Weeks 2 (chapter 7)

MGMT6036

Developing
Quantitative Business Analysis

LinearCourse Material
Programming Models :
Academicand
Graphical Resources Center
Computer
Methods
Quantitative Analysis for Management, Twelfth Edition, Global Edition,
by Render, Stair, Hanna and Hale
 Text book used

7
Linear
Programming
Models:
Graphical and
Computer
Methods
To accompany
Quantitative Analysis for Management, Twelfth Edition,
Global Edition,
by Render, Stair, Hanna and Hale Copyright ©2015 Pearson Education, Inc.
Power Point slides created by Jeff Heyl
 LEARNING OUTCOMES
On successful completion of this course, student will be able to:
LO 1: Explain the concept of quantitative business
analysis
LO 2: Apply mathematic concept properly and
mathematical concept in solving a business
problem

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 CHAPTER OUTLINE
7.1 Introduction
7.2 Requirements of a Linear Programming Problem
7.3 Formulating LP Problems
7.4 Graphical Solution to an LP Problem
7.5 Solving Minimization Problems

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 Introduction
• Many management decisions involve making
the most effective use of limited resources
• Linear programming (LP)
– Widely used mathematical modeling technique
– Planning and decision making relative to resource
allocation
• Broader field of mathematical programming
– Here programming refers to modeling and solving
a problem mathematically

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 Requirements of a
Linear Programming Problem
• Four properties in common
– Seek to maximize or minimize some quantity (the
objective function)
– Restrictions or constraints are present
– Alternative courses of action are available
– Linear equations or inequalities

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 LP Properties and Assumptions
TABLE 7.1

PROPERTIES OF LINEAR PROGRAMS

1. One objective function
2. One or more constraints
3. Alternative courses of action
4. Objective function and constraints are linear –
proportionality and divisibility
5. Certainty
6. Divisibility
7. Nonnegative variables

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 Formulating LP Problems
• Developing a mathematical model to
represent the managerial problem
• Steps in formulating a LP problem
1. Completely understand the managerial problem
being faced
2. Identify the objective and the constraints
3. Define the decision variables
4. Use the decision variables to write mathematical
expressions for the objective function and the
constraints

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 Formulating LP Problems
• Common LP application – product mix
problem
• Two or more products are produced using
limited resources
• Maximize profit based on the profit
contribution per unit of each product
• Determine how many units of each product to
produce

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 Flair Furniture Company
• Flair Furniture produces inexpensive tables
and chairs
• Processes are similar, both require carpentry
work and painting and varnishing
– Each table takes 4 hours of carpentry and 2 hours
of painting and varnishing
– Each chair requires 3 of carpentry and 1 hour of
painting and varnishing
– There are 240 hours of carpentry time available
and 100 hours of painting and varnishing
– Each table yields a profit of $70 and each chair a
profit of $50

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 Flair Furniture Company
• The company wants to determine the best
combination of tables and chairs to produce to
reach the maximum profit
TABLE 7.2

HOURS REQUIRED TO
PRODUCE 1 UNIT
(T) (C) AVAILABLE HOURS
DEPARTMENT TABLES CHAIRS THIS WEEK
Carpentry 4 3 240

Painting and varnishing 2 1 100

Profit per unit $70 $50

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 Flair Furniture Company
• The objective is
Maximize profit
• The constraints are
– The hours of carpentry time used cannot exceed
240 hours per week
– The hours of painting and varnishing time used
cannot exceed 100 hours per week
• The decision variables are
T = number of tables to be produced per week
C = number of chairs to be produced per week

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 Flair Furniture Company
• Create objective function in terms of T and C
Maximize profit = $70T + $50C
• Develop mathematical relationships for the
two constraints
– For carpentry, total time used is
(4 hours per table)(Number of tables produced)
+ (3 hours per chair)(Number of chairs produced)
– First constraint is
Carpentry time used ≤ Carpentry time available
4T + 3C ≤ 240 (hours of carpentry time)

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 Flair Furniture Company
• Similarly
Painting and varnishing time used
≤ Painting and varnishing time available
2 T + 1C ≤ 100 (hours of painting and varnishing time)

This means that each table produced requires

two hours of painting and varnishing time

– Both of these constraints restrict production

capacity and affect total profit

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 Flair Furniture Company
• The values for T and C must be nonnegative
T ≥ 0 (number of tables produced is greater than or
equal to 0)
C ≥ 0 (number of chairs produced is greater than
or equal to 0)
The complete problem stated mathematically
Maximize profit = $70T + $50C
subject to
4T + 3C ≤ 240 (carpentry constraint)
2T + 1C ≤ 100 (painting and varnishing constraint)
T, C ≥ 0 (nonnegativity constraint)
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 Graphical Solution to an
LP Problem
• Easiest way to solve a small LP problems is
graphically
• Only works when there are just two decision
variables
– Not possible to plot a solution for more than two
variables
• Provides valuable insight into how other
approaches work
• Nonnegativity constraints mean that we are
always working in the first (or northeast)
quadrant of a graph
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 Graphical Representation
of Constraints
FIGURE 7.1 – Quadrant Containing All Positive Values

100 –
– This Axis Represents the Constraint T ≥ 0
80 –
Number of Chairs

–
60 –
–
40 – This Axis Represents the
– Constraint C ≥ 0
20 –
–
| | | | | | | | | | | |

0 20 40 60 80 100 T
Number of Tables
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 Graphical Representation
of Constraints
• The first step is to identify a set or region of
feasible solutions
• Plot each constraint equation on a graph
• Graph the equality portion of the constraint
equations
4T + 3C = 240
• Solve for the axis intercepts and draw the line

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 Graphical Representation
of Constraints
• When Flair produces no tables, the carpentry
constraint is:
4(0) + 3C = 240
3C = 240
C = 80
• Similarly for no chairs:
4T + 3(0) = 240
4T = 240
T = 60
– This line is shown on the following graph

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 Graphical Representation
of Constraints
FIGURE 7.2 – Graph of Carpentry Constraint Equation

100 –
–
80 – (T = 0, C = 80)
Number of Chairs

–
60 –
–
40 –
– (T = 60, C = 0)
20 –
–
| | | | | | | | | | | |

0 20 40 60 80 100 T
Number of Tables
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 Graphical Representation
of Constraints
FIGURE 7.3 – Region that Satisfies the Carpentry Constraint

C • Any point on or below the

constraint plot will not
100 – violate the restriction
–
• Any point above the plot will
80 –
Number of Chairs

violate the restriction

–
60 –
–
(30, 40) (70, 40)
40 –
–
20 –
– (30, 20)
| | | | | | | | | | | |

0 20 40 60 80 100 T
Number of Tables
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 Graphical Representation
of Constraints
• The point (30, 40) lies on the line and exactly
satisfies the constraint
4(30) + 3(40) = 240
• The point (30, 20) lies below the line and
satisfies the constraint
4(30) + 3(20) = 180
• The point (70, 40) lies above the line and
does not satisfy the constraint
4(70) + 3(40) = 400

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 Graphical Representation
of Constraints
FIGURE 7.4 – Region that Satisfies the Painting and Varnishing Constraint

100 – (T = 0, C = 100)
–
80 –
Number of Chairs

–
60 –
–
40 –
– (T = 50, C = 0)
20 –
–
| | | | | | | | | | | |

0 20 40 60 80 100 T
Number of Tables
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 Graphical Representation
of Constraints
• To produce tables and chairs, both
departments must be used
• Find a solution that satisfies both constraints
simultaneously
• A new graph shows both constraint plots
• The feasible region is where all constraints
are satisfied
– Any point inside this region is a feasible solution
– Any point outside the region is an infeasible
solution

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 Graphical Representation
of Constraints
FIGURE 7.5 – Feasible Solution Region

100 –
–
80 –
Number of Chairs

Painting/Varnishing Constraint
–
60 –
–
40 –
–
Carpentry Constraint
20 – Feasible
Region
–
| | | | | | | | | | | |

0 20 40 60 80 100 T
Number of Tables
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 Graphical Representation
of Constraints
• For the point (30, 20)
Carpentry 4T + 3C ≤ 240 hours available
constraint (4)(30) + (3)(20) = 180 hours used 
Painting 2T + 1C ≤ 100 hours available
constraint (2)(30) + (1)(20) = 80 hours used


• For the point (70, 40)

Carpentry 4T + 3C ≤ 240 hours available
constraint (4)(70) + (3)(40) = 400 hours used 
Painting 2T + 1C ≤ 100 hours available
constraint (2)(70) + (1)(40) = 180 hours used 

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 Graphical Representation
of Constraints
• For the point (50, 5)
Carpentry 4T + 3C ≤ 240 hours available
constraint (4)(50) + (3)(5) = 215 hours used 
Painting 2T + 1C ≤ 100 hours available
constraint (2)(50) + (1)(5) = 105 hours used 

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 Isoprofit Line Solution Method
• Find the optimal solution from the many
possible solutions
• Speediest method is to use the isoprofit line
• Starting with a small possible profit value,
graph the objective function
• Move the objective function line in the
direction of increasing profit while maintaining
the slope
• The last point it touches in the feasible region
is the optimal solution

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 Isoprofit Line Solution Method
• Choose a profit of $2,100
• The objective function is
$2,100 = 70T + 50C
• Solving for the axis intercepts, draw the graph
• Obviously not the best possible solution
• Further graphs can be created using larger
profits
– The further we move from the origin, the larger the
profit
• The highest profit ($4,100) will be generated
when the isoprofit line passes through the
point (30, 40)
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 Isoprofit Line Solution Method
FIGURE 7.6 – Profit line of $2,100

100 –
–
80 –
Number of Chairs

–
60 –
– $2,100 = $70T + $50C
40 –
–
(30, 0)
20 –
–
| | | | | | | | | | | |

0 20 40 60 80 100 T
Number of Tables
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 Isoprofit Line Solution Method
FIGURE 7.7 – Four Isoprofit Lines

100 –
– $3,500 = $70T + $50C
80 –
Number of Chairs

– $2,800 = $70T + $50C

60 –
– $2,100 = $70T + $50C
40 –
– $4,200 = $70T + $50C
20 –
–
| | | | | | | | | | | |

0 20 40 60 80 100 T
Number of Tables
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 Isoprofit Line Solution Method
FIGURE 7.8 – Optimal Solution

100 –
–
80 –
Number of Chairs

Maximum Profit Line

–
60 – Optimal Solution Point
– (T = 30, C = 40)
40 –
– $4,100 = $70T + $50C
20 –
–
| | | | | | | | | | | |

0 20 40 60 80 100 T
Number of Tables
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Corner Point Solution Method
• The corner point method for solving LP
problems
• Look at the profit at every corner point of the
feasible region
• Mathematical theory is that an optimal
solution must lie at one of the corner points
or extreme points

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Corner Point Solution Method
FIGURE 7.9 – Four Corner Points of the Feasible Region

100 –
–
(0, 80)
80 –
Number of Chairs

–
60 –
–
(?)
40 –
–
20 –
– (50, 0)
| | | | | | | | | | | |
(0, 0) 0 20 40 60 80 100 T
Number of Tables

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Corner Point Solution Method
• Solve for the intersection of the two constraint lines
• Using the elimination method to solve simultaneous
equations method, select a variable to be eliminated
• Eliminate T by multiplying the second equation by –2
and add it to the first equation

– 2(2T + 1C = 100) = – 4T – 2C = –200

4T + 3C = 240 (carpentry)
– 4T – 2C = –200 (painting)
C = 40

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Corner Point Solution Method
• Substitute C = 40 into either equation to solve for T

4T + 3(40) = 240 Thus the

4T + 120 = 240 corner point
4T = 120 is (30, 40)
T = 30
TABLE 7.3 – Feasible Corner Points and Profits

NUMBER OF TABLES (T) NUMBER OF CHAIRS (C) PROFIT = $70T + $50C

0 0 $0
50 0 $3,500
0 80 $4,000
30 40 $4,100

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Highest profit – Optimal Solution 7 – 36
 Slack and Surplus
• Slack is the amount of a resource that is not
used
– For a less-than-or-equal constraint
Slack = (Amount of resource available)
– (Amount of resource used)
– Flair decides to produce 20 tables and 25 chairs

4(20) + 3(25) = 155 (carpentry time used)

240 = (carpentry time available)
240 – 155 = 85 (Slack time in carpentry)

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 Slack and Surplus
At the optimal solution,
slack is 0 as all 240
• Slack is the amount of a resource that is not
hours are used
used
– For a less-than-or-equal constraint
Slack = (Amount of resource available)
– (Amount of resource used)
– Flair decides to produce 20 tables and 25 chairs

4(20) + 3(25) = 155 (carpentry time used)

240 = (carpentry time available)
240 – 155 = 85 (Slack time in carpentry)

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 Slack and Surplus
• Surplus is used with a greater-than-or-equal-
to constraint to indicate the amount by which
the right-hand side of the constraint is
exceeded
Surplus = (Actual amount) – (Minimum amount)
– New constraint
T + C ≥ 42
– If T = 20 and C = 25, then
20 + 25 = 45
Surplus = 45 – 42 = 3
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 Summaries of
Graphical Solution Methods
TABLE 7.4
ISOPROFIT METHOD
1. Graph all constraints and find the feasible region.
2. Select a specific profit (or cost) line and graph it to find the slope.
3. Move the objective function line in the direction of increasing profit (or decreasing
cost) while maintaining the slope. The last point it touches in the feasible region is
the optimal solution.
4. Find the values of the decision variables at this last point and compute the profit
(or cost).
CORNER POINT METHOD
1. Graph all constraints and find the feasible region.
2. Find the corner points of the feasible reason.
3. Compute the profit (or cost) at each of the feasible corner points.
4. Select the corner point with the best value of the objective function found in Step
3. This is the optimal solution.

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 Solving Flair Furniture’s
LP Problem
• Most organizations have access to software
to solve big LP problems
• There are differences between software
implementations, the approach is basically the
same
• With experience with computerized LP
algorithms, it is easy to adjust to minor
changes

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 Solving Minimization Problems
• Many LP problems involve minimizing an
objective such as cost
• Minimization problems can be solved
graphically
– Set up the feasible solution region
– Use either the corner point method or an isocost
line approach
– Find the values of the decision variables (e.g., X1
and X2) that yield the minimum cost

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 Holiday Meal Turkey Ranch
• The Holiday Meal Turkey Ranch is considering buying
two different brands of turkey feed and blending them
to provide a good, low-cost diet for its turkeys
TABLE 7.5 – Holiday Meal Turkey Ranch data

COMPOSITION OF EACH POUND

OF FEED (OZ.) MINIMUM MONTHLY
REQUIREMENT PER
INGREDIENT BRAND 1 FEED BRAND 2 FEED TURKEY (OZ.)
A 5 10 90
B 4 3 48
C 0.5 0 1.5
Cost per pound 2 cents 3 cents

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 Holiday Meal Turkey Ranch
Let
X1 = number of pounds of brand 1 feed purchased
X2 = number of pounds of brand 2 feed purchased

Minimize cost (in cents) = 2X1 + 3X2

subject to:
5X1 + 10X2 ≥ 90 ounces (ingredient A constraint)
4X1 + 3X2 ≥ 48 ounces (ingredient B constraint)
0.5X1 ≥ 1.5 ounces (ingredient C constraint)
X1 ≥ 0 (nonnegativity constraint)
X2 ≥ 0 (nonnegativity constraint)

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 Holiday Meal Turkey Ranch
FIGURE 7.10 – Feasible Region

X2
–

20 – Ingredient C Constraint
Pounds of Brand 2

15 – Feasible Region

a
10 –
Ingredient B Constraint
5–
b Ingredient A Constraint

c
0 |– | | | | |
5 10 15 20 25 X1
Pounds of Brand 1
Copyright ©2015 Pearson Education, Inc. 7 – 45
 Holiday Meal Turkey Ranch
• Solve for the values of the three corner points
– Point a is the intersection of ingredient constraints
C and B
4X1 + 3X2 = 48
X1 = 3
– Substituting 3 in the first equation, we find X2 = 12
– Solving for point b we find X1 = 8.4 and X2 = 4.8
– Solving for point c we find X1 = 18 and X2 = 0

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 Holiday Meal Turkey Ranch
• Substituting these values back into the
objective function we find
Cost = 2X1 + 3X2
Cost at point a = 2(3) + 3(12) = 42
Cost at point b = 2(8.4) + 3(4.8) = 31.2
Cost at point c = 2(18) + 3(0) = 36

– The lowest cost solution is to purchase 8.4 pounds

of brand 1 feed and 4.8 pounds of brand 2 feed for
a total cost of 31.2 cents per turkey

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 Holiday Meal Turkey Ranch
• Solving using an isocost line
• Move the isocost line toward the lower left
• The last point touched in the feasible region
will be the optimal solution

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 Holiday Meal Turkey Ranch
FIGURE 7.11 – Graphical Solution Using the Isocost Approach

X2
–
Feasible Region

20 –
Pounds of Brand 2

15 –

10 –

5–

(X1 = 8.4, X2 = 4.8)

0 |– | | | | |
5 10 15 20 25 X1
Pounds of Brand 1
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