Chapter 17: Applications of Optimization

1. A firm sells each unit of a product for $250. The cost function that describes the total cost, C(x), as a
function of the number of units produced and sold, x, is given by:
= 50 + 0.1 ! + 150
a. Formulate the profit function P(x).
b. How many units must be produced and sold in order to maximize total profit?
c. What is the maximum profit?
d. What is the total revenue at this level of output?
e. What is the total cost at this level of output?

2. A firm sells each unit of a product for $500. The cost function that describes the total cost, C(x), as a
function of the number of units produced and sold, x, is given by:
= 100 + 0.25 ! + 10,000
a. Formulate the profit function P(x).
b. How many units must be produced and sold in order to maximize total profit?
c. What is the maximum profit?
d. What is the total revenue at this level of output?
e. What is the total cost at this level of output?

3. A manufacturer has determined a cost function that expresses the annual cost of purchasing, owning,
and maintaining its raw material inventory as a function of the size of each order. The cost function is:
625,000
= + 10 + 150,000

where q is the size of each order (in tons) and C(q) is the annual inventory cost (in dollars).
a. Determine the order size q that minimizes annual inventory cost.
b. What are minimum annual inventory costs expected to equal?

4. A manufacturer has determined a cost function that expresses the annual cost of purchasing, owning,
and maintaining its raw material inventory as a function of the size of each order. The cost function is:
800,000
= + 5 + 100,000

where q is the size of each order (in units) and C(q) is the annual inventory cost (in dollars).
a. Determine the order size q that minimizes annual inventory cost.
b. What are minimum annual inventory costs expected to equal?

5. A manufacturer has determined a cost function that expresses the annual cost of purchasing, owning,
and maintaining its raw material inventory as a function of the size of each order. The cost function is:
2,000,000
= + 8 + 200,000

where q is the size of each order (in units) and C(q) is the annual inventory cost (in dollars).
a. Determine the order size q that minimizes annual inventory cost.
b. What are minimum annual inventory costs expected to equal?

6. A major distributor of tennis balls purchases tennis balls from a sporting goods manufacturer. The
annual cost of purchasing, owning, and maintaining its inventory is described by the function:
20,000,000
= + 5 + 200,000

where q is the size of each order (in dozens of tennis balls) and C(q) is the annual inventory cost.
a. Determine the order size q that minimizes annual inventory cost.
b. What are minimum annual inventory costs expected to equal?
Adapted from Frank Budnick, 2013
7. The total cost of producing q units of a certain product is described by the function:
= 4,000,000 + 300 + 0.01!
where q is the size of each order (in units) and C(q) is the annual inventory cost (in dollars).
a. How many units should be produced in order to minimize the average cost per unit?
b. What is the minimum average cost per unit?
c. What is the total cost of production at this level of output?

8. The total cost of producing q units of a certain product is described by the function:
= 1,000,000 + 15,000 + 0.25!
where q is the size of each order (in units) and C(q) is the annual inventory cost (in dollars).
a. How many units should be produced in order to minimize the average cost per unit?
b. What is the minimum average cost per unit?
c. What is the total cost of production at this level of output?

9. The total cost of producing q units of a certain product is described by the function:
= 500,000 + 500 + 0.25!
where q is the size of each order (in units) and C(q) is the annual inventory cost (in dollars).
a. How many units should be produced in order to minimize the average cost per unit?
b. What is the minimum average cost per unit?
c. What is the total cost of production at this level of output?

10. The total cost of producing q units of a certain product is described by the function:
= 350,000 + 7,500 + 0.25!
where q is the size of each order (in units) and C(q) is the annual inventory cost (in dollars).
a. How many units should be produced in order to minimize the average cost per unit?
b. What is the minimum average cost per unit?
c. What is the total cost of production at this level of output?

11. The total cost and revenue functions for a product, where q is number of units produced and sold, are:
= 50,000 + 20 + 0.0001!
= 60 0.004!
a. For what number of units will profit be maximized?
b. What is the maximum profit?

12. The total cost and revenue functions for a product, where q is number of units produced and sold, are:
= 25,000 + 40 + 0.005!
= 100 0.01!
a. For what number of units will profit be maximized?
b. What is the maximum profit?

13. The total cost and revenue functions for a product, where q is number of units produced and sold, are:
= 500 + 100 + 0.5!
= 500
a. For what number of units will profit be maximized?
b. What is the maximum profit?

14. The total cost and revenue functions for a product, where q is number of units produced and sold, are:
= 40,000 + 25 + 0.002!
= 75 0.008!
a. For what number of units will profit be maximized?
b. What is the maximum profit?

Adapted from Frank Budnick, 2013

15. The total cost and revenue functions for a product, where q is number of units produced and sold, are:
= 100 + 5 + 0.2!
= 150
a. For what number of units will profit be maximized?
b. What is the maximum profit?
16. The total cost and revenue functions for a product, where q is number of units produced and sold, are:
= 10,000 + 10 + 0.001!
= 60 0.004!
a. For what number of units will profit be maximized?
b. What is the maximum profit?
17. A company estimates that the demand for its product fluctuates with price. The demand function is
= 280,000 400 where q is the number of units demanded and p is the price. The total cost of
producing q units of the product is estimated by the function = 350,000 + 300 + 0.0015! .
a. Determine the total revenue function R(q).
b. Determine the total profit function P(q).
c. Determine the number of units that need to be produced and sold in order to maximize profit.
d. What price should be charged to generate the level of demand in part (c).
e. What is the maximum profit expected to equal?

18. A person wishes to fence in a rectangular garden that is to have an area of 6,000 square meters. If the
objective is to minimize the total length of fencing required, determine the dimensions of the garden.

19. A person wishes to fence in a rectangular garden that is to have an area of 2,000 square feet. If the
objective is to minimize the total length of fencing required, determine the dimensions of the garden.

20. A small beach club has been given 400 meters of floatation barrier to enclose a rectangular swimming
area. The desire is to create the largest swim area given the 600 meters of flotation barrier. Note that
the floatation barrier will make up 3 sides of the rectangular swim area. The beach is the 4th side.
a. What dimensions will result in the largest swimming area?
b. What is the maximum area?

21. A small beach club has been given 600 meters of floatation barrier to enclose a rectangular swimming
area. The desire is to create the largest swim area given the 400 meters of flotation barrier. Note that
the floatation barrier will make up 3 sides of the rectangular swim area. The beach is the 4th side.
a. What dimensions will result in the largest swimming area?
b. What is the maximum area?

22. A company wants to create a rectangular storage area in a large parking lot behind its building. The
company has 1,500 feet of fence available to enclose the storage area. Note, the fence will be used only
for 3 sides. The 4th side of the storage area will be the building.
a. What dimensions should the storage area be if the objective is to maximize the square footage?
b. What is the maximum storage area that can be created?

23. An automobile distributor wishes to create a parking area near a major port for storing new cars
imported from Germany. The parking area is to have a total area of 1,000,000 square feet. The
distributor wants to enclose the parking area with fence. Because of security concerns, the section of
fence across the front of the lot will be more heavy duty and taller than the fence used along the sides
and rear of the lot. The cost of the fence for the front is $40 per running foot and the cost for the other
three sides is $20 per running foot.
a. Determine the dimensions that will result in minimum total cost of the fence.
b. What is the minimum cost?
Adapted from Frank Budnick, 2013
24. A company wishes to fence in a parking lot where it keeps company vehicles and equipment. The
parking area is to have a total area of 500,000 square feet. The distributor wants to enclose the parking
area with fence. Because of security concerns, the section of fence across the front of the lot and on the
two sides of the lot will be more heavy duty and taller than the fence used along the rear of the lot. The
cost of the fence for the front and sides is $50 per running foot and the cost for the rear is $30 per
running foot.
a. Determine the dimensions that will result in minimum total cost of the fence.
b. What is the minimum cost?

25. A small warehouse is to be constructed that is to have a total area of 10,000 square feet. The building is
to be partitioned as shown below. Costs have been estimated based on the number of feet of exterior
and interior walls. The costs are estimated at $200 per foot of exterior wall and $100 per foot of interior
wall.
- - - - - - interior wall
exterior wall
y

x
a. Determine the dimensions that will minimize the construction costs.
b. What are the minimum costs?

26. A company is planning on constructing an office building that is to have an area of 20,000 square feet.
The diagram below shows the layout of the building with interior and exterior walls. Construction costs
for the building are estimated based upon the number of feet of load-bearing walls and the number of
feet of load-bearing walls and the number of feet of non-load-bearing walls. The costs are $300 per foot
of load-bearing walls and $200 per foot of non-load-bearing walls.

- - - - - - non-load bearing
y load-bearing wall

x
a. Determine the dimensions of the building that will minimize the construction costs.
b. What are the minimum construction costs estimated to be?

27. The figure below illustrates a recreation yard that is to be fenced within a prison. In addition to
enclosing the area, a section of fence should divide the total area in half. 3,600 feet of fence is available.

x
a. Determine the dimensions x and y that result in the maximum total area for the recreation yard.
b. What is the maximum area?

28. A police department purchases new patrol cars for $22,000. The department estimates that average
capital cost and average operating cost are a function of x, the number of miles the car is driven. The
salvage value of a patrol car (in dollars) is expressed by the function = 19,000 0.12. Average
operating cost, stated in dollars per mile, is estimated by the function = 0.0000006 + 0.18.
How many miles should the car be driven prior to replacement if the objective is to minimize the sum of
average capital cost and average operating cost per mile?
Adapted from Frank Budnick, 2013
29. A taxi company purchases new cars for $18,000. The department estimates that average capital cost and
average operating cost are a function of x, the number of miles the car is driven. The salvage value of a
taxi (in dollars) is expressed by the function = 16,000 0.1. Average operating cost, stated in
dollars per mile, is estimated by the function = 0.0000003 + 0.15. How many miles should the
car be driven prior to replacement if the objective is to minimize the sum of average capital cost and
average operating cost per mile?

30. A police department has determined that the daily crime rate depends upon the number of officers
assigned to each shift. Specifically, the function describing this relationship is = 500 7.5 !!.!"!
where N is the daily crime rate and x is the number of officers assigned to each shift.
a. Determine the number of officers that will result in a minimum daily crime rate.
b. What is the minimum daily crime rate expected to equal?

31. A firms annual profit is stated as a function of the number of salespeople employed. The profit
function is = 10 !!.!!"! where P is the profit stated in thousands of dollars and x is the number of
salespeople.
a. Determine the number of salespeople that will maximize annual profit.
b. What is the maximum profit expected to equal?

32. A police department has determined that the daily crime rate depends upon the number of officers
assigned to each shift. Specifically, the function describing this relationship is = 300 4.5 !!.!"!
where N is the daily crime rate and x is the number of officers assigned to each shift.
a. Determine the number of officers that will result in a minimum daily crime rate.
b. What is the minimum daily crime rate expected to equal?

33. A firms annual profit is stated as a function of the number of salespeople. The profit function is
= 20 !!.!!"! where P is the profit stated in thousands of dollars and x is the number of salespeople.
a. Determine the number of salespeople that will maximize annual profit.
b. What is the maximum profit expected to equal?

34. A new state welfare agency wants to determine how many analysts to hire for processing of welfare
applications. It is estimated that the average cost C of processing an application is a function of the
number of analysts, x. Specifically, the estimated cost function is = 0.005 ! 16 ln + 70.
a. If the objective is to minimize the average cost per application, determine the number of analysts
to hire.
b. What is the minimum average cost of processing an application expected to equal?

35. A large global employment agency wants to determine how many employees to hire for processing job
applications. It is estimated that the average cost C of processing an application is a function of the
number of employees, x. Specifically, the estimated cost function is = 0.001 ! 5 ln + 60.
a. If the objective is to minimize the average cost per application, determine the number of
employees to hire.
b. What is the minimum average cost of processing an application expected to equal?

36. A firm has estimated that the average production cost per unit, C, fluctuates with the number of units
produced, x. The average cost function is = 0.002 ! 1,000 ln + 7,500, where C is stated in
dollars per unit and x is stated in hundreds of units.
a. Determine the number of units that should be produced in order to minimize the average
production cost per unit.
b. What is the minimum average cost expected to equal?
c. What are total production costs expected to equal?

Adapted from Frank Budnick, 2013

ANSWERS
1. (a) P(x) = -0.1x2 + 200x - 150, (b) 1,000 units, (c) $99,850, (d) $250,000, (e) $150,150
2. (a) P(x) = -0.25x2 + 400x 10,000, (b) 800 units, (c) $150,000, (d) $400,000, (e) $250,150
3. (a) 250 tons, (b) $155,000
4. (a) 400 units, (b) $104,000
5. (a) 500 units, (b) $208,000
6. (a) 2,000 dozen tennis balls, (b) $220,000
7. (a) 20,000 units, (b) $700, (c) $14 million
8. (a) 2,000 units, (b) $16,000, (c) $32 million
9. (a) 1,414 or 1,415 units, (b) $1,207.11, (c) $1,706,849 or $1,708,056.25
10. (a) 1,183 or 1,184 units, (b) $8,091.61, (c) $9,572,372.25 or $9,580,464
11. (a) 4,878 units, (b) $47,561
12. (a) 2,000 units, (b) $35,000
13. (a) 400 units, (b) $79,500
14. (a) 2,500 units, (b) $22,500
15. (a) 363 units, (b) $26,181.20
16. (a) 5,000 units, (b) $115,000
! !
17. (a) () = 700 !"", (b) () = 400 0.004! 350,000, (c) 50,000 units,
(d) $575, (e) $9,650,000
18. 77.46 m by 77.46 m
19. 44.72 ft by 44.72 ft
20. (a) 200 m by 100 m (b) 20,000 square meters
21. (a) 300 m by 150 m (b) 45,000 square meters
22. (a) 750 m by 375 m (b) 281,250 square meters
23. (a) 816.5 ft by 1,224.7 ft (b) $97,978
24. (a) 790.57 ft by 632.45 ft (b) $126,490.60
25. (a) x = 84.5 ft by y = 118.34 ft (b) $118,320
26. (a) x =166.4 ft and y = 120.19 ft (b) $432,662
27. (a) x = 900 ft and y = 600 ft (b) 540,000 square feet
28. 70,710.68 miles
29. 81,649.6 miles
30. (a) 33 or 34 officers, (b) About 408 crimes per day
31. (a) 250 salespeople, (b) $919,500
32. (a) 50 officers, (b) 217 or 218 crimes per day
33. (a) 500 salespeople, (b) $3,678,794
34. (a) 40, (b) $18.98
35. (a) 50, (b) $42.94
36. (a) 500 hundreds of units = 50,000 employees, (b) $1,785.40 per unit, (c) $89,270,000

Adapted from Frank Budnick, 2013