QUANTITATIVE TECHNIQUES

Module 1
Linear Programming Problem - Formulation
INTRODUCTION
• Linear programming is a mathematical technique that enables to
allocate limited resources (like raw material; labor, capital, etc.) on
several activities so as to optimize (maximize or minimize) the given
objective function.
• These limited resources have to be allocated to various activities of
production, marketing, investment so as to maximize the profit or
production or to minimize the cost or loss.
Introduction
• Linear - linear relationship among the variables in the model. Given a
change in one variable will always cause a resulting proportional
change in another variable.
• Programming - formulating / modeling and solving the problem
mathematically that involves the economic allocation of limited
resources by choosing a particular course of action or strategy among
various alternative strategies.
Structure of LPP
• Decision variables: Factors or components on which decision is to be
taken are called decision variables.
• Objective function: A function that gives relationship between a
measures of performance usually profit, cost, production etc., and the
decision variables.

• Constraints:
• As the resources are limited, there are certain limitations in utilizing them to
maximize or minimize the objective function.
• These limitations are to be expressed as constraints in the form of inequalities.
• The solution of an LPP should satisfy these constraints
Assumptions
• Certainty:
• The following parameters must be known and constant.
• Availability of resources, Contribution towards profit and the number of units
of resources to be consumed for a decision variables product to be produced.
• Divisibility (Continuity):
• The decision variables are assured to be continuous – can assure any possible
values.
• It is assumed that 2.4 units of a product can be produced. The continuity
ensure divisibility. But it is not desirable to have / produce 2.5 chairs or tables
– here number of units to be produced is a discrete variable and only in this
case “Integer programming” can be used.
Assumptions
• Additivity:
• The value of the objective function i.e., total amount of resources used must be
equal to sum of their respective individual contribution by decision variables.
For example, the total number of units sold may be the totals of two different
products, say P1 and P2, sold.
• Linearity:
• The amount of each resource used and its contribution to the profit (objective
function) must be proportional to the value of each decision variable.
• For example, if one unit of a product require 10 units of one resource, say labor,
then 3 units require 3 * 10 = 30 units of resources.
• The LP model is deterministic.
Problem 1
• A firm produces two types of products P and Q through two processes,
viz., Foundry and Machine shop. The number of man-hours required
for each unit of P and Q in each of the processes and the number of
man hours that can be availed at best in the two processes are given as
follows. Net profit expected from each unit of the product is: P – Rs. 50
and Q – Rs.40. Formulate the problem for solution to arrive at the
optimal number of the two products P and Q to be produced.
Foundry Process (In man-hours) Machine Process (In man-hours)
Product P 10 5
Product Q 6 4
Available at best 1000 600
Solution: Problem 1
• Step 1: Notation
• Let Z = Total of max net profit
• X1= No of units of P products to be produced
• X2 = No of units of Q products to be produced

• Step 2: Decision Table

PRODUCT DECISION FOUNDRY MACHINE PROFIT/UNIT
VARIABLE PROCESS PROCESS
P X1 10 5 50
Q X2 6 4 40
Maximum 1000 UNITS 600 UNITS
Available Hours
Solution: Problem 1
Step 3: Construction of different linear functions

i. Objective Function:
Max Profit Z = 50X1 + 40 X2
ii. Constraint Function:
a. Foundry Constraint
10X1 + 6X2 ≤ 1000
b. Machine Shop Constraint
5X1 + 4X2 ≤ 600
Solution: Problem 1
iii. NON - NEGATIVE FUNCTION Function:
X1, X2 ≥ 0

Step 4: LPP Formulation

Objective function :
Max Z = 50X1 + 40 X2
Subject to the constraints

10X1 + 6X2 ≤ 1000

5X1 + 4X2 ≤ 600
Non negative C
Problem 2
• A company sells two different products Marker Pen and Pen making a
profit of Rs.40 and Rs.30 per unit on them respectively. They are
produced in a common production process and are sold in two
different markets. The production process has a capacity of 30,00 man
hours. It takes 3 hours to produce one unit of Marker Pen and one
hour to produce one unit of Pen. The market has been surveyed and
company officials feel that maximum number of units of Marker Pen
that can be sold is 8000 units and that of Pen is 12000 units. Subject to
these limitations products can be sold in any combination. Formulate a
LPP model to maximize profit.
Solution: Problem 2
• Step 1: Notation
• Let Z = Total of max net profit
• X1= No of units of Marker Pens to be produced
• X2 = No of units of Pens to be produced

• Step 2: Decision Table

PRODUCT DECISION TIME TAKEN UNITS THAT CAN PROFIT

VARIABLE BE SOLD
Marker Pens X1 3 8000 40
Pens X2 1 12000 30
Maximum Available 3000
Solution: Problem 2
Step 3: Construction of different linear functions

i. Objective Function:
Max Profit Z = 40X1 + 30 X2
ii. Constraint Function:
a. Foundry Constraint
3X1 + X2 ≤ 3000
b. Marker Pen Sales Constraint
X1 ≤ 8000
c. Pen Sales Constraint
X2 ≤ 12000
Solution: Problem 2
iii. NON - NEGATIVE FUNCTION Function:
X1, X2 ≥ 0

Step 4: LPP Formulation

Max Z = 40X1 + 30 X2
X1 ≤ 8000
X2 ≤ 12000
X1, X2 ≥ 0
Problem 3
Consider a small plant which makes two types of automobile parts - Battery
Box and Battery cable. It buys castings that are machined, bored and polished.
The capacity of machining is 25 per hour for Battery Box, 24 per hour for
Battery cable; capacity of boring is 28 per hour for Battery Box, 35 per hour
for Battery cable; capacity of polishing is 35 per hour for Battery Box and 25
per hour for Battery cable.
Castings for a Battery Box costs ₹2 and sell for ₹5 and those for Battery cable
costs ₹3 and sells for ₹6 each. Three machines have running cost of ₹20, ₹14
and ₹17.5 per hour respectively.
Assuming that any combination of Battery Box and Battery cable can be sold,
formulate a LP model to determine the product mix which maximizes the
profit.
Solution: Problem 3
• Step 1: Notation
• Let Z = Total of max net profit
• X1= No of units of Battery Box to be produced
• X2 = No of units of Battery Cable to be produced
 Solution: Problem 3
• Step 2: Decision Table
CAPACITY EXPENDITURE SALES
  DECISION
PRODUCTS VARIABLES MACHINING BORING POLISHING CASTINGS COST SELLING
(PER HOUR) (PER HOUR) (PER HOUR) (₹) PRICE (₹)

Battery Box X1 25 28 35 Rs.2 Rs.5

Battery
X2 24 35 25 Rs.3 Rs.6
Cable

Running
₹ 20 ₹ 14 ₹ 17.5    
Cost
 Solution: Problem 3
 
Step 3: Construction of different linear functions

i. Objective Function: Profit = Revenue – Cost

Profit = (Revenue from A – Cost) + (Revenue from B – Cost)
Max Profit Z = {5X1 -X1} +
{6X -X2}
2

Max Profit Z = X1+ X2

 Solution: Problem 3
 
ii. Constraint Function(assuming that the production takes place for
an hour)
a. Machining Constraint
X1+ X2≤ 1
b. Boring Constraint
X1+ X2≤ 1
c. Polishing Constraint
X1+ X2≤ 1
Solution: Problem 3
iii. NON - NEGATIVE FUNCTION Function:
X1, X2 ≥ 0

Step 4: LPP Formulation

 
Max Profit Z = X1+ X2
X1+ X2≤ 1
X1+ X2 ≤ 1
X1+ X2 ≤ 1
X1, X2 ≥ 0
Problem 4
An advertisement agency wishes that the advertisements should reach two
types of audiences - customers with annual income greater than ₹5,00,000
(target group A) and customers with annual income lesser than ₹5,00,000
(target group B). The total budget is ₹20,00,000. One program of TV
advertisement costs 5,00,000 and one program of radio advertisement costs
₹2,00,000. For contract reasons at least three programs have to be on TV and
the number of radio programs have to be limited to five. Survey indicate that a
single TV program reaches 45,00,000 in target A audiences, and 5,00,000 target
B audience. Also one radio program reaches 2,00,000 target a audiences and
3,50,000 target B audiences. Determine the media mix to maximize the total
reach.
Solution: Problem 4
• Step 1: Notation
• Let Z = Total of maximum reach
• X1= Reach by TV Advertisement
• X2 = Reach by Radio Advertisement
Solution: Problem 4
• Step 2: Decision Table

 
Type of audiences
(Reach)
Constraint
(Number of Cost
A B programmes)
(Annual (Annual
income<Rs.5Lakhs) income>Rs.5Lakhs)

TV Ad (X1) 45,00,000 5,00,000 ≥3 Rs.5,00,000/prog

Radio Ad (X2) 2,00,000 3,50,000 ≤5 Rs.2,00,000/prog
Total Budget Rs.20,00,000  
Solution: Problem 4
Step 3: Construction of different linear functions

i. Objective Function: The objective function is to

maximize the reach, hence
Maximize Z = (45,00,000 + 5,00,000)X1 + (2,00,000 +
3,50,000)X2
Max Z = 50,00,000 X1+ 5,50,000X2
Solution: Problem 4
ii. Constraint Function:
a. TV Advertisement Constraint
X1 ≥ 3
b. Radio Advertisement Constraint
X2 ≤ 5
c. Cost Constraint
5,00,000 X1+ 2,00,000X2 ≤ 20,00,000

iii. NON - NEGATIVE FUNCTION Function:

X1, X2 ≥ 0
Solution: Problem 4
Step 4: LPP Formulation
Max Z = 50,00,000 X1+ 5,50,000X2
X1 ≥ 3
X2 ≤ 5
5,00,000 X1+ 2,00,000X2 ≤ 20,00,000
X1, X2 ≥ 0
Problem 5
An advertising company wishes to plan an advertising campaign for three
different media: television, radio and magazine. The purpose of the
advertising is to reach as many potential customers as possible. The
following are the results of the market study:
Problem 5
Television

Prime Prime Radio(₹ Magazine

Day(Rs.) Time(₹) ) (Rs.)

Cost of an advertising unit 40,000 75,000 30,000 15,000

No. of Potential customers

4,00,000 9,00,000 5,00,000 2,00,000
reached per unit

No. of women customers

3,00,000 4,00,000 2,00,000 1,00,000
reached per unit
Problem 5
The company does not want to spend more than Rs. 8,00,000 on
advertising. It is further required that:
• At least two million exposures take place among women,
• The cost of advertising on television be limited toRs.5,00,000
• At least three advertising units be bought on prime day and two units
during prime time
• The number of advertising units on the radio and the magazine should
each be between five and ten

Formulate this problem as an LP model to maximize potential customer

reach.
Problem 6
An advertising agency is preparing an advertising campaign for a group of
agencies. These agencies have decided that different characteristics of
their target customers should be given different importance ( weightage) .
The following table gives the characteristics with their corresponding
importance (weightage).
Problem 6

Characteristics Weightage ( %)

Age 25-40 years 20

Annual Income Above ₹60000 30

Female Married 50
Problem 6
The agency has carefully analyzed three media and has compiled the following data :

Data Item Media

Women’s Magazine (%) Radio ( %) Television ( %)
Reader characteristics
i) Age: 25-40 years 80 70 60
ii) Annual income: Above ₹60000 60 50 45
iii) Females / Married 40 35 25
Cost per advertisement (₹) 9500 25000 100000
Minimum number of 10 5 5
advertisement allowed

Maximum number of 20 10 10
advertisement allowed

Audience size ( 1000s) 750 1000 1500

Problem 6
The budget for launching the advertising campaign is ₹500000. Formulate
this problem as an LP model for the agency to maximize the total expected
effective exposure
Problem 7
An engineering company planned to diversify its operations during the
year 2019-20. The company allocated capital expenditure budget equal to
₹5.15 core in the year 2019 and ₹6.50 core in the year 2020. The
company had to take five investment projects under consideration. The
estimated net returns at that present value and the expected cash
expenditure on each project in those two years are as follows.
Assume that the return from a particular project would be in direct
proportion to the investment in it, so that, for example, if in a project, say
A, 20% (of 120 in 2019 and of 320 in 2020) was invested, then the
resulting net return in it would be 20% (of 240). This assumption also
implies that individual of the project should be ignored. Formulate this
capital budgeting problem as an LP model to maximize the net return.
Problem 7

Cash Expenditure ( in ‘000 ₹)

Estimated Net
Project Returns ( in
Year 2019 Year 2020
‘000 ₹)

A 240 120 320

B 390 550 594
C 80 118 202
D 150 250 340
E 182 324 474
Problem 8
XYZ is an investment company. To aid in its investment decision, the
company has developed the investment alternatives for a 10-year period,
as given in the following table. The return on investment is expressed as
an annual rate on the invested capital. The risk coefficient and growth
potential are subjective estimates made by the portfolio manager of the
company. The terms of investment is the average length of time period
required to realize the return on investment as indicated.
Problem 8
Investment Length of Annual Rate of Risk Growth Potential
Alternative Investment Return ( Year) Coefficient Return ( %)

A 4 3 1 0
B 7 12 5 18
C 8 9 6 10
D 6 20 8 32
E 10 15 6 20
F 3 6 3 7
Cash 0 0 0 0
Problem 8
The objective of the company is to maximize the return on its investments.
The guidelines for selecting the portfolio are :
• The average length of the investment for the portfolio should not exceed 7 years.
• The average risk for the portfolio should not exceed 5.
• The average growth potential for the portfolio should be at least 10%
• At least 10% of all available funds must be retained in the form of cash, at all times.

Formulate this problem as an LP model to Maximize total return.

Problem 9
Evening shift resident doctors in a government hospital work five
consecutive days and have two consecutive days off. Their five days of
work can start on any day of the week and their schedule rotates
indefinitely. The hospital requires the following minimum number of
doctors to work on the given days :

Sunday Monday Tuesday Wednesday Thursday Friday Saturday

35 35 60 50 60 50 45

No more than 40 doctors can start their five working days on the same
day. Formulate this problem as an LP model to minimize the number of
doctors employed by the hospital.
Problem 10
The security and traffic force, on the eve of Republic Day, must satisfy the
staffing requirements as shown in the table. Officers work 8-hour shifts
staring at each of the 4-hour intervals as shown below. How many officers
should report for duty at the beginning of each time period in order to
minimize the total number of officers needed to satisfy the requirements?
Formulate this problem as an LP model so as to determine the minimum
number of officers required on duty at beginning of each time period.
Problem 10

Time (Hrs) Number of Officers Required

0:01 - 4:00 5

4:01 - 8:00 7

8:01 – 12:00 15

12:01 – 16:00 7

16:01-20:00 12

20:01 – 24:00 9
Problem 11
MSA Computer Corporation manufactures two models of minicomputers,
the Alpha 4 and the Beta 5. The firm employs 5 technicians, working 160
hours each per month on the assembly line. Management insists that full
employment (i.e., all 160 hours of time) be maintained for each worker
during the next month’s operations. It requires 20 labor hours to
assemble each Alpha 4 computer and 25 hours to assemble each Beta 5
model. MSA wants to see at least 10 Alpha 4 models and at least 15 Beta 5
models produced during the production period. Alpha 4 generates
₹90000 profit per unit and Beta 5, ₹140000 profit per unit. Formulate the
problem to determine the most profitable number of each model of
minicomputers to produce during the coming month.
Q&A
Thank You