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03 Binary Variables - Handout

The document discusses several integer programming and binary variable problems: 1) A capital budgeting problem that involves selecting investment projects to maximize total net present value, given a budget constraint. 2) A fixed charge production problem that involves selecting products to maximize weekly profit, given constraints on resources like labor hours and materials. 3) Several set covering problems that involve locating ambulances, facilities, or resources to maximize coverage of populations, given location constraints. 4) An assignment problem that involves allocating customers to salespeople to maximize total sales potential or minimize imbalance. 5) A workforce planning problem that involves training new technicians over multiple periods to minimize costs while meeting changing demand levels.

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119 views10 pages

03 Binary Variables - Handout

The document discusses several integer programming and binary variable problems: 1) A capital budgeting problem that involves selecting investment projects to maximize total net present value, given a budget constraint. 2) A fixed charge production problem that involves selecting products to maximize weekly profit, given constraints on resources like labor hours and materials. 3) Several set covering problems that involve locating ambulances, facilities, or resources to maximize coverage of populations, given location constraints. 4) An assignment problem that involves allocating customers to salespeople to maximize total sales potential or minimize imbalance. 5) A workforce planning problem that involves training new technicians over multiple periods to minimize costs while meeting changing demand levels.

Uploaded by

Ali Khan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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INTEGER

PROGRAMMING Using
Binary Variables
Week 3
BINARY Integer Programming
• Many complex problems can be modeled using 0-1 variables and other variables
that are forced to assume integer values. Usually a 0-1 variable corresponds to
an activity that is or is not undertaken – it is called a BINARY variable. (BIN)
• Often you can think of these variables as switches, either:
• Turning something on (1) or turning it off (0)
• Denoting True(1) or False (0)
• They can be used with the Boolean Operators “AND”. “OR” & “NOT”
• Examples:
• Capital Budgeting (Invest = 1, Don’t = 0)
• Fixed Charge (Produce = 1, Don’t = 0)
• Location Planning / Set-covering (Locate here = 1, Don’t = 0)
• Many problems can only be modelled via the BIN variables
Problem 3.1 – Project NPV Year1 Year2 Year3 Year4 Year5
CAPITAL Budgeting 1 20 1 3 4 1 1

2 25 3 4 2 1 2

3 30 4 4 3 2 1
• You are given a group of
4 35 6 5 3 2 3
possible investment projects for
your company’s capital. For 5 40 5 1 2 3 8
each project you are given the 6 42 4 5 2 5 5
NPV the projects would add to 7 31 2 3 1 4 6
the firm, as well as the cash
8 33 0 0 3 6 7
outflow required by each
project during each year*. 9 35 1 1 4 8 3
Determine the investments that 10 37 3 2 4 1 6
maximize the firm’s NPV. The
11 38 9 2 4 1 1
firm has 30M dollars available
during each of the next 5 years. 12 39 8 7 1 1 1

(All values in millions)

*These are long term project that have a 5 year build phase
Problem 11 – CAPITAL Budgeting
Part 2
• You can select only 1 of projects 5, 6 or 7
• If you select project 11, you must also accept project 2
• But you can select project 2 without selecting project 11
• Projects 9 & 10 must be select together or not at all

10/03/2021 Haskayne School of Business 4


Fixed-Charge Model
• In many situations, a fixed cost is incurred if an activity is
undertaken at any positive level. This cost is independent of
the level of the activity and is known as a fixed charge. Some
examples:
• Construction costs of opening a location
• Banking service charges are typically not based on
volume, but rather dependent upon whether you have an
account or not
• Production setup costs are only incurred if there is
production of that line and are the same for large or
small runs.
In all these cases, zero fixed costs are incurred if the activity is
not undertaken at all. You may be inclined to use an IF()
statement, but this makes the model nonlinear!
Product Machine Rental $
Problem 3.2 – /Week
FIXED CHARGE Shirt 200
Shorts 150
• Gandy Cloth Company is capable of
manufacturing 3 types of clothing: Pants 100
shirts, shorts and pants. The
manufacture of each type of
clothing requires that Gandy have
the appropriate type of machinery
available. The machinery needed to
manufacture each type of clothing
must be rented at the following Labour Cloth(sq. Sales Variable
rates:
(h) yd.) Price Cost
• There are 150 hours and 160 square
yards of cloth available each week. Shirts $3 $4 $12 $6
Gandy wants to find a solution that Shorts $2 $3 $8 $4
maximizes weekly profit.
Pants $6 $4 $15 $8
Set-Covering
Eaton et al. used a set covering model to
determine where EMS vehicles should be
stationed in Austin, Texas. They determined the
location of emergency medical facilities and
vehicles that maximized (within a limited budget)
the number of people receiving adequate
emergency service. The Eaton model is
estimated to have saved Austin over $10M! Try
the following ‘scaled down’ version…
PROBLEM 3.3 –
AMBULANCE
(Set COVERING)
Gotham City has been District 1 2 3 4 5 6 7 8
divided into eight Population 40 30 35 20 15 50 45 60
districts. The time (in
minutes) that it takes an
ambulance to travel
from one district to Suppose Gotham City has n ambulance
another is shown in locations. Determine the locations of
Week3 Template.xls. ambulances that maximize the number of
The population of each
district (in thousands) is people who live within two minutes of an
as follows: ambulance. Do this separately for n=1,
n=2… n=4.
• A company would like to allocate ten possible
customers to five of its current salespeople in
the most equitable way possible. A customer
can only be assigned to a single salesperson.
To do this, ideally, the customers assigned to
each of the five salespeople would have
Problem 3.4 – exactly the same sales potential. If such a
solution is not possible, the company would
Assignment like to minimize the total amount be which
the actual sales potentials for the customers
MODELS assigned to each salesperson deviate from
the ideal allocation.
• The sales potentials are given in the table
below:
Customer 1 2 3 4 5 6 7 8 9 10
Potential ($000) $113 $106 $84 $52 $155 $103 $87 $91 $128 $131
• CSL is a chain of computer stores. During the
next five months, the following number of
skilled repair hours will be needed: 6000 in
January; 7000 in February; 8000 in March; 9500
in April; 11000 in May. At the beginning of
January, CSL employs 50 skilled technicians.
Problem 3.5 – Each skilled technician can work up to 160 hours
per month. To meet future demands, new
Dynamic technicians must be trained. It takes one month
to train a new technician. During the month of
Workforce training, a trainee must be supervised for 50
hours by an experienced technician.
MODELS Experienced technicians are paid $2000 per
month and trainees are paid $1000 per month
during their training. Historical data indicate
that 5% of CSL’s skilled technicians quit each
month. CSL wants to use LP to determine a
training schedule that minimizes the cost of
meeting the demands for the next five months.

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