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Linear Programming Lab 3

OPMT 3301

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Piyush Chawla
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62 views

Linear Programming Lab 3

OPMT 3301

Uploaded by

Piyush Chawla
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Linear Programming Lab 3 – Sensitivity Analysis

Set up the following Make vs Buy Problem


The Electro-Poly Corporation is the world’s leading manufacturer of slip rings. A slip ring is an electrical coupling device that allows
current to pass through a spinning or rotating connection – such as a gun turret on a ship, aircraft, or tank. The company recently
received a $750,000 order for various quantities of three types of slip rings. Each slip ring requires a certain amount of time to wire
and harness. The following table summarizes the requirements for the three models of slip rings.
Model 1 Model 2 Model 3
Number Ordered 3,000 2,000 900
Hours of Wiring Required per Unit 2 1.5 3
Hours of Harnessing Required per Unit 1 2 1

Unfortunately, Electro-Poly does not have enough wiring and harnessing capacity to fill the order by its due date. The company has
only 10,000 hours or wiring capacity and 5,000 hours of harnessing capacity available to devote to this order. However, the
company can subcontract any portion of this order to one of its competitors. The unit costs of producing each model in-house and
buying the finished products from a competitor are summarized in the following table.
Model 1 Model 2 Model 3
Cost to Make $50 $83 $130
Cost to Buy $61 $97 $145

a) Solve the problem in Excel using Solver.


b) Run a sensitivity analysis on the solution in Solver.
See the variable cells sensitivity output & notes below on sensitivity analysis. Use
Variable Cellsthese to answer parts c) to i) below.
Final Reduced Objective Allowable Allowable
Variable cells (in Excel’s Sensitivity Analysis Report)___ Cell Name Value Cost Coefficient Increase Decrease
$B$7 Make Model 1 3000 0 50 4 1E+30
Final Value: The optimal value for each variable in order to achieve an $C$7 Make Model 2 550 0 83 14 8
optimal objective function $D$7 Make Model 3 900 0 130 8 1E+30
$B$8 Buy Model 1 0 4 61 1E+30 4
Reduced Cost: For each variable which is currently zero, the reduced cost $C$8 Buy Model 2 1450 0 97 8 14
$D$8 Buy Model 3 0 8 145 1E+30 8
gives an estimate of how much the objective function will change if we
force/make that variable to be non-zero (it will be the change per unit
change in the zero variable). The value of the reduced cost is often called the
“opportunity cost” for the variable. It is also the difference between the
marginal profit and marginal value of the resource it consumes.
Objective Coefficient: The coefficient of each variable in the objective
function.
Allowable Increase: The range in which the coefficient of a given decision
variable in the objective function may be increased without changing the
optimal solution, where all other data are fixed.
Allowable Decrease: The range in which the coefficient of a given decision
variable in the objective function may be decreased without changing the
optimal solution, where all other data are fixed.

Note: for both the allowable increase & decrease changes to coefficients – the objective function will change in value but the optimal solution will
remain the same (ie: the values of the variables will remain the same)
c) How much extra will it cost if we need to buy 1 unit of Model 1?

$4

d) How much extra will it cost if we need to buy 1 unit of Model 3?

$8

e) Up to how much can it cost to make model 1 and still have the same optimal solution? By how much will the cost increase at
this maximum cost?

$54, 3000 x $4 = $12000

f) What is the lowest cost for model 1 possible to still have the same optimal solution? Does the value make sense?

$50 - ∞ = 0

g) Up to how much can it cost to buy model 1 and still have the same product mix? Does this make sense?

$61 + ∞ = ∞

h) What if the cost to buy model 1 drops to $56. What will happen?

Buy model 1 as it is cheap. Wiring and harnessing can be used towards Model 2.

i) What is the cost to buy model 1 is $58. What will be the total cost?
Allowable decrease is < $4. Nothing happens.

See the variable cells sensitivity output & notes below on sensitivity analysis. Use these to answer parts j) to o) below.

Constraints (in Excel’s Sensitivity Analysis Report)___


Final Value: The amount of each resource used in the optimal
solution
Constraint R.H. Side: The max amount available for each
resource.
Binding: A constraint is “binding” if all of the resource is used up
(ie: if Final Value = Constraint R.H. Side).
Non-Binding: A constraint is “non-binding” if not all of the resource is used up.
Shadow Price: The value of the increase in the objective function for a 1 unit
increase in the right hand side of the given constraint.
Allowable Increase: On non-binding constraints, this is the range in which
the right hand side of the constraint may be increased without changing the
optimal solution, where all other data are fixed. For binding constraints, this
is the range in which the right hand side of the constraint may be increased
without changing the shadow price.
Allowable Decrease: On non-binding constraints, the range in which the
Right hand side of the constraint may be decreased without changing the
optimal solution, where all other data are fixed. For binding constraints, this
is the range in which the right hand side of the constraint may be decreased
without changing the shadow price.
Note: for both the allowable increase & decrease changes to the right hand side of the constraint – the objective function will change in value but the
optimal solution will remain the same (ie: the values of the variables will remain the same)
j) How many hours of wiring do we end up needing? 9525 hrs
k) How many hours of harnessing do we end up needing? 5000 hrs
l) Which resource(s) is(are) binding? Harnessing
m) Which resource(s) is(are) not binding? Wiring
n) If we end up needing 3001 units of model 1 instead of 3000, what is the extra cost? Does this make sense? $57

o) If we end having 5001 hours of harnessing available, what the effect on the cost? Does this make sense? Saves $7/hr

p) What if we have 1 more hour of wiring available – what is the effect on cost? Nothing

q) What will be the minimum cost if we need to supply 3001 units of model 1 instead of 3000? $453557

r) What will be the minimum cost if we need to supply 3379 units of model 1 instead of 3000? 453557 + 57 x 379 = 474903

s) What will be the minimum cost if we need to supply 101 units of model 1 instead of 3000? 453557 + 57 x 2899 = 288057

t) What is the minimum number of model 2 we would need to supply without changing its shadow price? 2000 – 2899 = 550
units

u) What would be the new cost at the amount in part t)? 453300 – 97 x 1450 = 312650

v) What is the maximum number of model 2 that we would need to supply without changing its shadow price?

w) Should be add more wiring hours? No


x) By how much can we decrease the wiring hours without changing the optimal solution? Decrease by 475 hours

y) Up to how many harnessing hours can we add without changing its shadow price? 633.33
z) What is the new total cost in part y? 453300 – 7 x 633.33 = 448866.69

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