x1 ≤ 12; x2 ≤ 24; x3 ≤ 12
= ; = (Number of units produced) x1 ≥ 13; x2 ≥ 16; x3 ≥ 12
3 2 2 5
and x1, x2, x3 ≥ 0.
x1 ≥ 500; x2 ≥ 500; x3 ≥ 375 (Market demand)
25. y = minimum expected gain per rupee deposited in the given
and x1, x2, x3 ≥ 0.
choice j ( j = 1, 2, 3, 4) by the gambler
18. Let x1, and x2 = number of units of models X and Y, respectively. xj = amount of bet money used among four different choices,
Max Z = 120x1 + 90x2 respectively ( j = 1, 2, 3, 4)
x1 x x1 x Max Z = y
subject to + 2 ≤1; + 2 ≤ 1 ; x1 ≤ 140 subject to
100 240 200 150 −3 x1 + 4 x 2 − 7 x 3 + 15 x 4 ≥ y
and x1, x2 ≥ 0. 5 x1 − 3 x 2 + 9 x 3 + 4 x 4 ≥ y
19. Let x1 and x2 = number of television and radio sets to be 3 x 1 − 9 x 2 + 10 x 3 − 8 x 4 ≥ y
manufactured, respectively. x 1 + x 2 + x 3 + x 4 ≤ 500
Max Z = 500x1 + 250x2 and xj may be negative, zero or positive.
64 Operations Research: Theory and Applications

26. Let x1, x2, x3 and x4 = percentage of the total fund that should subject to 5,000x1 + 2 × 7,000x2 ≤ 1,00,000
be invested in activities A1, A2, A3 and 2 × 7,000x2 + 8,500x3 ≤ 1,00,000
A4, respectively. and x1, x2, x3 ≥ 0.
Max Z = 0.10x1 + 0.12x2 + 0.14x3 + 0.16x4 33. Let x1, x2, x3 = number of station wagons, minibuses and larges
subject to x1 + x 2 + x 3 + x 4 ≤ 1, 00 , 000 buses, respectively to be purchased.
(total money invested) Max Z (total profit) = 15,000x1 + 35,000x2 + 45,000x3
x 2 + x 3 ≤ 0.50 ( x1 + x 2 + x 3 + x 4 )
subject to x1 + x2 + x3 ≤ 30 (Availability of drivers)
1
x1 ≥ x 4 2 , 45, 000 x1 + 3,50 , 000 x 2 + 5, 00 , 000 x 3 ≤ 50 , 00 , 000
3
(Budget)
and x j ≥ 0 for all j.
3 1
x1 + x 2 + x 3 ≤ 80 (Maintenance capacity)
27. Let x1 = bond debt to be obtained. 5 2
x2 and x3 = loan to be obtained from financial corporations A and x1, x2, x3 ≥ 0.
and B, respectively. Note: 1 S.W. = (3/5) M.B., because (5/3) S.W. = 1 M.B.;
Min Z = 0.12x1 + 0.16x2 + 0.18x3 and 1 S.W. = (3/5) M.B., because (5/3) S.W. = 1 M.B.
subject to x1 + x 2 + x 3 = 50 34. Let xj = number of units of food type j ( j = 1, 2, 3, 4) used.
x1 ≤ 20; x 2 ≤ 30 Min (total cost) Z = 1.00x1 + 1.25x2 + 0.95x3 + 1.35x4
x1 + x 3 ≤ 2 x 2 ; x1 ≤ x 2 subject to 40x1 + 50x2 + 30x3 + 60x4 ≥ 500
30x1 + 60x2 + 35x3 + 40x4 ≥ 750
and x1 , x 2 ≥ 0 .
25x1 + 30x2 + 25x3 + 50x4 ≥ 600
28. Let x1, x2, x3 and x4 = amount of money to be invested in A, and x1, x2, x3, x4 ≥ 0.
B, C and D securities, respectively. 35. Let x1 and x2 = number of old hens and young hens bought,
Max (current dividend return)
respectively.
Z = 0.06 x1 + 0.07 x 2 + 0.03 x 3 + 0.05 x 4
Max Z = 0.5 (3x1 + 5x2) – (x1 + x2) = 0.5x2 – 1.5x1
subject to x1 + x2 + x3 + x4 ≤ 1,00,000 subject to 100x1 + 250x1 ≥ 8,000; x1 + x2 ≤ 20
x1 + x2 ≤ 30,000 ; x1 + x3 ≥ 40,000 and x1, x2 ≥ 0.
and x 1 , x 2 , x 3 , x 4 ≥ 0. 36. Let x1 and x2 = number of units of share A and B respectively.

31. Let x1, x2, x3, x4 and x5 = percentage of the total fund that to Min (total investment) Z = x1 + x2
should be invested in all given five subject to 0.12x1 + 0.04x2 ≥ 600 (Dividend constraint)
schemes, respectively. 0.10x1 + 0.40x2 ≥ 1,000 (Investment constraint)
Max Z = 6 x 1 + 13 x 2 + 10 x 3 + 20 x 4 + 25 x 5 and x1, x2 ≥ 0.
subject to 15 x1 + 3 x 2 + 5 x 3 + 6 x 4 + 10 x 5 ≤ 15 37. Let x1 and x2 = volume of purchase from supplier A and B,
x1 + 3 x2 + 2 x3 + 5 x4 + x5 ≤ 4 respectively.

x5 ≥ 0.25 Min Z = x1 + 4x2

x1 + x2 + x3 + x4 + x5 = 1 1 3
subject to (i) x1 + x2 ≥ 2,000; (ii) x1 + x ≥ 1, 000
and x j ≥ 0 for all j. 4 4 2
1 1
32. Let x1, x2, x3 = number of scooters of types A, B and C, (iii) x + x ≥ 175
20 1 10 2
respectively. and x1, x2 ≥ 0.
Max Z = 0.7 (6,000 – 5,000)x1 + 0.8 (8,500 – 7,000)x2
+ 0.6 (10,500 – 8,500)x3

CHAPTER SUMMARY

This chapter presents basic assumptions, limitations, components of any linear programming model and broad application areas
of linear programming. The guidelines of mathematical modelling of any decision problem were explained followed by a large
number of model building solved exercises in all functional areas of management and allied areas. These exercises are illustrative
for students to deal with more complex and real-life problems.
 Linear Programming: Applications and Model Formulation 65

CHAPTER CONCEPTS QUIZ

True or False
1. In a Linear Programming model, all parameter are assumed to (c) use of the available resource
be known as constant. (d) all of the above
2. In LP model, any variable can assume to take only integer 24. The distinguishing feature of an LP model is
values or restricted to take discrete number of values. (a) relationship among all variables is linear
3. Total contribution is used in place of profit in the objective (b) it has single objective function and constraints
function of maximization. problem because whole profit is not (c) value of decision variables is non-negative
linearly related to sales volume. (d) all of the above
4. An equation is more restrictive than an inequality. 25. Constraints in an LP model represents
5. All the variables in the solution of a linear programming problem (a) limitations
are either positive or negative because of the existence of (b) requirements
structural constraints. (c) balancing limitations and requirements
(d) all of the above
6. Linear programming is a technique for finding the best uses of
an organizations manpower, money and machinery. 26. Non-negativity condition is an important component of LP model
because
7. Production planning is one of the application areas of the linear (a) variables value should remain under the control of the
programming. decision-maker
8. The effect of time and uncertainty are taken into consideration (b) value of variables make sense and correspond to real-
by linear programming model. world problems
9. Linear Programming determines the economic and efficient way (c) variables are interrelated in terms of limited resources
of locating manufacturing plants for physical distribution. (d) none of the above
10. All variables in the linear programming problem must take one 27. Before formulating a formal LP model, it is better to
negative values. (a) express each constraint in words
(b) express the objective function in words
Fill in the Blanks (c) verbally identify decision variables
11. Linear programming is a technique which attempts to determine (d) all of the above
how best to allocate __________ in order achieve some __________. 28. Each constraint in an LP model is expressed as an
12. A linear programming technique improves the quality of __________. (a) inequality with ³ sign
(b) inequality with £ sign
13. In a linear programming, all relationships among decision variables (c) equation with = sign
are __________. (d) none of the above
14. If two variables always take on values which are in the same 29. Maximization of objective function in an LP model means
proportion, the variables are __________ related. (a) value occurs at allowable set of decisions
15. __________ appearing in the models are assumed to be constant (b) highest value is chosen among allowable decisions
but __________ in real life situations. (c) neither of above
16. Every linear programming problem includes __________ which (d) both (a) and (b)
relates variable in the problem to the goal of the firm and 30. Which of the following is not a characteristic of the LP model
__________ which represent the limit on resource available to the (a) alternative courses of action
firm. (b) an objective function of maximization type
17. Most of the constraints in the linear programming problem are (c) limited amount of resources
expressed as __________. (d) non-negativity condition on the value of decision variables
18. Linear programming is used to allocate __________ to activities 31. The best use of linear programming technique is to find an optimal
so as to optimize the value of objective function. use of
19. If the value of the variables are under the control of decision (a) money (b) manpower
makers then variables are said to be __________ otherwise (c) machine (d) all of the above
__________. 32. Which of the following is not the characteristic of linear
20. __________ of the decision variables is one of the assumption of programming
the linear programming model. (a) resources must be limited
(b) only one objective function
Multiple Choice (c) parameters value remains constant during the planning period
(d) the problem must be of minimization type
21. The mathematical model of an LP problem is important because
(a) it helps in converting the verbal description and numerical 33. Non-negativity condition in an LP model implies
data into mathematical expression (a) a positive coefficient of variables in objective function
(b) decision-makers prefer to work with formal models (b) a positive coefficient of variables in any constraint
(c) it captures the relevant relationship among decision factors (c) non-negative value of resources
(d) it enables the use of algebraic technique (d) none of the above
22. Linear programming is a 34. Which of the following is an assumption of an LP model
(a) constrained optimization technique (a) divisibility (b) proportionality
(b) technique for economic allocation of limited resources (c) additivity (d) all of the above
(c) mathematical technique 35. Which of the following is a limitation associated with an LP Model
(d) all of the above (a) the relationship among decision variables in linear
(b) no guarantee to get integer valued solutions
23. A constraint in an LP model restricts (c) no consideration of effect of time and uncertainty on LP model
(a) value of objective function (d) all of the above
(b) value of a decision variable
66 Operations Research: Theory and Applications

Answers to Quiz
1. T 2. F 3. T 4. T 5. F 6. T 7. T
8. F 9. T 10. T 11. resources, objective 12. decisions 13. linear
14. linearly 15. parameters, unknown 16. objective function, constraints 17. inequalities 18. scarce resources
19. controllable and uncontrollable 20. certainty 21. (a) 22. (d) 23. (d) 24. (a)
25. (d) 26. (b) 27. (d) 28. (d) 29. (a) 30. (b) 31. (d)
32. (d) 33. (d) 34. (d) 35. (d)

CASE STUDY

Case 2.1: Welltype Manufacturing

Welltype manufacturing company produces three types of typewriters. All the three models are required to be
machined first and then assembled. The time required for the various models are as follows:
Types Manual Electronic Deluxe
Typewriters Typewriters Electronic
Typewriters
Machine time (in hours) 15 12 14
Assembly time (in hours) 4 3 5

The total available machine time and assembly time are 3,000 hours and 1,200 hours, respectively. The data
regarding the selling price and variable costs for the three types are:

Types Manual Electronic Deluxe

Typewriters Typewriters Electronic
Typewriters
Selling price (Rs) 4,100 7,500 14,600
Labour, material and
other variable costs
(Rs) 2,500 4,500 9,000
The company sells all the three types on credit, but can only collect the amounts on the first of the following month.
The labour, material and other variable expenses will have to be paid in cash. This company has taken a loan of Rs 40,000
from a co-operative bank and will have to repay it to the bank on 1 April 2008. The TNC Bank from whom this company
has borrowed Rs 60,000 has expressed its approval to renew the loan.
Balance Sheet of the Company as on 31 March 2008

Liabilities Rs Assets Rs
Equity Share Capital 1,50,000 Land 90,000
Capital Reserve 15,000 Building 70,000
General Reserve 1,10,000 Plant &
Profit & Loss A/c 25,000 Machinery 1,00,000
Long-term Loan 1,00,000 Furniture &
Loan from TNC Fixtures 15,000
Bank 60,000 Vehicles 30,000
Loan from Inventory 5,000
Co-operative Bank 40,000 Receivables 50,000
Cash 1,40,000

Total 5,00,000 Total 5,00,000

The company will have to pay a sum of Rs 10,000 towards salary of top management executives and other
fixed overheads for the month. Interest on long-term loans is to be paid every month at 24% per annum. Interest
on loans from TNC and cooperative banks may be taken to be 1,200 for the month. Also this company has promised
to deliver 2 manual typewriters and 8 deluxe electronic typewriters to one of its valued customers next month. Keep
 Linear Programming: Applications and Model Formulation 67

in mind the fact that the level of operations in this company is subject to the availability of cash next month. This
company will also be able to sell all types of typewriters in the market. The senior manager of this company desires
to know as to how many units of each typewriter must be manufactured in the factory next month so as maximize
the profits of the company. Advise the management of the company for manufacturing strategy with an aim to
maximize profit.

Case 2.2: Shreya Advertizers

Shreya Advertizers – a marketing company dealing with laminated sheets ‘Gloss’ in the western zone covering
Maharashtra, Gujarat and Madhya Pradesh, is considering to launch an advertisement campaign within a budget of
Rs 2.5 lakh. On the basis of advertisement testing of the previous year, the company’s research department has
found that magazines and films are the ideal media for advertising laminated sheets. The company is not in a position
to use the audiovisual medium due to limitation of funds. The magazines enjoying good recall in last year’s campaign
are Stardust, Filmfare, Reader’s Digest and Madhuri. This is attributed to the effective visual impact made by the
good reproduction of the advertisements both in colour, and black and white.
The characteristics of target audience for ‘Gloss’ and weightage for each characteristic are as follows:

Characteristics Weightage (%)

Age 15–34 yrs 20
Monthly income Over Rs 5,000 70
Education Above S.S.C. 10

The audience characteristics for the four magazines selected are given below:

Characteristics Stardust Filmfare Reader’s Madhuri

(%) (%) Digest (%) (%)
Age: 15–34yrs 75 45 56 80
Monthly income: Over Rs 5,000 52 43 47 25
Education: Above S.S.C. 83 53 72 34

The efficacy index for a black and white advertisement may be taken as 0.15 and that for a colour advertisement
as 0.20. The cost per insertion of a black and white, and a colour advertisement and the readership for the four
magazines are as follows:

Magazines Cost (Rs) per Insertion Readership

(in ’000 Rs)
Black and White Colour
Stardust (Monthly) 4,500 8,400 189
Filmfare (Fortnightly) 4,200 8,400 256
Reader’s Digest (Monthly) 6,400 9,600 136
Madhuri (Fortnightly) 3,300 6,600 205

It has also been found that for creating an impact at least 03 insertions are necessary in Stardust and Reader’s Digest,
while a minimum of 04 insertions will be required in the case of Filmfare.
Suggest an advertising strategy for the company to maximize the expected effective exposure.