LECTURE 4 – APPLICATIONS OF LP

Question - Product-Mix Problem

Aviation Electronics produces three types switching devices. Each type involves a two-step
assembly operations. The assembly times are shown in the following Table

Assembly Time per Unit (minutes)

Station 1 Station 2
Model A 2.5 3.0
Model B 1.8 1.6
Model C 2.0 2.2

Each workstation has a daily working time of 7.5 hours. Manager Bob Parkes wants to obtain the greatest
possible profit during the next five working days. Model A yields a profit of $8.25 per unit, Model B a profit of
$7.50 per unit, and Model C a profit of $7.80 per unit. Assume that the firm can sell all it produces during this
time, but it must fill outstanding orders for 20 units of each model type.

Formulate the linear programming model of this problem.

■ Decision Variables
𝑥1 Production quantity for Model A
𝑥2 Production quantity for Model B
𝑥3 Production quantity for Model C

■ Objective Function
Maximize Profit, 𝑍 = 8.25𝑥1 +7.5 𝑥2 +7.8 𝑥3

■ Subject to constrains,
Station 1: 2.5 𝑥1 +1.8 𝑥2 +2.0 𝑥3 ≤ 7.5 × 60 × 5 = 2250
Station 2: 3.0 𝑥1 +1.6 𝑥2 +2.2 𝑥3 ≤ 2250
Outstanding Orders: 𝑥1 ≥ 20
Outstanding Orders: 𝑥2 ≥ 20
Outstanding Orders: 𝑥3 ≥ 20
Non-Negativity Constraints: 𝑥1 , 𝑥2 , 𝑥3 ≥ 0
■ Decision Variables
𝑥1 Production quantity for Model A
𝑥2 Production quantity for Model B
𝑥3 Production quantity for Model C

■ Objective Function
Maximize Profit, 𝑍 = 8.25𝑥1 +7.5 𝑥2 +7.8 𝑥3

■ Subject to constrains,
Station 1: 2.5 𝑥1 +1.8 𝑥2 +2.0 𝑥3 ≤ 7.5 × 60 = 450
Station 2: 3.0 𝑥1 +1.6 𝑥2 +2.2 𝑥3 ≤ 450
Outstanding Orders: 𝑥1 ≥ 20
Outstanding Orders: 𝑥2 ≥ 20
Outstanding Orders: 𝑥3 ≥ 20
Non-Negativity Constraints: 𝑥1 , 𝑥2 , 𝑥3 ≥ 0
Diet Problem
Anna Broderick is the Dietitian for the State University football team, and she is attempting to determine a nutritious lunch menu
for the team. She has set the following nutritional guidelines for each lunch serving:
- Between 1,500 and 2,000 calories - At least 5mg of iron
- At least 20 but no more than 60g of fat - At least 30g of protein
- At least 40g of carbohydrates - No more than 30mg of cholesterol
She selects the menu from seven basic food items, as follows, with the nutritional contribution per pound and the costs as given:

Calories Iron Protein Carbohydr Fat (g/lb.) Cholestero $/lb.

(per lb.) (mg/lb.) (g/lb.) ates (g/lb.) l (mg/lb.)
Chicken 520 4.4 17 0 30 180 0.80
Fish 500 3.3 85 0 5 90 3.70
Ground Beef 860 0.3 82 0 75 350 2.30
Dried Beans 600 3.4 10 30 3 0 0.90
Lettuce 50 0.5 6 0 0 0 0.75
Potatoes 460 2.2 10 70 0 0 0.40
Milk (2%) 240 0.2 16 22 10 20 0.83

The Dietitian wants to select a menu to meet the nutritional guidelines while minimizing the total cost per serving.
■ Formulate a linear programming model for this problem.
■ If a serving of each of the food items (other than milk) was limited to no more than a half pound, what effect would this have
on the solution?
■ Decision Variables
𝑥1 Pounds of chicken in the selected menu 𝑥2 Pounds of fish in the selected menu
𝑥3 Pounds of ground beef in the selected menu 𝑥4 Pounds of dried beans in the selected menu
𝑥5 Pounds of lettuce in the selected menu 𝑥6 Pounds of potatoes in the selected menu
𝑥7 Pounds of milk (2%) in the selected menu

■ Objective Function
Minimize Cost, 𝑍 = 0.8𝑥1 +3.7 𝑥2 +2.3 𝑥3 +0.9 𝑥4 +0.75 𝑥5 +0.40 𝑥6 +0.83 𝑥7

■ Subject to constrains,
Minimum Calorie: 520𝑥1 +500 𝑥2 +860 𝑥3 +600 𝑥4 +50 𝑥5 +460 𝑥6 +240 𝑥7 ≥ 1500
Maximum Calorie: 520𝑥1 +500 𝑥2 +860 𝑥3 +600 𝑥4 +50 𝑥5 +460 𝑥6 +240 𝑥7 ≤ 2000
Minimum Iron: 4.4𝑥1 + 3.3 𝑥2 + 0.3 𝑥3 + 3.4 𝑥4 +0.5 𝑥5 +2.2 𝑥6 +0.2 𝑥7 ≥5
Minimum Fat: 30𝑥1 + 5 𝑥2 + 75 𝑥3 + 3 𝑥4 +10 𝑥7 ≥ 20
Maximum Fat: 30𝑥1 + 5 𝑥2 + 75 𝑥3 + 3 𝑥4 +10 𝑥7 ≤ 60
Minimum Protein: 17𝑥1 + 85 𝑥2 + 82 𝑥3 + 10 𝑥4 + 6 𝑥5 + 10 𝑥6 + 16 𝑥7 ≥ 30
Minimum Carbohydrates: 30 𝑥4 + 70 𝑥6 +22 𝑥7 ≥ 40
Maximum Cholesterol: 180𝑥1 + 90 𝑥2 +350 𝑥3 +20 𝑥7 ≤ 30
Non-Negativity Constraints: 𝑥1 , 𝑥2 , 𝑥3 ≥ 0
Diet Problem
A small specialty shop, Nuts-to-You, sells a variety of candy and nuts. The owner is concerned with the problem of how to package
nuts. The shop carries four types of nuts, which are sold in one-pound bags. It also sells one-pound bags for its own special mix,
which consists of 40 percent peanuts and equal parts of the other three types of nuts. The shop has a limited supply of nuts on
hand, and the owner believes that before the next shipment of nuts arrives, the current supply can be sold. However, the owner
recognizes the different combinations of nuts (individual bags versus bags of special mix) will yield different profits. The owner
would like to know how much of the current supply to allocate to the mix and how much to each individual type in order to
maximize profits.

Nuts Cost per pound Pounds Available Selling Price

Mix - - $4.00
Peanuts $1.00 600 1.50
Cashew 3.00 360 4.80
Walnuts 2.50 500 4.60
Pecans 3.50 400 5.00

Assume that mixing costs are negligible. Formulate this linear programming problem.
■ Decision Variables
𝑥1 Number of packages of one-pound bag of special mix
𝑥2 Number of packages of one-pound bag of Peanuts
𝑥3 Number of packages of one-pound bag of Cashew
𝑥4 Number of packages of one-pound bag of Walnuts
𝑥5 Number of packages of one-pound bag of Pecans

■ Objective Function
Maximize Profit,
𝑍 = 4𝑥1 +1.5 𝑥2 +4.8 𝑥3 + 4.8 𝑥4 +5 𝑥5 − 0.4𝑥1 + 𝑥2 × 1 − 0.2𝑥1 + 𝑥3 × 3 − 0.2𝑥1 + 𝑥4 × 2.5 − 0.2𝑥1 + 𝑥5 × 3.5
= 1.8𝑥1+0.5 𝑥2 +1.8 𝑥3 + 2.1 𝑥4+1.5 𝑥5

■ Subject to constrains,
Available Peanuts: 0.4𝑥1 + 𝑥2 ≤ 600
Available Cashew: 0.2𝑥1 + 𝑥3 ≤ 360
Available Walnuts: 0.2𝑥1 + 𝑥4 ≤ 500
Available Pecans: 0.2𝑥1 + 𝑥5 ≤400
Non-Negativity Constraints: 𝑥1 , 𝑥2 , 𝑥3 ≥ 0
First American Bank issues five types of loans. In addition, to diversify its portfolio, and to minimize
risk, the bank invests in risk-free securities. The loans and the risk-free securities with their annual
rate of return are given in Table 4-3.

Table Rates of Return for Financial Planning Problem

Type of Loan or Security Annual Rate of Return (%)

Home mortgage (first) 6

Home mortgage (second) 8
Commercial loan 11
Automobile loan 9
Home improvement loan 10
Risk-free securities 4
The bank’s objective is to maximize the annual rate of return on investments subject to the following
policies, restrictions, and regulations:

1. The bank has $90 million in available funds.

2. Risk-free securities must contain at least 10 percent of the total funds available for
investments.
3. Home improvement loans cannot exceed $8,000,000.
4. The investment in mortgage loans must be at least 60 percent of all the funds invested in
loans.
5. The investment in first mortgage loans must be at least twice as much as the investment in
second mortgage loans.
6. Home improvement loans cannot exceed 40 percent of the funds invested in first mortgage
loans.
7. Automobile loans and home improvement loans together may not exceed the commercial
loans.
8. Commercial loans cannot exceed 50 percent of the total funds invested in mortgage loans.
The bank has $90 million in available funds.

Risk-free securities must contain at least 10

percent of the total funds available for investments.

Home improvement loans cannot exceed

$8,000,000.

The investment in mortgage loans must be at least

60 percent of all the funds invested in loans.

The investment in first mortgage loans must be at

least twice as much as the investment in second
mortgage loans.

Home improvement loans cannot exceed 40

percent of the funds invested in first mortgage
loans.

Automobile loans and home improvement loans

together may not exceed the commercial loans.

Commercial loans cannot exceed 50 percent of the

total funds invested in mortgage loans.