Arba Minch University

COLLEGE of Business and economics

DEPARTMENT OF MANAGEMENT MBA PROGRAM

Assignment 2 of Quantitative Analysis for Decision Making

Name: - Chirotaw Kentib

ID: - PEBE/022/12

Submitted to: -: Mr. Daniel Tekle (Assi. Professor)

Part One:
 1. What is the purpose of linear programming?

Linear programming is used to obtain optimal solutions for operations research. Using linear
programming allows researchers to find the best, most economical solution to a problem within all of
its limitations, or constraints. Many fields use linear programming techniques to make their
processes more efficient.

2. Discuss the components and assumptions of Linear programing model

Assumptions of Linear programming

There are several assumptions on which the linear programming works, these are:

1. Proportionality: The basic assumption underlying the linear programming is that any change
in the constraint inequalities will have the proportional change in the objective function. This
means, if product contributes Rs 20 towards the profit, then the total contribution would be
equal to 20x1, where x1 is the number of units of the product.

For example, if there are 5 units of the product, then the contribution would be Rs 100 and in
the case of 10 units, it would be Rs 200. Thus, if the output (sales) is doubled, the profit would
also be doubled.

2. Additivity: The assumption of additivity asserts that the total profit of the objective function is
determined by the sum of profit contributed by each product separately. Similarly, the total
amount of resources used is determined by the sum of resources used by each product
separately. This implies, there is no interaction between the decision variables.

3. Continuity: Another assumption of linear programming is that the decision variables are
continuous. This means a combination of outputs can be used with the fractional values along
with the integer values.

For example, if 52/3 units of product A and 101/3 units of product B to be produced in a week.
In this case, the fractional amount of production will be taken as a work-in-progress and the
remaining production part is taken in the following week. Therefore, a production of 17 units
of product A and 31 units of product B over a three-week period implies 5 2/3 units of product
A and 101/3 units of product B per week.
 4. Certainty: Another underlying assumption of linear programming is a certainty, i.e. the
parameters of objective function coefficients and the coefficients of constraint inequalities is
known with certainty. Such as profit per unit of product, availability of material and labor per
unit, requirement of material and labor per unit are known and is given in the linear
programming problem.

5. Finite Choices: This assumption implies that the decision maker has certain choices, and the
decision variables assume non-negative values. The non-negative assumption is true in the
sense, the output in the production problem cannot be negative. Thus, this assumption is
considered feasible.

3. What are the steps in formulating Linear programming model?

Steps for Developing an Algebraic LP Model

1. What decisions need to be made? Define each decision variable.

2. What is the goal of the problem? Write down the objective function as a function of the
decision variables.
3. What resources are in short supply and/or what requirements must be met? Formulate the
constraints as functions of the decision variables

Steps for Developing an LP Model in a Spreadsheet

1. Enter all of the data for the model. Make consistent use of rows and columns.

2. Make a cell for each decision to be made (changing cells). Follow the same structure as the
data. (Sometimes it is easier to do step 2 before step 1.)

3. What is the goal of the problem? Enter the equation that measures the objective in a single
cell on the worksheet (target cell). Typically: SUMPRODUCT (Cost Data, Changing Cells) or
SUMPRODUCT (Profit Data, Changing Cells)

4. What resources are in short supply and/or what requirements must be met? Enter all
constraints in three consecutive cells on the spreadsheet, e.g.,

amount of resource used, <=, amount of resource available

or amount attained, >=, minimum requirement
4. What are the methods that can be used to solve LP Problems?
Step 1: Formulate the LP (Linear programming) problem

We have already understood the mathematical formulation of an LP problem in a previous section.

Step 2: Construct a graph and plot the constraint lines

The graph must be constructed in ‘n’ dimensions, where ‘n’ is the number of decision variables. This
should give you an idea about the complexity of this step if the number of decision variables increases.

One must know that one cannot imagine more than 3-dimensions anyway! The constraint lines can be
constructed by joining the horizontal and vertical intercepts found from each constraint equation.

Step 3: Determine the valid side of each constraint line

This is used to determine the domain of the available space, which can result in a feasible solution.
How to check? A simple method is to put the coordinates of the origin (0,0) in the problem and
determine whether the objective function takes on a physical solution or not. If yes, then the side of the
constraint lines on which the origin lies is the valid side. Otherwise it lies on the opposite one.

Step 4: Identify the feasible solution region

The feasible solution region on the graph is the one which is satisfied by all the constraints. It could be
viewed as the intersection of the valid regions of each constraint line as well. Choosing any point in
this area would result in a valid solution for our objective function.

Step 5: Plot the objective function on the graph

It will clearly be a straight line since we are dealing with linear equations here. One must be sure to
draw it differently from the constraint lines to avoid confusion. Choose the constant value in the
equation of the objective function randomly, just to make it clearly distinguishable.

Step 6: Find the optimum point

Optimum Points

An optimum point always lies on one of the corners of the feasible region. How to find it? Place a ruler
on the graph sheet, parallel to the objective function. Be sure to keep the orientation of this ruler fixed
in space. We only need the direction of the straight line of the objective function. Now begin from the
far corner of the graph and tend to slide it towards the origin.
 5. Discuss at least five LP application areas in business. Give example for each.

1. Food and Agriculture

Farmers apply linear programming techniques to their work. By determining what crops, they should
grow, the quantity of it and how to use it efficiently, farmers can increase their revenue.

In nutrition, linear programming provides a powerful tool to aid in planning for dietary needs. In order
to provide healthy, low-cost food baskets for needy families, nutritionists can use linear programming.
Constraints may include dietary guidelines, nutrient guidance, cultural acceptability or some
combination thereof. Mathematical modeling provides assistance to calculate the foods needed to
provide nutrition at low cost, in order to prevent noncommunicable disease. Unprocessed food data
and prices are needed for such calculations, all while respecting the cultural aspects of the food types.
The objective function is the total cost of the food basket. Linear programming also allows time
variations for the frequency of making such food baskets.

2. Applications in Engineering

Engineers also use linear programming to help solve design and manufacturing problems. For
example, in airfoil meshes, engineers seek aerodynamic shape optimization. This allows for the
reduction of the drag coefficient of the airfoil. Constraints may include lift coefficient, relative
maximum thickness, nose radius and trailing edge angle. Shape optimization seeks to make a shock-
free airfoil with a feasible shape. Linear programming therefore provides engineers with an essential
tool in shape optimization.

3. Transportation Optimization

Transportation systems rely upon linear programming for cost and time efficiency. Bus and train
routes must factor in scheduling, travel time and passengers. Airlines use linear programming to
optimize their profits according to different seat prices and customer demand. Airlines also use linear
programming for pilot scheduling and routes. Optimization via linear programming increases airlines'
efficiency and decreases expenses.
 4. Efficient Manufacturing

Manufacturing requires transforming raw materials into products that maximize company revenue.
Each step of the manufacturing process must work efficiently to reach that goal. For example, raw
materials must past through various machines for set amounts of time in an assembly line. To
maximize profit, a company can use a linear expression of how much raw material to use. Constraints
include the time spent on each machine. Any machines creating bottlenecks must be addressed. The
number of products made may be affected, in order to maximize profit based on the raw materials and
the time needed.

5. Energy Industry

Modern energy grid systems incorporate not only traditional electrical systems, but also renewables
such as wind and solar photovoltaics. In order to optimize the electric load requirements, generators,
transmission and distribution lines, and storage must be taken into account. At the same time, costs
must remain sustainable for profits. Linear programming provides a method to optimize the electric
power system design. It allows for matching the electric load in the shortest total distance between
generation of the electricity and its demand over time. Linear programming can be used to optimize
load-matching or to optimize cost, providing a valuable tool to the energy industry.

A surprising number of occupations use linear equations. In math, linear equations use two or more
variables that produce a graph that proceeds in straight line, such as y = x + 2. Learning how to use and
solve linear equations can be vital to entering some popular careers. Careers using linear equations
range from health care workers to store clerks and everything in between.

6. Business Manager

Managers in a variety of fields are required to use linear equations to calculate measurements, make
purchases, evaluate raises and determine how many employees are required to complete specific jobs.
Some of the more common managerial positions using linear equations include advertising, real estate,
funeral director, purchasing and agriculture. For example, an advertising manager might plan an online
ad campaign budget using linear equations based on the cost per click.
Part Two

1. Answer

First Solution:

One variable per product. Number the products 1 through 5 from left to right (1 is apple, 2 is grape,
etc.).

xi = gallons of product i to produce.

max 64(0.09x1 +0.06x2 +0.05x3 +0.07x4 +0.08x5)

−64(0.02(x1 +0.7x4 +0.6x5) +0.04(x2 +0.3x4) +0.03(x3 +0.4x5))

x1 +0.7x4 +0.6x5 ≤200

x2 +0.3x4 ≤100

x3 +0.4x5 ≤150

x1 ≥10, x5 ≥12

x2,x3,x4 ≥0

Alternative Solution:

One variable per combo (material, product). Number the products 1 through 5 from left to right (1 is
apple, 2 is grape, etc.). Raw materials are A (apple), G (grape), C (cranberry).

xij = gallons of raw material i = A,G,C used to produce product j =1,...,5.

max 64(0.09xA1 +0.06xG2 +0.05xC3 +0.07(xA4 +xG4)+0.08(xA5 +xC5))

−64(0.02(xA1 +xA4 +xA5)+0.04(xG2 +xG4)+0.03(xC3 +xC5))

xA1 +xA4 +xA5 ≤200

xG2 +xG4 ≤100

xC3 +xC5 ≤150

xA4 =0.7(xA4 +xG4)

xA5 =0.6(xA5 +xC5)

xA1 ≥10, xA5 +xC5 ≥12

All remaining xij ≥0

2. Answer

A, Formulate and solve a linear programming model for this problem.

start by entering the data. The data for this problem are the unit profit of each type of backpack, the
resource requirements (square feet of nylon and labor hours required), the availability of each resource,
5400 square feet of nylon and (35 laborers)(40 hours/laborer) = 1400 labor hours, and the sales
forecast for each type of backpack (1000 Collegiate and 1200 Minis). In order to keep the units
consistent in row 8 (hours), the labor required for each backpack (in cells C8 and D8) are converted
from minutes to hours (0.75 hours = 45 minutes, 0.667 hours = 40 minutes). The range names Unit
Profit (C4:D4), Available (G7:G8), and Sales Forecast (C13:D13) are added for these data

B C D E F G

3 Collegiate mini
4 Unit profit $32 $24
5
6 Resource Per unit Available
used produced

7 Nylon(sq.ft) 3 2 5400
8 Labor (hr) 0.75 0.667 1400
9
10
11
12
13 Sales 1000 1200
forecast
The decision to be made in this problem is how many of each type of backpack to make. Therefore,
we add two changing cells with range name Units Produced (C11:D11). The values in Calls Placed
will eventually be determined by the Solver. For now, arbitrary values of 10 and 10 are entered.
 B C D E F G
3 Collegiate mini
4 Unit profit $32 $24
5
6 Resource Per unit Available
used produced

7 Nylon(sq.ft) 3 2 5400
8 Labor (hr) 0.75 0.667 1400
9
10
11 Units 10 10
Produced
12
13 Sales forecast 1000 1200

The goal is to produce backpacks so as to achieve the highest total profit. Thus, the objective
cell should calculate the total profit, where the objective will be to maximize this objective cell. In this
case, the total profit will be

Total Profit = ($32)(# of Collegiates) + ($24)(# of Minis)

or

Total Cost = SUMPRODUCT(UnitProfit, UnitsProduced).

This formula is entered into cell G11 and given a range name of TotalProfit. With 10 Collegiates and
10 Minis produced, the total profit would be ($32)(10) + ($24)(10) = $560.

B, Use the graphical method to solve this M = 0 yields a C-intercept of 1800

model. C = 0 yields an M-intercept of 2700.

For the Nylon constraint boundary line (3C + Labor constraint boundary line ((3/4)C +
2M = 5400) (2/3)M = 1400),
M = 0 yields a C-intercept of 1866.67
C = 0 yields an M-intercept of 2100. 500

The sales forecast constraints are a horizontal

line at M = 1200 and a vertical line at C = 1000 500 1000 1500 2000

mini
3000
2500
2000
1500
1000
optimal(C,M)=(1000,975)

500
500 1000 1500 2000
$32c+$24m=$55,400

mini
3000
3C + 2M = 5400

2500

2000 C = 1000

(3/4)C + (2/3)M = 1400

1500 M =1200

1000
 3. Answer

X1 X2
Aqua- Hydro-
Spa Lux Total Profit
$ $
Unit Profit 350 300 $ 66,100
Required Available Used
Pumps 1 1 200 174
Labor 9 6 1566 1566
Tubing 12 16 2880 2088

Productio
n Levels 174 0

Optimal
Levels 122 78

Pump constraint <

1 X1 + 1 X2 = 200

slope -1
intercept 200

Labor constraint <

9 X1 + 6 X2 = 1566

slope -1.5

intercept 261

Tubing constraint <

12 X1 + 16 X2 = 2880
slope -0.75
intercept 180

Profit level curve

$ 350 X1 + $ 300 X2 = $ 66,100

slope -1.1666667
intercept 220.333333

Pump-Labor Labor-Tubing Pump-Tubing

intersection intersection intersection
feasibl
feasible Y feasible N e Y

12 10
X1 2 122 X1 8 - X1 80 80

X2 78 78 X2 99 - X2 120 120
$ $ $
Profit 66,100 Profit - Profit 64,000

Pump X2 Labor X2 Tubing X2

intercept intercept intercept
feasibl
feasible N feasible N e Y

X1 - - X1 - - X1 - -

20 26
X2 0 - X2 1 - X2 180 180
$ $ $
Profit - Profit - Profit 54,000

Pump X1 Labor X1 Tubing X1

intercept intercept intercept
feasibl
feasible N feasible Y e N

20 17
X1 0 - X1 4 174 X1 240 -

X2 - - X2 - - X2 - -
$ $ $
Profit - Profit 60,900 Profit -
 4. Answer

Let,

A = Number of product A to be produced and

B = Number of product B to be produced.

Then, LPP is,

Maximize, Profit = $3000*A+ $2000*B

Subject to,

2*A+ 1*B ≤ 2 (Availability of resource Q)

1*A+ 2*B ≤ 2 (Availability of resource R)

3*A+ 3*B ≤ 4 (Availability of resource S)

A, B ≥ 0

Nonnegativity

xA  0, xB  0
 5. Answer

(A) Formulate a linear programming model for this problem.

The decisions that need to be made are the number of 27-inch and 20-inch TV sets to be
produced per month by the Apex Television Company. Therefore, the decision variables for the
model are
x1 = number of 27-inch TV sets to be produced per month,
x2 = number of 20-inch TV sets to be produced per month.
Also let
Z = total profit per month.
The model now can be formulated in terms of these variables as follows.
The total profit per month is Z = 120 x1 + 80 x2.
The resource constraints are:
(1) Number of 27-inch sets sold per month: x1  40
(2) Number of 20-inch sets sold per month: x2  10
(3) Work-hours availability: 20 x1 + 10 x2  500.
Nonnegativity constraints on TV sets produced:
x1  0
x2  0
With the objective of maximizing the total profit per month, the LP model for this problem is

Maximize Z = 120 x1 + 80 x2,

subject to
x1  40
x2  10
20 x1 + 10 x2  500
and
x1  0, x2  0.
 B,

Goal Constraints
Maximize profit 27"<=40
20"<=10
TVs 27"hours+20"hours <=500
27"
20"
500 hours per month
27" requires 20 hours
20" requires 10 hours
Profit from 27" $120
Profit form 20" $80

27" 20"
20 10

Inputs
Demand 40 10 Total p $ 3,200.00
Total Time
Maximum Hours   500 Costs 500
Time Costs per
set 20 10
p per set $ 120.00 $ 80.00

p $ 2,400.00 $ 800.00
Time Costs 400 100