Linear Programming: Model

Formulation and Solution

MBA 8104: Quantative Analysis

2-1
 Chapter Topics
 Model Formulation
 A Maximization Model Example
 Graphical Solutions of Linear Programming Models
 A Minimization Model Example
 Characteristics of Linear Programming Problems
 Solving Linear Programming Problems with TORA

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 Introduction
 Objectives of business decisions frequently involve
maximizing profit or minimizing costs.
 Linear programming uses linear algebraic relationships
to represent a firm’s decisions, given a business
objective, and resource constraints.
 Steps in application:
1. Identify problem as solvable by linear
programming.
2. Formulate a mathematical model of the
unstructured problem.
3. Solve the model.
4. Implementation presentation notes
 Model Components
• Decision variables - mathematical symbols representing levels
of activity of a firm.
• Objective function - a linear mathematical relationship
describing an objective of the firm, in terms of decision
variables - this function is to be maximized or minimized.
• Constraints – requirements or restrictions placed on the firm
by the operating environment, stated in linear relationships of
the decision variables.
• Parameters - numerical coefficients and constants used in the
objective function and constraints.

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Summary of Model Formulation Steps

Step 1 : Clearly define the decision variables

Step 2 : Construct the objective function

Step 3 : Formulate the constraints

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 LP Model Formulation

Illustration 1: A Maximization Example (1 of 4)

• Product mix problem - Beaver Creek Pottery Company
• How many bowls and mugs should be produced to maximize
profits given labor and materials constraints?
• Product resource requirements and unit profit:
Resource Requirements
Labor Clay Profit
Product
(Hr./Unit) (Lb./Unit) ($/Unit)
Bowl 1 4 40
Mug 2 3 50

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LP Model Formulation

A Maximization Example (2 of 4)

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 LP Model Formulation

A Maximization Example (3 of 4)
Resource 40 hrs of labor per day
Availability: 120 lbs of clay
Decision x1 = number of bowls to produce per day
Variables: x2 = number of mugs to produce per day
Objective Maximize Z = $40x1 + $50x2
Function: Where Z = profit per day
Resource 1x1 + 2x2  40 hours of labor
Constraints: 4x1 + 3x2  120 pounds of clay
Non-Negativity x1  0; x2  0
Constraints:

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LP Model Formulation

A Maximization Example (4 of 4)

Complete Linear Programming Model:

Maximize Z = $40x1 + $50x2

subject to: 1x1 + 2x2  40

4x2 + 3x2  120
x1 , x2  0
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 Feasible Solutions

A feasible solution does not violate any of the constraints:

Example: x1 = 5 bowls
x2 = 10 mugs
Z = $40x1 + $50x2 = $700

Labor constraint check: 1(5) + 2(10) = 25 < 40 hours

Clay constraint check: 4(5) + 3(10) = 70 < 120 pounds

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 Infeasible Solutions
An infeasible solution violates at least one of the
constraints:

Example: x1 = 10 bowls
x2 = 20 mugs
Z = $40x1 + $50x2 = $1400

Labor constraint check: 1(10) + 2(20) = 50 > 40 hours

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 Graphical Solution of LP Models

• Graphical solution is limited to linear programming models

containing only two decision variables (can be used with
three variables but only with great difficulty).

• Graphical methods provide visualization of how a solution for

a linear programming problem is obtained.

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 Coordinate Axes
Graphical Solution of Maximization Model
(1 of 12)

X2 is mugs

Maximize Z = $40x1 + $50x2

subject to: 1x1 + 2x2  40
4x2 + 3x2  120
x1, x2  0

X1 is bowls

Figure 2.2 Coordinates for Graphical Analysis

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 Labor Constraint
Graphical Solution of Maximization Model (2 of 12)

Maximize Z = $40x1 + $50x2

subject to: 1x1 + 2x2  40
4x2 + 3x2  120
x1, x2  0

Figure 2.3 Graph of Labor Constraint

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 Labor Constraint Area
Graphical Solution of Maximization Model (3 of 12)

Maximize Z = $40x1 + $50x2

subject to: 1x1 + 2x2  40
4x2 + 3x2  120
x1, x2  0

Figure 2.4 Labor Constraint Area

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Clay Constraint Area
Graphical Solution of Maximization Model (4 of 12)

Maximize Z = $40x1 + $50x2

subject to: 1x1 + 2x2  40
4x2 + 3x2  120
x1, x2  0

Figure 2.5 Clay Constraint Area

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Both Constraints
Graphical Solution of Maximization Model (5 of 12)

Maximize Z = $40x1 + $50x2

subject to: 1x1 + 2x2  40
4x2 + 3x2  120
x1, x2  0

Figure 2.6 Graph of Both Model Constraints

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 Feasible Solution Area
Graphical Solution of Maximization Model (6 of 12)

Maximize Z = $40x1 + $50x2

subject to: 1x1 + 2x2  40
4x2 + 3x2  120
x1, x2  0

Figure 2.7 Feasible Solution Area

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 Objective Function Solution = $800
Graphical Solution of Maximization Model (7 of 12)

Maximize Z = $40x1 + $50x2

subject to: 1x1 + 2x2  40
4x2 + 3x2  120
x1, x2  0

Figure 2.8 Objection Function Line for Z = $800

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 Alternative Objective Function Solution Lines
Graphical Solution of Maximization Model (8 of 12)

Maximize Z = $40x1 + $50x2

subject to: 1x1 + 2x2  40
4x2 + 3x2  120
x1, x2  0

Figure 2.9 Alternative Objective Function Lines

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Optimal Solution
Graphical Solution of Maximization Model (9 of 12)

Maximize Z = $40x1 + $50x2

subject to: 1x1 + 2x2  40
4x2 + 3x2  120
x1, x2  0

Figure 2.10 Identification of Optimal Solution Point

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Optimal Solution Coordinates

Graphical Solution of Maximization Model (10 of 12)

Maximize Z = $40x1 + $50x2

subject to: 1x1 + 2x2  40
4x2 + 3x2  120
x1, x2  0

Figure 2.11 Optimal Solution Coordinates

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 Extreme (Corner) Point Solutions
Graphical Solution of Maximization Model (11 of 12)

Maximize Z = $40x1 + $50x2

subject to: 1x1 + 2x2  40
4x2 + 3x2  120
x1, x2  0

Figure 2.12 Solutions at All Corner Points

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 Optimal Solution for New Objective Function
Graphical Solution of Maximization Model (12 of 12)

Maximize Z = $70x1 + $20x2

subject to: 1x1 + 2x2  40
4x2 + 3x2  120
x1, x2  0

Figure 2.13 Optimal Solution with Z = 70x1 + 20x2

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 Slack Variables

 Standard form requires that all constraints be in the

form of equations (equalities).
 A slack variable is added to a  constraint (weak
inequality) to convert it to an equation (=).
 A slack variable typically represents an unused
resource.
 A slack variable contributes nothing to the objective
function value.

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 Linear Programming Model: Standard Form

Max Z = 40x1 + 50x2 + s1 + s2

subject to:1x1 + 2x2 + s1 = 40
4x2 + 3x2 + s2 = 120
x1, x2, s1, s2  0
Where:
x1 = number of bowls
x2 = number of mugs
s1, s2 are slack variables

Figure 2.14 Solution Points A, B, and C with Slack

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Illustration 2: LP Model Formulation – Minimization (1 of 8)

 Two brands of fertilizer available - Super-gro, Crop-quick.

 Field requires at least 16 pounds of nitrogen and 24 pounds of
phosphate.
 Super-gro costs $6 per bag, Crop-quick $3 per bag.
 Problem: How much of each brand to purchase to minimize total cost
of fertilizer given following data ?
Chemical Contribution

Nitrogen Phosphate
Brand
(lb/bag) (lb/bag)
Super-gro 2 4
Crop-quick 4 3

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 LP Model Formulation – Minimization (2 of 8)

Figure 2.15 Fertilizing

farmer’s field

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 LP Model Formulation – Minimization (3 of 8)
Decision Variables:
x1 = bags of Super-gro
x2 = bags of Crop-quick

The Objective Function:

Minimize Z = $6x1 + 3x2
Where: $6x1 = cost of bags of Super-Gro
$3x2 = cost of bags of Crop-Quick

Model Constraints:
2x1 + 4x2  16 lb (nitrogen constraint)
4x1 + 3x2  24 lb (phosphate constraint)
x1, x2  0 (non-negativity constraint)

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 Constraint Graph – Minimization (4 of 8)

Minimize Z = $6x1 + $3x2

subject to: 2x1 + 4x2  16
4x2 + 3x2  24
x1, x2  0

Figure 2.16 Graph of Both Model Constraints

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 Feasible Region– Minimization (5 of 8)

Minimize Z = $6x1 + $3x2

subject to: 2x1 + 4x2  16
4x2 + 3x2  24
x1, x2  0

Figure 2.17 Feasible Solution Area

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 Optimal Solution Point – Minimization (6 of 8)

Minimize Z = $6x1 + $3x2

subject to: 2x1 + 4x2  16
4x2 + 3x2  24
x1, x2  0

Figure 2.18 Optimum Solution Point

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 Surplus Variables – Minimization (7 of 8)
 A surplus variable is subtracted from a  constraint to
convert it to an equation (=).
 A surplus variable represents an excess above a
constraint requirement level.
 A surplus variable contributes nothing to the calculated
value of the objective function.
 Subtracting surplus variables in the farmer problem
constraints:
2x1 + 4x2 - s1 = 16 (nitrogen)
4x1 + 3x2 - s2 = 24 (phosphate)
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 Graphical Solutions – Minimization (8 of 8)

Minimize Z = $6x1 + $3x2 + 0s1 + 0s2

subject to: 2x1 + 4x2 – s1 = 16
4x2 + 3x2 – s2 = 24
x1, x2, s1, s2  0

Figure 2.19 Graph of Fertilizer Example

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Irregular Types of Linear Programming Problems
For some linear programming models, the general
rules do not apply.

• Special types of problems include those with:

 Multiple optimal solutions
 Infeasible solutions
 Unbounded solutions

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 Multiple Optimal Solutions Beaver Creek Pottery

The objective function is

parallel to a constraint line.
Maximize Z=$40x1 + 30x2
subject to: 1x1 + 2x2  40
4x2 + 3x2  120
x1, x2  0
Where:
x1 = number of bowls
x2 = number of mugs

Figure 2.20 Example with Multiple Optimal Solutions

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 An Infeasible Problem

Every possible solution

violates at least one constraint:
Maximize Z = 5x1 + 3x2
subject to: 4x1 + 2x2  8
x1  4
x2  6
x1, x2  0

Figure 2.21 Graph of an Infeasible Problem

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 An Unbounded Problem

Value of the objective

function increases indefinitely:
Maximize Z = 4x1 + 2x2
subject to: x1  4
x2  2
x1, x2  0

Figure 2.22 Graph of an Unbounded Problem

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Characteristics of Linear Programming Problems
• A decision amongst alternative courses of action is required.
• The decision is represented in the model by decision
variables.
• The problem encompasses a goal, expressed as an objective
function, that the decision maker wants to achieve.
• Restrictions (represented by constraints) exist that limit the
extent of achievement of the objective.
• The objective and constraints must be definable by linear
mathematical functional relationships.

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Properties of Linear Programming Models
• Proportionality - The rate of change (slope) of the objective
function and constraint equations is constant.
• Additivity - Terms in the objective function and constraint
equations must be additive.
• Divisibility -Decision variables can take on any fractional value
and are therefore continuous as opposed to integer in nature.
• Certainty - Values of all the model parameters are assumed to
be known with certainty (non-probabilistic).

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Problem Statement: Example (1 of 3)

■ Hot dog mixture in 1000-pound batches.

■ Two ingredients, chicken ($3/g) and beef ($5/g).
■ Recipe requirements:
at least 500 pounds of “chicken”
at least 200 pounds of “beef”
■ Ratio of chicken to beef must be at least 2 to 1.
■ Determine optimal mixture of ingredients that will minimize
costs.

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 Solution: Example Problem No. 1 (2 of 3)
Step 1:
Identify decision variables.
x1 = Quantity in grams of chicken in mixture
x2 = Quantity in grams of beef in mixture
Step 2:
Formulate the objective function.
Minimize Z = $3x1 + $5x2
where Z = cost per 1,000-lb batch
$3x1 = cost of chicken
$5x2 = cost of beef

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 Solution: Example Problem No. 1 (3 of 3)
Step 3:
Establish Model Constraints
x1 + x2 = 1,000 lb
x1  500 g of chicken
x2  200 g of beef
x1/x2  2/1 or x1 - 2x2  0
x1, x2  0
The Model: Minimize Z = $3x1 + 5x2
subject to: x1 + x2 = 1,000 g
x1  50
x2  200
x1 - 2x2  0
x1,x2  0
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 Example Problem No. 2 (1 of 3)
Solve the following model
graphically:
Maximize Z = 4x1 + 5x2
subject to: x1 + 2x2  10
6x1 + 6x2  36
x1  4
x1, x2  0

Step 1: Plot the constraints

as equations

Figure 2.23 Constraint Equations

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 Example Problem No. 2 (2 of 3)

Maximize Z = 4x1 + 5x2

subject to: x1 + 2x2  10
6x1 + 6x2  36
x1  4
x1, x2  0
Step 2: Determine the feasible
solution space

Figure 2.24 Feasible Solution Space and Extreme Points

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 Example Problem No. 2 (3 of 3)
Maximize Z = 4x1 + 5x2
subject to: x1 + 2x2  10
6x1 + 6x2  36
x1  4
x1, x2  0
Step 3 and 4: Determine the
solution points and optimal
solution

Figure 2.25 Optimal Solution Point

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 Group work No. 1: Super Grain Corp. Advertising-Mix
Problem
Goal: Design the promotional campaign for Crunchy Start.
The three most effective advertising media for this product are
Television commercials on Saturday morning programs for children.
Advertisements in food and family-oriented magazines.
Advertisements in Sunday supplements of major newspapers.
The limited resources in the problem are
Advertising budget ($4 million).
Planning budget ($1 million).
TV commercial spots available (5).
The objective will be measured in terms of the expected number of exposures.
Question: At what level should they advertise Crunchy Start in each of the three media?

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 Cost and Exposure Data
Costs

Each
TV Each Each
Cost Category Commercial Magazine Ad Sunday Ad
Ad Budget
$300,000 $150,000 $100,000
($4 million)

Planning
budget 90,000 30,000 40,000
($1 million)

Expected
number of 1,300,000 600,000 500,000
exposures

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Group work No. 2 Think-Big Capital Budgeting Problem
Think-Big Development Co. is a major investor in commercial real-estate
development projects.
They are considering three large construction projects
Construct a high-rise office building.
Construct a hotel.
Construct a shopping center.
Each project requires each partner to make four investments: a down payment
now, and additional capital after one, two, and three years.
Given the following table determine at what fraction should Think-Big
invest in each of the three projects.

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 Financial Data for the Projects
Investment Capital Requirements
Office Shopping
Year Hotel
Building Center
0 $40 million $80 million $90 million
1 60 million 80 million 50 million
2 90 million 80 million 20 million
3 10 million 70 million 60 million
Net present
$45 million $70 million $50 million
value

Assume for years 0 through 3 the firm has: $25MM, $45MM, $65MM, and $80MM available.
(cumulative)

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 Diet Mix Problem
A prison is trying to decide what to feed its prisoners. They would like to offer
some combination of milk, beans, and oranges. Their goal is to minimize cost,
subject to meeting the minimum nutritional requirements imposed by law. The
cost and nutritional content of each food, along with the minimum nutritional
requirements are shown below.

Na vy Orang e s M inimum
M ilk B ea ns (larg e Ca lif . Da ily
(g allon s) (c up s) Va len c ia ) R equ i remen t

Niaci n (m g) 3.2 4.9 0.8 13 .0

Th iam in (mg ) 1.12 1.3 0.19 1.5

V it amin C (mg ) 32 .0 0.0 93 .0 45 .0

C ost ($ ) 2.00 0.20 0.25

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