Chpter 1

QM350 – Chapter 1
Introduction to 350
Mrs. Sara Almeer
Problem Solving, and Decision Making
◼ Problem
Exists whenever objectives are not being met.
◼ Problem Solving
The process of taking corrective action to meet objectives.
◼ Decision Making
The process of selecting an alternative course (path) of
action that will solve a problem
7 Steps of Problem Solving
◼ (The First 5 steps are the process of decision making)
1. Define the problem. (Example: unemployment)
2. Identify the set of alternative solutions. (go to Qatar, United Arab
Emirates, or stay in Bahrain)
3. Determine the criteria for evaluating alternatives. (salary,
promotion)
4. Evaluate the alternatives. (evaluate each criterion with respect to
salary and promotion)
5. Choose an alternative (make a decision).
6. Implement (execute) the chosen alternative.
7. Evaluate the results.
Quantitative Analysis
Quantitative Analysis Process

◼ Model Development
◼ Data Preparation
◼ Model Solution
◼ Report Generation
Categories of Model Development
 Models are representations of real objects or situations
• Three forms of models are:
1. Iconic models - physical replicas of real objects. (example, a model of an airplane is
representation of real airplane, a child’s toy truck is a model of real truck)
2. Analog models - physical in form, but do not physically resemble the object being
modeled (example, the speedometer of an automobile is an analog model, a
thermometer is analog representing temperature)
3. Mathematical models - represent real world problems through a system of

mathematical formulas and expressions based on key assumptions, estimates, or
statistical analyses. (example, the total profit from the sale of a product can be
determine by multiplying the profit per unit by the quantity sold)
Example 1
 Iron Works, Inc. manufactures two products made from steel and
just received this month's allocation of b pounds of steel. It takes
a1 pounds of steel to make a unit of product1 and a2 pounds of
steel to make a unit of product2. Let x1 and x2 denote this
month's production level of product1 and product2, respectively.
Denote by p1 and p2 the unit profits for products 1 and 2,
respectively.
 Iron Works has a contract calling for at least m units of product1
this month. The firm's facilities are such that at most u units of
product2 may be produced monthly.
Examples
 Total Monthly profit
(profit per unit of product 1) x (monthly production of product 1) + (profit per unit of product
2) x (monthly production of product 2)
P1*X1 + P2* X2
 Total amount of steel used
(steel required per unit of product 1) x (monthly production of product 1) + (steel required
per unit of product 2) x (monthly production of product 2) =
a1 x1 + a2 x2
This quantity must be less than or equal to the allocated b pounds of steel:
a1 x1 + a2 x2 ≤ b
b: monthly allocation received of pounds of steel.
Example
◼ The monthly production level of product1 must be greater than or

equal to m :
x1 ≥ m
◼ The monthly production level of product2 must be less than or
equal to u :
x2 ≤ u
◼ However, the production level for product1 & 2 cannot be
negative:
x1,x2 ≥ 0
Question:
 Suppose b = 2000,
 a1 = 2, a2 = 3,
 m = 60, u = 720,
 p1 = 100, p2 = 200.
Rewrite the model with these specific values for the uncontrollable
inputs
Answer
Max (p1x1 + p2x2 ) - Max (100*x1 + 200*x2)

s.t. a1x1 + a2x2 < b - s.t. (2*x1 + 3*x2 < 2000)
x1 > m - (x1 > 60 )
x2 < u - ( x2 < 720 )
x1 ,x2 > 0 -(x1 ,x2 > 0)
Question:
 The optimal solution to the current model is x1=60 and x2 = 626

2/3.
 If the product were engines, explain why this is not a true optimal
solution for the "real-life" problem.
 Answer: One cannot produce and sell 2/3 of an engine. Thus the
problem is further restricted by the fact that both x1 and x2 must
be integers.
 They could remain fractions if it is assumed these fractions are
work in progress to be completed the next month
Practice – Question 1
 A retail store in Des Moines, Iowa, receives shipments of a particular product from Kansas City and
Minneapolis.
 Let :
x = number of units of the product received from Kansas City
Y= number of units of the product received from Minneapolis
 Write an expression for the total number of units of the product received by the retail store in Des
Moines.
 b. Shipments from Kansas City cost $0.20 per unit, and shipments from Minneapolis cost $0.25 per
unit. Develop an objective function representing the total cost of shipments to Des Moines.
 c. Assuming the monthly demand at the retail store is 5000 units, develop a constraint that
requires 5000 units to be shipped to Des Moines.
 d. No more than 4000 units can be shipped from Kansas City, and no more than 3000 units can be
shipped from Minneapolis in a month. Develop constraints to model this situation.
 e. Of course, negative amounts cannot be shipped. Combine the objective function and
constraints developed to state a mathematical model for satisfying the demand at the Des
Moines retail store at minimum cost
 A retail store in Des Moines, Iowa, receives shipments of a particular product from Kansas
City and Minneapolis.
 Let :
x = number of units of the product received from Kansas City
Y= number of units of the product received from Minneapolis
a. Write an expression for the total number of units of the product received by the retail
store in Des Moines.
Total units received = x + y
b. Shipments from Kansas City cost $0.20 per unit, and shipments from Minneapolis cost $0.25
per unit. Develop an objective function representing the total cost of shipments to Des
Moines.
Total cost = 0.20x + 0.25y
c. Assuming the monthly demand at the retail store is 5000 units, develop a constraint that
requires 5000 units to be shipped to Des Moines.
x + y = 5000
d. No more than 4000 units can be shipped from Kansas City, and no more
than 3000 units can be shipped from Minneapolis in a month. Develop
constraints to model this situation.
x ≤ 4000 Kansas City

y ≤ 3000 Minneapolis
e. Of course, negative amounts cannot be shipped. Combine the objective
function and constraints developed to state a mathematical model for
satisfying the demand at the Des Moines retail store at minimum cost
Min 0.20x + 0.25y
s.t. x + y = 5000
x ≤ 4000
y ≤ 3000
x, y ≥ 0
 Financial Analysts, Inc., is an investment firm that manages stock
portfolios for a number of clients. A new client is requesting that the
firm handle an $800,000 portfolio. As an initial investment strategy,
the client would like to restrict the portfolio to a mix of the following
two stocks:
x = number of shares of Oil Alaska

Y= number of shares of Southwest Petroleum
A. Develop the objective function, assuming that the client desires to

maximize the total annual return.
b. Show the mathematical expression for each of the following three

constraints: (
1) Total investment funds available are $800,000.
(2) Maximum Oil Alaska investment is $500,000.
(3) Maximum Southwest Petroleum investment is $450,000
A. Develop the objective function, assuming that the client desires to
maximize the total annual return.
Max 6x + 4y
b. Show the mathematical expression for each of the following three
constraints: (
1) Total investment funds available are $800,000.
(2) Maximum Oil Alaska investment is $500,000.
(3) Maximum Southwest Petroleum investment is $450,000
50x + 30y ≤ 800,000

50x ≤ 500,000
30y ≤ 450,000
 The O’Neill Shoe Manufacturing Company will produce a special-style
shoe if the order size is large enough to provide a reasonable profit. For
each special-style order, the company incurs a fixed cost of $2000 for the
production setup. The variable cost is $60 per pair, and each pair sells for
$80.
a. Let x indicate the number of pairs of shoes produced. Develop a

mathematical model for the total cost of producing x pairs of shoes.
b. Let P indicate the total profit. Develop a mathematical model for the
total profit realized from an order for x pairs of shoes.
c. How large must the shoe order be before O’Neill will break even?
 The O’Neill Shoe Manufacturing Company will produce a special-style shoe if the
order size is large enough to provide a reasonable profit. For each special-style
order, the company incurs a fixed cost of $2000 for the production setup. The
variable cost is $60 per pair, and each pair sells for $80.
a. Let x indicate the number of pairs of shoes produced. Develop a mathematical

model for the total cost of producing x pairs of shoes.
TC 5 2000 1 60x
b. Let P indicate the total profit. Develop a mathematical model for the total profit
realized from an order for x pairs of shoes.
P 5 80x 2 (2000 1 60x) 5 20x 2 2000
c. How large must the shoe order be before O’Neill will break even?
Break even when P = 0
Thus, 20x - 2000 = 0
20x = 2000
x= 100

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QM350 – Chapter 1

Quantitative Analysis Process

3. Mathematical models - represent real world problems through a system of

◼ The monthly production level of product1 must be greater than or

Max (p1x1 + p2x2 ) - Max (100x1 + 200x2)

 The optimal solution to the current model is x1=60 and x2 = 626

x ≤ 4000 Kansas City

x = number of shares of Oil Alaska

A. Develop the objective function, assuming that the client desires to

b. Show the mathematical expression for each of the following three

50x + 30y ≤ 800,000

a. Let x indicate the number of pairs of shoes produced. Develop a

a. Let x indicate the number of pairs of shoes produced. Develop a mathematical

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