OPERATIONS RESEARCH

ASSIGNMENT 1

MBA-IB 2018-20

DIV B

Submitted To : Submitted By :
Dr Asmita Chitnis Shashank Jain - 18020241141
7)
F= Total dollars required for cash settlement necessary to fund the annual payments
S1= Unit of Government Securities of type 1 bought at $1055 (par value $1000)

S2= Unit of Government Securities of type 2 bought at $1000 (par value $1000)

SAn= Savings made in year n (n =1,2,…,6)

Minimize F

Constraints

F – 1.055S1 – 1S2 – SA1 = 190

0.0675S1 + 0.05125S2 + 1.04SA2 – SA3 = 215

0.0675S1 + 0.05125S2 + 1.04SA1 – SA3 = 240

1.0675S1 + 0.0512 + 1.04SA3 – SA4 = 285

1.05125S2 + 1.04SA4 – SA5 = 315

1.04SA5 – SA6 = 460

OPTIMAL SOLUTION

Objective Function Value = 1484.96655

Variable Value Reduced Costs

-------------- --------------- ------------------

F 1484.96655 0.00000

S1 232.39356 0.00000

S2 720.38782 0.00000

SA1 329.40353 0.00000

SA2 180.18611 0.00000

SA3 0.00000 0.02077

SA4 0.00000 0.01942

SA5 442.30769 0.00000

SA6 0.00000 0.78551

 Constraint Slack/Surplus Dual Prices

-------------- --------------- ------------------

1 0.00000 -1.00000

2 0.00000 -0.96154

3 0.00000 -0.92456

4 0.00000 -0.86903

5 0.00000 -0.81693

6 0.00000 -0.78551

OBJECTIVE COEFFICIENT RANGES

Variable Lower Limit Current Value Upper Limit

------------ --------------- --------------- ---------------

F 0.00000 1.00000 No Upper Limit

S1 -0.01973 0.00000 0.02132

S2 -0.85880 0.00000 0.01963

SA1 -0.01980 0.00000 0.65430

SA2 -0.02026 0.00000 1.28344

SA3 -0.02077 0.00000 No Upper Limit

SA4 -0.01942 0.00000 No Upper Limit

SA5 -0.81693 0.00000 No Upper Limit

SA6 -0.78551 0.00000 No Upper Limit

RIGHT HAND SIDE RANGES

Constraint Lower Limit Current Value Upper Limit

------------ --------------- --------------- ---------------

 1 -1294.96655 190.00000 No Upper Limit

2 -127.57967 215.00000 No Upper Limit

3 52.60644 240.00000 No Upper Limit

4 36.91988 285.00000 3047.03307

5 -442.30769 315.00000 4139.23689

6 0.00000 460.00000 4437.20636

Min F = 1484.96655.

So, the total minimum cash settlement necessary to fund the annual payments is
$1,484,966.55.

Amount invested in S1 = $245,175.21

Amount invested in S2 = $720,387.82

Amount invested in SA1 = $329,403.53

Amount invested in SA2 = $180,186.11

Amount invested in SA5 = $442,307.69

B). The dual price can be thought of as the negative of the present value of each dollar in the
cash requirement. For example, each dollar that must be paid in year 6 has a present value of
$0.78551.

So, to reduce investment from $460,000 to $400,000.

Additional amount to be paid is,

$60000 X 0.78551 = $47,130.60

C). From the same concept, to reduce year 1 investments from $190,000 to $150,000

Additional amount to be paid is,

$40000 X 1 = $40,000

D). If the annual payments are to made in the end of the year, then the problem constraint
changes as below

Constraints:
F - 1.055S1 - 1S2 - SA1 = 0

0.0675S1 + 0.05125S2 + 1.04SA1 - SA2 = 190

0.0675S1 + 0.05125S2 + 1.04SA2 – SA3 = 215

1.0675S1 + 0.05125S2 + 1.04SA3 – SA4 = 240

1.05125S2 + 1.04SA4 – SA5 = 285

1.04SA5 – SA6 = 315

1.04SA6 = 460

When solved in Management Scientist

The Min F is 1417.73857.

So, the total minimum cash settlement necessary to fund the annual payments is
$1,417,738.57.

If Hoxworth can negotiate this, then they can save $67,227.98.

Q12) Let Si be the quantities sold each week where i-=1,2,3,4

Let Bi be the quantities bought each week where i-=1,2,3,4
Let Ii be the quantities held in inventory each week where i-=1,2,3,4

Max 6S1+6.2S2+6.65S3+5.55S4-6B1-6.2B2-6.65B3-5.55B4-6I1-6.2I2-6.65I3-
5.55I4
Constraints

I1-B1+S1=20000 I2 <100000

I1-I2+B2-S2=0 I3 <100000

I2-I3+B3-S3=0 I4 <100000

I3-I4+B4-S4=0 I4 >25000

I1 <100000

OPTIMAL SOLUTION

Objective Function Value = 12500.000

Variable Value Reduced Costs

-------------- --------------- ------------------

S1 0.000 0.000
 S2 0.000 0.000

S3 100000.000 0.000

S4 0.000 0.000

B1 80000.000 0.000

B2 0.000 0.000

B3 0.000 0.000

B4 25000.000 0.000

I1 100000.000 0.000

I2 100000.000 0.000

I3 0.000 1250

I4 25000.000 0.000

Constraint Slack/Surplus Dual Prices

-------------- --------------- ------------------

1 0.000 6.000

2 0.000 -6.200

3 0.000 -6.650

4 0.000 -5.550

5 0.000 0.050

6 0.000 0.300

7 100000.000 0.000

8 75000.000 0.000

9 0.000 -5.700

OBJECTIVE COEFFICIENT RANGES

Variable Lower Limit Current Value Upper Limit

------------ --------------- --------------- ---------------

S1 No Lower Limit 6.000 6.000

S2 No Lower Limit 6.200 6.200

 S3 6.350 6.650 6.650

S4 No Lower Limit 5.550 5.550

B1 -6.050 -6.000 -6.000

B2 -6.500 -6.200 -6.200

B3 No Lower Limit -6.650 -6.650

B4 -6.800 -5.550 -5.550

I1 -0.200 -0.150 No Upper Limit

I2 -0.450 -0.150 No Upper Limit

I3 No Lower Limit -0.150 1.100

I4 No Lower Limit -0.150 5.550

RIGHT HAND SIDE RANGES

Constraint Lower Limit Current Value Upper Limit

------------ --------------- --------------- ---------------

1 No Lower Limit 20000.000 100000.000

2 0.000 0.000 No Upper Limit

3 No Lower Limit 0.000 100000.000

4 -25000.000 0.000 No Upper Limit

5 20000.000 100000.000 100000.000

6 100000.000 100000.000 No Upper Limit

7 0.000 100000.000 No Upper Limit

8 25000.000 100000.000 No Upper Limit

9 0.000 25000.000 100000.000

Therefore the firm has to buy only in the first and last weeks in quantities of 80,000 and 25,000
respectively and sell 1,00,000 pounds in the third week so as to meet the maximum inventory
constraints and the minimum requirement for the last week.

The whole inventory of 1,00,000 pounds in unused at the end of third week.