Linear Programming

Program: FT MBA Core

Trim: II
Instructor: Prof. Arti Deo
Linear Programming

 How to allocate limited resources to get

optimum returns.
Components of a Linear Programming
Problem

 The activities (decision variables) and

their relationships
 The objective function
 The constraints
 The non-negativity restriction
Basic Assumptions of Linear
Programming
 Proportionality: There exists proportionality in the
objective function and the constraints. (Economies of scale
and Learning curve absent)
 Additivity: The total of all activities is given by the sum
total of each activity conducted separately. (Synergy
absent).
 Continuity: The decision variables are continuous in nature.
 Certainty: The various parameters (objective function
coefficients, constraint coefficients and righty hand side
values) are known with certainty.
 Finite Choices: Limited number of choices are available to
the decision maker and the decision variables do not
assume negative values.
Steps of LP Model Formulation

 Step 1: Understand the problem

thoroughly

 Step 2: Define the Decision Variables

 Step 2: Formulate the Objective Function

 Step 3: Formulate the Constraints

A firm is engaged in producing two products, A
and B. Each unit of product A requires 2 kg of
raw material and 4 labour hours for processing,
whereas each unit of product B requires 2 kg of
raw material and 3 hours of labour, of the same
type. Every week the firm has an availability of
60 kg of raw material and 96 labour hours. One
unit of product A sold yields Rs.40 and one unit
of product B sold gives Rs.33 as profit.

Formulate and solve this problem as a linear

programing problem to determine as to how
many units of each of the products should be
produced per week so that the firm can earn
the maximum profit. Assume that there is no
marketing constraint so that all that is
produced is sold.
LPP Formulation
Decision Variables: x = number of units of
product A
y=
number of units of product B

Objective Function: Maximixe Z = 40x + 33y

Subject to the Constraints:

Raw Material Constraint 2x

+ 2y ≤ 60
Labour Hours Constraint 4x
+ 3y ≤ 96
 x y Z
0 0 0
0 30 990
24 0 960
6 24 1032
 x y Z
0 0 0
0 30 990
24 0 960
6 24 1032
The ABC Company has been a producer of picture
tubes for television sets and certain printed circuits
for radios. The company has just expanded into full
scale production and marketing of AM and AM-FM
radios. It has built a new plant that can operate 48
hours per week. Production of an AM radio in the
new plant will require 2 hours and production of an
AM-FM radio will require 3 hours. Each AM radio will
contribute Rs 40 to profits while an AM-FM radio
will contribute Rs 80 to profits. The marketing
department, after extensive research has
determined that a maximum of 15 AM radios and 10
AM-FM radios can be sold each week.

Formulate a linear programming model to

determine the optimum production mix of AM and
FM radios that will maximize profits.
LPP Formulation
Decision Variables: x = number of AM
radios
y=
number of AM-FM radios

Objective Function: Maximixe Z = 40x +

80y

Subject to the Constraints:

Production Constraint 2x
+ 3y ≤ 48
Marketing Constraint 1 x
 x y Z
0 0 0
15 0 600
0 10 800
16 6 1080
9 10 1160
 x y Z
0 0 0
15 0 600
0 10 800
16 6 1080
9 10 1160
Vitamins V and W are found in two different
foods F1 and F2. One unit of food F1 contains
2 units of vitamin V and 5 units of vitamin W.
One unit of food F2 contains 4 units of
vitamin V and 2 units of vitamin W. One unit
of food F1 and F2 cost Rs. 30 and 25
respectively. The minimum daily
requirements (for a person) of vitamin V and
W is 40 and 50 units respectively. Assuming
that anything in excess of daily minimum
requirement of vitamin V and W is not
harmful, find out the optimal mixture of food
F1 and F2 at the minimum cost which meets
the daily minimum requirement of vitamins V
and W.
LPP Formulation
Decision Variables: x = number of units of
F1
y=
number of units of F2

Objective Function: Minimize Z = 30x + 25y

Subject to the Constraints:

Vitamin V requirement 2x
+ 4y ≥ 40
Vitamin W rerquirement 5x
+ 2y ≥ 50
x y Z
0 25 625
20 0 600
7.5 6.25 381.25
 Use graphical method to solve the
following LP problem
 Maximise Z = 3x1 + 3x2
 subject to the constraints
 x1 - x2 ≤ 1
 x1 + x2 ≥ 3
 and x1, x2 ≥ 0
Unbounded Solution
 Use graphical method to solve the
following LP problem:
 Maximise Z = 6x1 - 4x2
 subject to the constraints
 2x1 + 4x2 ≤ 4
 4x1 + 8x2 ≥ 16
 and x1, x2 ≥ 0
Infeasible Solution
 Solve graphically the following LPP:
 Maximise Z = 8x1 + 16x2
 Subject to
 x1 + x2 ≤ 200
 x2 ≤ 125
 3x1 + 6x2 ≤ 900
 x1, x2 ≥ 0
 x y Z
0 0 0
200 0 1600
0 125 2000
100 100 2400
50 125 2400
A firm is engaged in producing two products, A
and B. Each unit of product A requires 2 kg of
raw material and 4 labour hours for processing,
whereas each unit of product B requires 3 kg of
raw material and 3 hours of labour, of the same
type. Every week the firm has an availability of
60 kg of raw material and 96 labour hours. One
unit of product A sold yields Rs.40 and one unit
of product B sold gives Rs.35 as profit.

Formulate and solve this problem as a linear

programing problem to determine as to how
many units of each of the products should be
produced per week so that the firm can earn
the maximum profit. Assume that there is no
marketing constraint so that all that is
produced is sold.
LPP Formulation

Decision Variables:X1 = number of units of

product A
X2 =
number of units of product B

Objective Function: Maximixe Z =

40X1 + 35X2

Subject to the Constraints:

Raw Material Constraint 2X1

+ 3X2 ≤ 60 Labour Hours Constraint
4X1 + 3X2 ≤ 96

Non-Negativity Restriction: X1, X2 ≥ 0

Answer Report

Objective Cell (Max)

Cell Name Original Value Final Value

$E$6 Max Z 0 1000

Optimal Solution is to make 18 units of A and 8 units of B

and the value of Z is 1000

Variable Cells
Cell Name Original Value Final Value Integer
$B$6 Solution X1 0 18Contin

$C$6 Solution X2 0 8Contin

Constraints
Cell Name Cell Value Formula Status Slack
$D$8<=$F$
$D$8 Raw Material LHS 60 8 Binding 0
Labour Hours $D$9<=$F$
$D$9 LHS 96 9 Binding 0
Both, Raw Material and Labour Hours are binding
constraints as both these resources are used up
completely
Sensitivity Report
Variable Cells
Final Reduced Objective Allowable Allowable
Coefficien
Cell Name Value Cost t Increase Decrease
$B$ 6.6666666 16.666666
6 Solution X1 18 0 40 67 67
$C$ of Optimality:
Range
6 X1:Solution X2
For 8 0 35 25 5
(40-16.67 to 40+6.67), that is (23.33 to 46.67)
This means that if the profit from A changes, and if the change is
within the given range, then also the current solution will remain
optimal i.e. if C1 changes from 40 to any value between 23.33 and
46.67, then also the current solution will remain optimal.
That is, best solution will be to continue making 18 units of X1 and 8
units of X2.
But the value of Z will change depending on the change in the
objective coefficients.
For X2:
(35-5 to 35+25), that is (30 to 60)
This means that if the profit from B changes, and if the change is
within the given range, then also the current solution will remain
optimal.
That is, best solution will be to continue making 18 units of X1 and 8
units of X2.
But the value of Z will change depending on the change in the
objective coefficients.
 Sensitivity Report
Constraints
Constrain
Final Shadow t Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$D$ Raw Material 3.3333333
8 LHS 60 33 60 36 12
Both
$D$Raw Material
Labour Hoursand Labour Hours are binding constraints as the
8.3333333
9
Final LHS is equal to the96
Value Constraint33
R.H. Side,96 24
i.e. the availability, i.e.36
both the resources are used up completely.

Shadow Price is also known as the Worth of the Resource or Dual Value.

Shadow Price will have some value for binding constraints.

Since the resource is used up completely, if we get an additional unit of

that resource from somewhere, we will be able to manufacture more,
as a result of which the value of Z will increase by the amount of the
Shadow Price per unit of additional resource as long as the increase in
resource is within the range of feasibility.

If the availability of the resource were to change, and the change is

within the range of feasibility, then the current product-mix continues
to remain optimal. However, both the quantities and the value of Z will
change.
Also, the worth of the resource continues to remain the same as long
as the change in the RHS is within the range of feasibility.
Range of feasibility for Raw Material: (60-12 to 60+36) i.e. (48 to 96)
The ABC Company has been a producer of picture
tubes for television sets and certain printed circuits
for radios. The company has just expanded into full
scale production and marketing of AM and AM-FM
radios. It has built a new plant that can operate 48
hours per week. Production of an AM radio in the
new plant will require 2 hours and production of an
AM-FM radio will require 3 hours. Each AM radio will
contribute Rs 40 to profits while an AM-FM radio
will contribute Rs 80 to profits. The marketing
department, after extensive research has
determined that a maximum of 15 AM radios and 10
AM-FM radios can be sold each week.

Formulate a linear programming model to

determine the optimum production mix of AM and
FM radios that will maximize profits.
LPP Formulation

Decision Variables:X1 = number of AM radios

X2 =
number of AM-FM radios

Objective Function: Maximixe Z =

40X1 + 80X2

Subject to the Constraints:

Production Hours Constraint 2X1

+ 3X2 ≤ 48
Marketing Constraint 1 X1
≤ 15
Marketing Constraint 2 X2
≤ 10
Answer Report
Objective Cell (Max)
Cell Name Original Value Final Value
$G$4 Maximize Z 0 1160

Optimal Solution is to make 9 units of AM

and 10 units of AM-FM radios and the optimal
value of Z is 1160
Variable Cells
Cell Name Original Value Final Value Integer
$C$6 Solution X1 0 9Contin
$D$6 Solution X2 0 10Contin

Constraints
Slac
Cell Name Cell Value Formula Status k
$E$8 Production Hours LHS 48$E$8<=$G$8 Binding 0
Marketing Constraint 1 Not
$E$9 LHS 9$E$9<=$G$9 Binding 6
$E$1 Marketing Constraint 2 $E$10<=$G$
0 LHS 10 10 Binding 0
Production Hours and Marketing Constraint 2 are binding
constraints as both these resources are used up
completely.
Marketing Constraint 1 is not binding. Its slack value is 6.
Sensitivity Report
Variable Cells
Reduce Allowabl
Final d Objective Allowable e
Coefficien
Cell Name Value Cost t Increase Decrease
13.333333
$C$6 Solution X1 9 0 40 33 40
Range of Optimality:
$D$6 Solution X2 10 0 80 1E+30 20
For X1:
(40-40 to 40+13.33), that is (0 to 53.33)
This means that if the profit from A changes, and if the change is within the
given range, i.e. if C1 changes from 40 to any value between 0 and 53.33,
then also the current solution will remain optimal.
That is, best solution will be to continue making 9 units of X1 and 10 units
of X2.
But the value of Z will change depending on the change in the objective
coefficients.
For X2:
(80-20 to 80+∞), that is (60 to ∞)
This means that if the profit from B changes, and if the change is within the
given range, then also the current solution will remain optimal.
That is, best solution will be to continue making 9 units of X1 and 10 units
of X2.
But the value of Z will change depending on the change in the objective
Sensitivity Report
Constraints
Constrain Allowabl
Final Shadow t Allowable e
Cell Name Value Price R.H. Side Increase Decrease
$E$8 Production Hours LHS 48 20 48 12 18
Marketing Constraint 1
$E$9 LHS 9 0 15 1E+30 6
$E$1 Marketing
Production Constraint
Hours and 2
Marketing Constraint 2 are binding constraints as the
0
Final LHS is equal to the Constraint
Value 10 R.H. Side,
20 i.e. the
10availability,6 i.e. both 4
the resources are used up completely.

Since Production Hours are used up completely, if we get an additional hour

from somewhere, we will be able to manufacture more, as a result of which
the value of Z will increase by 20 per hour as long as the increase in hours is
within the range of feasibility.
If the Marketing Department is able to sell more units of AM-FM radios, then
for every additional unit that they can sell the value of Z will increase by 20
as long as the additional units that they can sell is within the range of
feasibility.

Range of feasibility for Production Hours: (48-18 to 48+12) i.e. (30 to 60)
Range of feasibility for Marketing Constraint 1: (15-6 to 15+ ∞) i.e. (9 to ∞)
Range of feasibility for Marketing Constraint 2: (10-4 to 10+ 6) i.e. (6 to 16)

If the availability of the resource were to change, and the change is within
the range of feasibility, then the current product-mix continues to remain
 A firm produces three products A, B, and C,
each of which passes through three
departments: Fabrication, Finishing and
Packaging. Each unit of product A requires 3, 4
and 2; a unit of product B requires 5, 4 and 4,
while each unit of product C requires 2, 4 and 5
hours respectively in the three departments.
Every day, 60 hours are available in the
fabrication department, 72 hours are available
in the finishing department, and 100 hours in
the packaging department.
 The unit contribution of product A is Rs. 5, of
product B is Rs. 10 and of product C is Rs. 8.
 Required:
 Formulate the problem as an LPP and determine
the number of units of each of the products that
should be made each day to maximize the total
 A
B C Maximum

Availability
Fabrication Hours 3 5 2
60

Finishing Hours 4 4
4 72

Packaging Hours 2 4 5
100
LPP Formulation

Decision variables:X1 = Number of units of

product A
X2 =
Number of units of product B
X3 =
Number of units of product C

Objective Function: Maximixe Z = 5X1 +

10X2 + 8X3

Subject to the Constraints:

Fabrication Hours Constraint 3X1 +

5X2 + 2X3 ≤ 60
Finishing Hours Constraint
4X1 + 4X2 + 4X3 ≤ 72
Packaging Hours Constraint 2X1 +
Answer
Report Cell (Max)
Objective
Cell Name Original Value Final Value
$H$5 Maximize Z 0 160
Optimal Solution is to make 8 units of Product B and 10 units of
Product C and not make Product A at all, and the optimal value
of Z is 160
Variable Cells
Cell Name Original Value Final Value Integer
$C$6 Solution X1 0 0Contin
$D$6 Solution X2 0 8Contin
$E$6 Solution X3 0 10Contin

Constraints
Cell Name Cell Value Formula Status Slack
Fabrication
$F$9 Hours 60$F$9<=$H$9 Binding 0
$F$10<=$H$1
$F$10 Finishing Hours 72 0 Binding 0
$F$11<=$H$1
$F$11 Packaging
Fabrication HoursHours 82 1 are binding
and Finishing Hours Not Binding
constraints 18
as both these resources are used up completely.
Packaging Hours is not binding. Its slack value is 18 i.e. we
have 18 hours balance with us.
Sensitivity Report
Variable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
-
3.66666666 3.66666666
$C$6 Solution X1 0 7 5 7 1E+30
$D$6 Solution X2 8 0 10 10 2
Range
$E$6 of Optimality:
Solution X3 10 0 8 2 4
For X1:
(5- ∞ to 5+3.67), that is (-∞ to 8.67)
Lower limit is -∞ as the optimal solution is to not make Product A, so even if
the profit from A reduces to 0, it will not make a difference to the optimal
solution.
However, if the profit increases by 3.67 or more, then we have to solve the
problem again to get the new optimal
For X2:
(10-2 to 10+10), that is (8 to 20)
For X3:
(8-4 to 8+2), that is (4 to 10)

Reduced Cost for X2 and X3 is zero because the optimal solution is to make
both B and C.
Reduced Cost for X1 is -3.67. It means that though the optimal solution is to
Sensitivity Report
Constraints
Constrain Allowabl
Final Shadow t Allowable e
Cell Name Value Price R.H. Side Increase Decrease
Fabrication 0.66666666
$F$9 Hours 60 7 60 30 24
$F$1 1.66666666 12.705882
0 Finishing Hours 72 7 72 35 24
Fabrication Hours and Finishing Hours are binding constraints as the Final
$F$1 Packaging
Value
1 is Hours
equal to the Constraint
82 R.H. Side,0 i.e. the100
availability,
1E+30 i.e. both the
18
resources are used up completely.

Range of feasibility for Fabrication Hours: (60-24 to 60+30) i.e. (36 to 90)
Range of feasibility for Finishing Hours: (72-24 to 72+12.71) i.e. (48 to
84.71)
Range of feasibility for Packaging Hours: (100-18 to 100+ ∞) i.e. (82 to ∞)

If the availability of the resource were to change, and the change is within
the range of feasibility, then the current product-mix continues to remain
optimal, i.e. we will continue to make only Products B and C and not make
Product A. However, both the quantities produced and the value of Z will
change.

Shadow price is also called the worth of the resource or the dual value.
The shadow price indicates the amount by which the value of the objective
function will increase for every additional unit that you get of that resource
 If the optimal solution obtained does not
require the production of some product, explain
as to why such product would not be produced.
In this context indicate the quantity (quantities)
of other product/s that would be foregone for
producing such product.
 What would be the effect on the solution of
each of the following:
 Obtaining an order for 6 units of product A
which has to be met.
 An increase of 20% capacity in the fabrication
department.
 The firm is contemplating introduction of a new
product D with a likely profit margin of Rs. 8.
The product shall consume 3 hours each in the
fabrication and finishing departments and 2
The optimal solution does not require us to make Product A, as
for every unit of Product A that we make, the optimal value of Z
will decrease by 3.67
If we have to meet an order for 6 units of Product A, then the
value of Z will decrease by 6 * 3.67.
The new value of Z will be 137.98

If there is an increase of 20% capacity in the Fabrication

Department, then the available hours will become 72 instead
of 60.
This increase is within the range of feasibility.
So, the new optimal solution will continue to have the same
product mix, i.e. we will make only Products B and C, but their
quantities will change and the new optimal value of Z will be
Profit
160 + Margin
0.67*12of = new Product D is 8
168.04
Resources used to make one unit of Product D are 3 hours in
the Fabrication and Finishing Departments each and 2 hours in
the Packaging department.
From the shadow prices, we get the worth of the resources
used to make one unit of Product D as:
3*0.67+3*1.67+2*0 = 7.02 which is less than the profit margin.
So it makes sense for the company to introduce Product D.
Merton Truck Company

 Formulate the LPP

 Find the optimal product-mix using

the graphical method

 Find the optimal product-mix using

Solver
LPP Formulation
Decision variables:X1 = Monthly production rate of Model
101 trucks X2 = Monthly
production rate of Model 102 trucks

Objective Function: Maximixe Z = 3000X1 + 5000X2

Subject to the Constraints:

Engine Assembly Constraint X1 + 2X2

≤ 4000
Metal Stamping Constraint 2X1 + 2X2
≤ 6000
Model 101 Assembly Constraint 2X1 ≤
5000
Model 102 Assembly Constraint 3X2
≤ 4500
x y
Z
0 0
0
0 1500 7500
1000 1500 10500000
2000 1000 11000000
2500 500 7495500
2500 0 7500
LPP Formulation in Excel

Model 101 Model 102

Decision
variables X1 X2
Maximise Objective
Z Function 3000 5000 0
Solution 0 0

Engine Assembly 1 2 0≤ 4000

Metal Stamping 2 2 0≤ 6000
Model 101
Assembly 2 0≤ 5000
Model 102
Assembly 3 0≤ 4500
Excel Solution

Model Model
101 102
Decision
variables X1 X2
Maximise Objective 110000
Z Function 3000 5000 00
Solution 2000 1000

Engine
Assembly 1 2 4000≤ 4000
Metal Stamping 2 2 6000≤ 6000
Model 101
Assembly 2 4000≤ 5000
Model 102
Assembly 3 3000≤ 4500
Answer Report
Objective Cell (Max)
Cell Name Original Value Final Value
$F$4 Objective Function 0 11000000

Variable Cells
Cell Name Original Value Final Value Integer
$C$5 Solution X1 0 2000Contin
$D$5 Solution X2 0 1000Contin

Constraints
Cell Name Cell Value Formula Status Slack
$E$7 Engine Assembly 4000$E$7<=$G$7 Binding 0
$E$8 Metal Stamping 6000$E$8<=$G$8 Binding 0
$E$9 Model 101 Assembly 4000$E$9<=$G$9 Not Binding 1000
$E$10<=$G$1
$E$10 Model 102 Assembly 3000 0 Not Binding 1500
Sensitivity Report
Variable Cells

Final Reduced Objective Allowable Allowable

Cell Name Value Cost Coefficient Increase Decrease

$C$5 Solution X1 2000 0 3000 2000 500
$D$5 Solution X2 1000 0 5000 1000 2000

Constraints

Final Shadow Constraint Allowable Allowable

Cell Name Value Price R.H. Side Increase Decrease
$E$7 Engine Assembly 4000 2000 4000 500 500
$E$8 Metal Stamping 6000 500 6000 500 1000
Model 101
$E$9 Assembly 4000 0 5000 1E+30 1000
$E$1 Model 192
0 Assembly 3000 0 4500 1E+30 1500
Merton Truck Company

 What would be the best product-mix if Engine

Assembly capacity were raised by one unit,
from 4000 to 4001 machine hours?
 What is the extra unit of capacity worth?
 What happens to the total contribution if the
Engine Assembly capacity were increased to
4100 machine hours?
 How many units of Engine Assembly capacity
can be added before there is a change in the
value of the additional unit of capacity?
 If Engine Assembly capacity were raised to
4001, we would still continue making Model 101
and Model 102 trucks as the increase in the
resource is within the range of feasibility. What
will change however is the amount of Model 101
and Model 102 trucks that you will make as the
resources are changing.
 The new optimal solution will be to make 1999
trucks of Model 101 and 1001 trucks of Model
102 and the value Model
of Z will
Modelbe 1100200
101 102
Decision variables X1 X2
1100200
Maximise Z Objective Function 3000 5000 0
Solution 1999 1001

Engine Assembly 1 2 4001≤ 4001

Metal Stamping 2 2 6000≤ 6000
Model 101 Assembly 2 3998≤ 5000
Model 102 Assembly 3 3003≤ 4500
The extra unit of capacity is worth 2000 as that is
the shadow price of the resource.

If the Engine Assembly capacity were increased to

4100 machine hours, the total contribution will
increase by 2000*100 = 200000

500 units of Engine Assembly capacity can be

added before there is a change in the value of
the additional unit of capacity.
Merton Truck Company

 The company has an option of renting capacity;

that is, purchasing Model 101 and/or Model 102
engines from an outside supplier in order to
overcome the engine assembly department
capacity problem. Should the company adopt
this alternative?

 If so, what is the maximum rent it should be

willing to pay for a machine-hour of engine
assembly capacity?

 What is the maximum number of machine-hours

it should rent?
The company can rent additional capacity in Engine
Assembly.

The maximum the company should be ready

to pay for the additional hour is 2000 as that
is the shadow price or the dual value or the
worth of the resource.

The maximum number of machine hours it should

rent is 500 as beyond that the resource will be
worthless to the company.
Merton Truck Company
 The Company is considering the introduction of
a new truck, to be called Model 103.
 Each Model 103 truck would give a contribution
of $2,000.
 The total engine assembly capacity would be
sufficient to produce 5,000 Model 103s per
month, and the total metal stamping capacity
would be sufficient to produce 4,000 Model
103s.
 The new truck would be assembled in the Model
101 assembly department, each Model 103
truck requiring only half as much time as a
Model 101 truck
 0.8 machine-hours of Engine Assembly capacity will be
required to make one Model 103 truck.
 1.5 machine-hours of Metal Stamping capacity will be
required to make one Model 103 truck.
 Each Model 103 truck will require one hour in the
Model 101 assembly department.
 The worth of the resources utilized for making one
Model 103 truck is 0.8*2000 + 1.5*500 + 1*0 = 2350
 The contribution from one unit of Model 103 truck is
2000 which is less than the resources used in its
production.

Hence Merton should not manufacture Model 103 trucks.

Merton Truck Company

 How high would the contribution on each Model

103 truck have to be before it became
worthwhile to produce the new model?
The contribution on each Model 103 truck
would have to be more than 2350 before it
became worthwhile to produce the new model
Merton Truck Company
 Engines can be assembled on overtime in the
engine assembly department.
 Suppose production efficiencies do not change
and 2,000 machine-hours of engine assembly
overtime capacity are available.
 Direct labor costs are higher by 50% for
overtime production.
 While variable overhead would remain the
same, monthly fixed overhead in the engine
assembly department would increase by $0.75
million.
Should Merton assemble engines on overtime?
LPP Formulation
Decision variables:
X1 = Monthly production rate of Model 101 trucks
X2 = Monthly
production rate of Model 102 trucks
X3 = Monthly production rate of Model 101
trucks in overtime X4 = Monthly
production rate of Model 102 trucks in overtime

Objective Function: Maximixe Z = 3000X1 + 5000X2 +

2400X3 + 3800X4

Subject to the Constraints:

Engine Assembly Constraint X1 + 2X2

≤ 4000
Metal Stamping Constraint 2X1 + 2X2 + 2X
+ 2X4 ≤ 6000
Model 101 Assembly Constraint 2X1 + 2 X3
 3000 5000 2400 3800
X1 X2 X3 X4 0
0 0 0 0

Engine
Assembly 1 2 0≤ 4000
Metal
Stamping 2 2 2 2 0≤ 6000

Model 101
Assembly 2 2 0≤ 5000

Model 102
Assembly 3 3 0≤ 4500
Engine
Assembly
Overtime 1 2 0≤ 2000
 3000 5000 2400 3800
117000
X1 X2 X3 X4 00
1500 1250 0 250

Engine
Assembly 1 2 4000≤ 4000
Metal
Stamping 2 2 2 2 6000≤ 6000
Model 101
Assembly 2 2 3000≤ 5000
Model 102
Assembly 3 3 4500≤ 4500
Engine
Assembly
Overtime 1 2 500≤ 2000

Merton Truck should not assemble engines on overtime as by

doing so, the increase in the value of Z is $0.70 whereas the
monthly fixed overhead cost would increase by $0.75
Merton Truck Company

 Merton's president, in arguing that maximizing

short-run contribution was not necessarily good
for the company in the long run, wanted to
produce as many Model 101s as possible. After
some discussion, it was agreed to maximize the
monthly contribution as long as the number of
Model 101 trucks produced was at least three
times the number of Model 102s.

What is the resulting "optimal" product mix?

LPP Formulation
Decision variables:X1 = Monthly production rate of Model
101 trucks X2 = Monthly
production rate of Model 102 trucks

Objective Function: Maximixe Z = 3000X1 + 5000X2

Subject to the Constraints:

Engine Assembly Constraint X1 + 2X2

≤ 4000
Metal Stamping Constraint 2X1 + 2X2
≤ 6000
Model 101 Assembly Constraint 2X1 ≤
5000
Model 102 Assembly Constraint 3X2
≤ 4500
Marketing Constraint X1
 3000 5000
X1 X2 0
0 0

Engine
Assembly 1 2 0≤ 4000
Metal
Stamping 2 2 0≤ 6000
Model 101
Assembly 2 0≤ 5000
Model 102
Assembly 3 0≤ 4500
Marketing
Constraint 1 -3 0≥ 0
 3000 5000
1050000
X1 X2 0
2250 750

Engine
Assembly 1 2 3750≤ 4000
Metal
Stamping 2 2 6000≤ 6000
Model 101
Assembly 2 4500≤ 5000
Model 102
Assembly 3 2250≤ 4500
Marketing
Constraint 1 -3 0≥ 0
 D Electronics produces three models of satellite dishes – Alpha,
Beta, and Gamma- which have contributions per unit of Rs 400, Rs
200, and Rs 100 respectively.
 There is a two-stage production process and the number of hours
per unit for each process are:
Alpha Beta Gamma
Process 1 2 3 2.5
Process 2 3 2 2

 There is an upper limit on process hours of 1,920 per period for

process 1 and 2,200 for process 2.
 The Alpha dish was designed for a low power satellite, which is
now fading and the sales manager thinks that sales will be no
more than 200 per period.
 Fixed costs are Rs. 40,000 per period.
 Formulate the LPP.
 Prepare the initial Simplex Tableau.
 Solve using Excel and investigate the effect on the solution of:
 An increase of 20 hours per period in Process 1
 An increase of 10 units per period in the output of Alpha.
LPP Formulation

Decision variables:X1 = Nummber of units of Alpha

X2 = Number of
units of Beta
X3 = Number of
units of Gamma

Objective Function: Maximixe Z = 400X1 +

200X2 + 100X3

Subject to the Constraints:

Process I Constraint
2X1 + 3X2 + 2.5X3 ≤ 1920
Process II Constraint
3X1 + 2X2 + 2X3 ≤ 2200
Marketing Constraint X1
≤ 200
Answer
Report

Objective Cell (Max)

Cell Name Original Value Final Value
$H$6 Max Z 0 181333.3333

Variable Cells
Cell Name Original Value Final Value Integer
$C$6 X1 0 200Contin
$D$6 X2 0 506.6666667 Contin
$E$6 X3 0 0Contin

Constraints
Cell Name Cell Value Formula Status Slack
$F$8 Process I 1920$F$8<=$H$8 Binding 0
586.666666
$F$9 Process II 1613.333333 $F$9<=$H$9 Not Binding 7
$F$10<=$H$1
$F$10 Marketing 200 0 Binding 0
Sensitivity Report

Variable Cells
Final Reduced Objective Allowable Allowable
Coefficien
Cell Name Value Cost t Increase Decrease
266.66666
$C$6 X1 200 0 400 1E+30 67
506.66666
$D$6 X2 67 0 200 400 80
-
Constraints 66.6666666 66.666666
$E$6 X3 0 7 100 67 1E+30
Constrain
Final Shadow t Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
66.6666666
$F$8 Process I 1920 7 1920 880 1520
Process 1613.3333 586.66666
$F$9 II 33 0 2200 1E+30 67
$F$1 Marketin 266.666666
0 g 200 7 200 352 200
An increase of 20 hours per period in Process 1
This will result in an increase in the value of Z by
20*66.67 = 1333.4.
The new optimal value of Z will be 1,82,666.73

An increase of 10 units per period in the output

of Alpha.
This will result in an increase in the value of Z by
10*266.67 = 2666.7

Receiving an order, which must be met, for 10 units of

Gamma
This will result in a decrease in the value of Z by 10*66.67 = 666.7
The new value of Z will be 1,80,666.63
Thank You