American Journal of Applied Mathematics

2022; 10(3): 86-92

http://www.sciencepublishinggroup.com/j/ajam
doi: 10.11648/j.ajam.20221003.11
ISSN: 2330-0043 (Print); ISSN: 2330-006X (Online)

Application of Linear Programming for Decision Making to

Business in Whao Beverages Nig. Ltd
Oladimeji Olanrewaju Adedipupo1, *, Lasisi Taiwo Abideen2, Ogunbanwo Tolulope Samson3,
Fadare Ayodeji4, Oluborode Kayode Oladipupo5
1
Department of Statistics, Faculty of Applied Science, Federal Polytechnic, Ile-Oluji, Nigeria
2
Department of Statistics, Ladoke Akintola University of Technology, Ogbomosho, Nigeria
3
Department of Mathematics and Statistics, Faculty of Pure and Applied Sciences, Osun State College of Technology, Esa-Oke, Nigeria
4
Department of Business Administration, Faculty of Business and Management Science, Osun State College of Technology, Esa-Oke,
Nigeria
5
Department of Computer Science, Faculty of Communication and Information Technology, Osun State College of Technology, Esa-Oke,
Nigeria

Email address:
*
Corresponding author

To cite this article:

Oladimeji Olanrewaju Adedipupo, Lasisi Taiwo Abideen, Ogunbanwo Tolulope Samson, Fadare Ayodeji, Oluborode Kayode Oladipupo.
Application of Linear Programming for Decision Making to Business in Whao Beverages Nig. Ltd. American Journal of Applied
Mathematics. Vol. 10, No. 3, 2022, pp. 86-92. doi: 10.11648/j.ajam.20221003.11

Received: April 19, 2022; Accepted: May 5, 2022; Published: May 19, 2022

Abstract: Linear Programming is a scientific method used for obtaining and determine the most optimal solution for a
problem with given constraints. This technique is useful for guidance of a quantitative decision-making in different fields such
as business planning, industrial engineering, production firm and to the extent of social and physical sciences. This research
examines the application of linear programming to determine the product(s) that maximize(s) the profit of WHAO Beverages
Nig. Ltd. The data used for this research is a secondary data obtained from the company. The method used to analyze the data
is a revised simplex method of a linear programming. The findings in this research was able to formulate mathematical model
for the research problem; determine the product that will yield the maximum profit for the company; and know the quantity of
this product that will give this profit. Data obtained from the company undergoes two iterations, whose analysis shows that the
squash drinks maximize the profit of the company at the second iteration. The quantity of SQUASH Drinks that gave the
maximum profit of 264 units produced and the maximum profit of the company (WHAO Beverages Nig. Ltd.) was #2200.83.
Keywords: Linear Programming, Simplex Method, Maximization, Resources, Business, Portfolio, Decision-Makers,
Optimization

will argue that profit maximization is a literal description of

1. Introduction what all managers or decision makers in firms pursue.
Many managerial or decisional problems are concerned In a world where some managers may maximize profit and
with how limited resources can be allocated efficiently to others may not, debate is largely focused on arguments
meet the desired objective i.e. if resources of any kind be it associated with natural selection. Going back as far as
capital, labour, machines, materials are being allocated on Wagner H. M [19] some economists have argued that firms in
this limited resources, then it is necessary to determine the which decision making most closely resemble profit
most effective and profitable way of allocating the resources maximization i.e. what to produce, division of labour and
to meet people’s large demands. After many decades of price of the goods, decisions will be more likely to survive,
debate within the economic profession and beyond, the profit and hence it can safely be assumed that industry outcomes
maximization hypothesis remains controversial. Few today are consistent with profit maximization, regardless of the
87 Oladimeji Olanrewaju Adedipupo et al.: Application of Linear Programming for Decision Making to
Business in Whao Beverages Nig. Ltd

actual motives of individual managers. Because intentions For some reasons, Linear Programming does not get as
may no longer matter, natural selection arguments are often much attention as it deserves in learning data science. As
hard to rebut. The idea that natural selection favours profit such, we thought of doing justice to this awesome technique
maximization has been widely challenged, perhaps most by writing an article that explains Linear programming in
notably by Pedro and Stefan S. [14]. simple English. Hence we have kept the content as simple as
Theoretically, Hamdy A. T [8] shows that profit maximization possible. The idea is to get you started and excited about
leads to certain bankrupting of the firm, while alternation Linear Programming.
strategies have a positive probability of long term survival.
Many producers think of a better way to minimize their cost of 2. Objectives
production so as to maximize their profit margin. Any decision
that a firm must take to achieve these goals are susceptible to The objectives of this research are to:
statistical analysis and evaluation by linear programming. 1) formulate a mathematical model for the research
An Entrepreneur is a person who performs entrepreneurial problem.
function. In line with Ogundele and Olayemi study [11], they 2) determine the variant drink (product) that will give
define Entrepreneurs as an agent of social and economic (yield) the maximum profit for the company.
change. It has been asserted by Akiniyi [1] that the growth 3) determine the maximum profit of the company from
and expansion of a business depends critically on the this product.
decision of the entrepreneurs. Those decisions include 4) know the quantity of this product that will give this
pricing decision, the identification of target market, ensuring profit.
standardization of the company’s product, the level of
technology involvement, manpower and others. Every 3. Literature Review
entrepreneur is faced with the task of making decision as
regards to efficient allocation of the available resources at his Meng and Yang [15] discussed various linear programming
disposal to various areas of need of the concerned applications and techniques. The authors reported that
organization. This is necessary and sufficient so as to aggregate production planning is the most important aspect of
minimize the cost incurred while maximizing profit earned. linear programming analysis. Markowitz [7] discussed the
Such resources allocation decisions are adopted through the financial research and investment aspect of the portfolio
use of quantitative technique such as Linear programming. optimization problem as one of the standard and most
Simplest Tableau, Transportation model, Net work analysis, important aspects of portfolio management. An elegant way of
sensitivity analysis and a host of others. managing risk in financial markets known as the portfolio
Linear programming according to Heizer and Render [9] is theory was introduced in the study. Konno and Yamazaki [6]
a mathematical technique used to rationalize many discussed Markowitz’s model and assessed it as a single-period
managerial decisions as regards the allocation of economic model where the investor’s main objective was to maximize
resources. Akiniyi [1] also defined it as an optimization the portfolio’s expected return. William introduced and
instrument used to analyze constrained optimization discussed the Capital Asset Pricing Model (CAPM) based
problems in which the objective function is a linear function upon the empirical observation that gives the maximum
which can be maximized or minimized subject to Linear expected return. The author compared and analyzed
inequality constraints. Markowitz’s model to develop a simplified variant that reduces
Optimization is the way of life. We all have finite resources data and computational requirements. Such an empirical fact
and time and we want to make the most of them. From using was analyzed, discussed, and supported by William.
your time productively to solving supply chain problems for Also, Ogryezak [18] discussed and analyzed the procedures
your company – everything uses optimization. It’s an and guidelines of setting investment policy. An asset allocation
especially interesting and relevant topic in data science. It is model was proposed and developed where the expected return
also a very interesting topic – it starts with simple problems, for an asset class will be estimated using the simplex algorithm
but it can get very complex. For example, sharing a bar of as an application of linear programming. Marcus [4] presented
chocolate between siblings is a simple optimization problem. and analyzed price efficiency as a market where all available
We don’t think in mathematical terms while solving it. On the information that is relevant to the valuation of securities at all
other hand, devising inventory and warehousing strategy for an times is fully reflected by the price. Olayinka et al. [13]
e-tailer can be very complex. Millions of SKUs with different examined and applied linear programming techniques in the
popularity in different regions to be delivered in defined time entrepreneur decision-making process to maximize profits with
and resources – you see what I mean! the available resources through a fast-food firm with the
Linear programming (LP) is one of the simplest ways to challenges of product selection and profit maximization due to
perform optimization. It helps you solve some very complex an increase in the price of raw materials. Oladejo et al. [12]
optimization problems by making a few simplifying considered the importance of optimization principles in
assumptions. As an analyst, you are bound to come across maximized profits and minimized cost of production and applied
applications and problems to be solved by Linear linear programming techniques in solving a particular challenge
Programming. in a bakery production firm using the AMPL software.
 American Journal of Applied Mathematics 2022; 10(3): 86-92 88

Thus, in this paper, we examine the level of investment in a agriculture, human resources and manufacturing decision
selected portfolio that gives maximum returns with minimal making etc. Limited data is required for calculate the result
input based on the secondary data supplied by a particular by using Simplex method which is easily available. Today’s
firm, which were used as the parameters for the proposed most powerful simplex solver for excel is used. In 1993,
linear programming model. This study has not been previously solver engineering was created and since 1995, solver has
examined, and it has created gaps in portfolio management and been supplying and dealing with implementation of R3
optimization of a firm. The study is motivated by the earlier management system of SAP company. This famous method
reports on the portfolio optimization and risk management of for LP is used in standard Excel solver and developer of
firms. A sensitivity analysis to ascertain the robustness of the solver built into optimization and premium solver platform.
resulting model towards the changes in input parameters to This technology can handle up to 8,000 variables and 8,000
determine how redundant a constraint linear programming is constraints and it is much faster and gives automatically best
carried out. The availability of funds and the allocation of each presolve strategy. Thousands of the companies are using
component of the portfolio to maximize returns and minimize Simplex method and solver as in this review paper showed
inputs by portfolio holders and managers who are the major the different application in many areas. Most researchers
decision-makers in allocating their resources were also such as Kurtz [10], Taha [17], Benedict. I. Ezema [3] posit
determined following Olayinka et al.’s [13] and Oladejo et al.’s that the use of scientific methods, particularly linear
[12] linear programming techniques. programming in the allocation of scarce resources is play
There seem to be paucity of Literature on the application of vital role to the manufacturing to boost the output.
Linear programming to the entrepreneur decision making
process. However the few studies selected are reviewed below. 4. Methodology
The Linear programming components were also identified by
Taha [17] and Stevenson [16]. The components according to A systematic procedure on the choice and rationale
them are the proportionality, additively, non-negativity, pertaining to all decisions in planning and implementation of
linearity, deterministic and with fixed external factors. strategies that will be adopted to collect data and undertake
Finally, according to the Chartered Institute of analytical aspects using Revised simplex method. Linear
Management Accounting, 2009, the technique designed to Programming: Linear programming deals with the
assist management in solving optimizations problem subject optimization (maximization or minimization) of a function of
to limitation or imposed restriction. There are diverse variables known as objective functions. It is subject to a set
opinions on application of simplex method to make decision of linear equalities and/or inequalities known as constraints.
in management in different sectors. During the world war he Linear programming is a mathematical technique which
worked on planning methods for the US Air Force. Dantzig involves the allocation of limited resources in an optimal
[5] formulated linear inequalities inspired by Wassily manner on the basis of a given criterion of optimality. The
Leontief. After that he planned for solving the industrial and most widely used method for solving Linear Programming
business problems. Initially, Dantzig didn’t include problems consisting of any number of variables is called the
objectives in formulation so that huge number of feasible simplex method developed by G. Dantzig in 1947 and made
solution found, therefore more rules were required to choose generally available in 1951.
a best solution among all feasible solution, In Mid 1947
Dantzig included objectives in his formulation. Afterwards, 5. Data Analysis and Interpretation
he developed a “Simplex Method” to solve linear
programming problems. Simplex method is a simple, elegant, The revised simplex method of linear programming was
yet powerful tool for solving linear programming problems. used for the analysis. However, the simplex method was also
Simplex is used to solve the major problems in many used to run to the data. This is to confirm the output of the
different fields like optimize maximum profit, minimize cost, different method of data analysis.

5.1. Data

Table 1. Production Data.

Required Available Total Required Available (sp)

Raw material Total Production Raw material (scp)
labour time labour time Available machine time machine per
Products consumed per available output per consumed per per Profit
per hrsweek per week labour time per unit / time per unit
week (kg) raw material week (pcs) unit/week (kg) unit (#)
(min) (hrs) per week (hrs) week (min) week (hrs) (#)
X1 400 1000 7200 18.00 0.50 48 96 0.70 96 22.50 25 2.50
X2 500 1000 10800 21.60 0.43 41 96 0.50 96 29.17 33.33 4.16
X3 700 1000 14400 20.57 0.38 36 96 0.38 96 29.17 33.33 4.16
X4 150 250 2880 19.20 1.13 108 96 1.25 96 58.33 66.67 8.34
X5 200 250 4320 21.60 0.83 80 96 1.00 96 58.33 66.67 8.34
X6 225 300 3240 14.40 1.11 107 96 1.11 96 58.33 66.67 8.34

Source: Whao Beverages Production.