LINEAR PROGRAMMING:

MODEL FORMULATION
AND COMPUTER
SOLUTION
JOEREMY L. CONCEPCION, CPA
 • Objectives of business decisions frequently
OVERVIEW 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.

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• Steps in application:
1. Identify problem as solvable by linear
programming.

2. Formulate a mathematical model of the

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MODEL
FORMULATION
 MODEL COMPONENTS

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Decision Variable Objective Constraints Parameters
Function
 MODEL COMPONENTS

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Objective
Constraints
Decision Variable
Parameters
Function
 MODEL COMPONENTS

mathematical symbols
representing levels of
activity by the firm.

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Objective
Constraints
Parameters Decision Variable
Function
 MODEL COMPONENTS
a linear mathematical
relationship describing an
objective of the firm, in
terms of decision variables
- this function is to be
maximized or minimized.

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Decision
Constraints
Variable
Parameters Objective
Function
 MODEL COMPONENTS
requirements or restrictions
placed on the firm by the
operating environment,
stated in linear
relationships of the
decision variables.

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Decision
Objective
Variable
Parameters Constraints
Function
 MODEL COMPONENTS
numerical coefficients
and constants used in
the objective function
and constraints.

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Constraints
Decision
Objective
Variable Parameters
Function
 MODEL FORMULATION STEPS

STEP 2
STEP 1 STEP 3
Define the
Define the
Define the decision
objective
variables. constraints.

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function.

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 MODEL FORMULATION STEPS

STEP 2
STEP 1 STEP 3
Define the
Define the decision Define the
objective
variables. constraints.

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function.

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 MODEL FORMULATION STEPS

STEP 2
STEP 1 STEP 3
Define the
Define the decision Define the
objective
variables. constraints.

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function.

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 MAXIMIZATION MODEL EXAMPLE
HAIRY POTTER COMPANY
Resource Requirements:
▪ Product mix problem – Hairy Potter Company
▪ How many bowls and mugs should be produced per day to maximize profits given
labor and materials constraints?
▪ Product resource requirements and unit profit:
Clay Labor Profit
Product
(lb/unit) (Hour/unit) ($/unit)

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Bowl 4 lb 1 hr 40
Mug 3 lb 2 hr 50

▪ Resource availability/constraints:
Resource Availability
Clay 120 lbs
Labor 40 hours/day

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HAIRY POTTER –
MANUAL SOLUTION

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HAIRY POTTER – MANUAL SOLUTION
STEP 1: DEFINE DECISION VARIABLES
Decision variables:
x = number of bowls to produce per day
y = number of mugs to produce per day

STEP 2: DEFINE THE OBJECTIVE FUNCTION

Objective function:
Maximize Z = $40x + $50y Clay material constraint
Where Z = profit per day

STEP 3: DEFINE THE CONSTRAINTS Labor constraint

Define the constraints:
4x + 3y ≤ 120
1x + 2y ≤ 40
x, y ≥ 0
HAIRY POTTER – MANUAL SOLUTION

FORMAL MODEL CONSTRUCTION:

Maximize Z = $40x + $50y

Subject to: 4x + 3y ≤ 120
1x + 2y ≤ 40
x, y ≥ 0
HAIRY POTTER – MANUAL SOLUTION
LINEAR PROGRAMMING – MANUAL SOLUTION

Step 1: Use constraint equations

4x + 3y = 120
1x + 2y = 40

Step 2: Find the value of either x or y by subtraction of algebraic

expression. (Suppose value of y should be solved first):
Make the both Xs in the two equations equal by multiplying
the labor constraint by 4:

4 x (1x + 2y = 40) 4x + 8y = 160

LINEAR PROGRAMMING – MANUAL SOLUTION
Step 1: Use constraint equations
4x + 3y = 120
1x + 2y = 40

Step 2: Find the value of either x or y by subtraction of algebraic expression. (Suppose

value of y should be solved first):
Make the both Xs in the two equations equal by multiplying the labor constraint by
4:

4 x (1x + 2y = 40) 4x + 8y = 160

Step 3: Subtract the algebraic expressions.

4x + 3y = 120 -5y = -40
-
4x + 8y = 160 y =8
0x - 5y = -40
LINEAR PROGRAMMING – MANUAL SOLUTION
Step 1: Use constraint equations
4x + 3y = 120
1x + 2y = 40

Step 2: Find the value of either x or y by subtraction of algebraic expression. (Suppose

value of y should be solved first):
Make the both Xs in the two equations equal by multiplying the labor constraint by
4:
4 x (1x + 2y = 40) 4x + 8y = 160
Therefore, the
optimal production
Step 3: Subtract the algebraic expressions.
would be to produce
4x + 3y = 120 -5y = -40
24 bowls and 8 mugs
4x + 8y = 160 y=8
per day.
0x - 5y = -40

Step 4: Substitute the value of y on any of the constraint equation.

4x + 3y = 120; where y = 8
4x + 3(8) = 120
x = 24
LINEAR PROGRAMMING – MANUAL SOLUTION

Step 5: Substitute it into the objective function.

Z = $40x + $50y ; where x=24 and y=8
Z = ($40)(24) + ($50)(8)
Z = $960 + $400
Z = $1,360

The most optimal production of 24 bowls and 8 mugs would yield a

maximized profit of $1,360.
HAIRY POTTER –
COMPUTER SOLUTION
(EXCEL SOLVER)

PRESENTATION TITLE
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 STEP 1:

INSTALL
SOLVER ADD-IN
ON MS EXCEL

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HAIRY POTTER – COMPUTER
SOLUTION

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 TRY IT ON
YOUR OWN!

25 LINEAR PROGRAMMING
 G TECHS COMPANY - SOLUTION

MODEL CONSTRUCTION:

Maximize Z = $13.10x1+ $9.25x2 + $ 6.50x3

Subject to 0.45x1 + 0.3x2 + 0.2x3 ≤ 10,000
0.04x1 + 0.055x2 + 0.04x3 ≤ 1,700
x1 ≤ 12,000
x2 ≤ 20,000

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x3 ≤ 9,000
x1,x2,x3 ≥ 0

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G-TECHS COMPANY - SOLUTION

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 POPO COMPANY - SOLUTION

MODEL CONSTRUCTION:

Maximize Z = $150A + $95B + $100C

Subject to $100A + $175B + $200C ≤ $100,000
3.5A + 1A + 1.5C ≤ 1,200
A ≥ 50
B ≥ 50

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C ≥ 50
A,B,C ≥ 0

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POPO COMPANY - SOLUTION

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MINIMIZATION
PROBLEM
USING
SOLVER
 MINIMIZATION MODEL EXAMPLE
LUMAKI SA FARM FERTILIZER COMPANY

▪ 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:

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Brand Nitrogen (lb/bag) Phospate(lb/bag)

Super-gro 2 lb 4 lb
Crop-quick 4 lb 3 lb

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HAIRY POTTER – MANUAL SOLUTION

FORMAL MODEL CONSTRUCTION:

Minimize Z = $6x + $3y

Subject to: 2x + 4y ≥ 16 lb. of nitrogen
4x + 3y ≥ 24 lb. of phospate
x, y ≥ 0
Where x = super-gro; and y = crop-quick
LUMAKI SA FARM COMPANY -
SOLUTION

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THANK YOU!

ANY QUESTIONS?

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