EM 602 Management Science

Practice Problems

Problem 1.

A chemical company manufactures three chemicals: A, B, and C. These chemicals are produced via two
production processes: 1 and 2. Running process 1 for an hour costs $400 and yields 300 units of A, 100
units of B, and 100 units of C. Running process 2 for an hour costs $100 and yields 100 units of A and 100
units of B. To meet customer demands, at least 1000 units of A, 500 units of B, and 300 units of C must
be produced daily.

Question:

Determine a daily production plan that minimizes the cost of meeting the company’s daily demands.

Problem 2.

A manufacturing company makes two products. Each product can be made on either of two machines.
The time (in hours) required to make each product on each machine is listed below.

Machine 1 Machine 2
Product 1 0.4 0.3
Product 2 0.7 0.4

Each month, 500 hours of time are available on each machine. Each month, customers are willing to buy
up to the quantities of each product at the prices given in a table below.

Demands and prices

Demands Prices
Month 1 Month 2 Month 1 Month 2
Product 1 1000 1900 $55 $12
Product 2 1400 1300 $65 $32

The company’s goal is to maximize the revenue obtained from selling units during the next two months.
Determine how the company can meet this goal. Assume that it will not produce any units in a month
that it cannot sell in that month.
Problem 3.

Texaco Oil produces two types of gasoline, gas 1 and gas 2, from two types of crude oil, crude 1 and
crude 2. Gas 1 is allowed to contain up to 4% impurities, and gas 2 is allowed to contain up to 3%
impurities. Gas 1 sells for $8 per barrel, whereas gas 2 sells for $12 per barrel. Up to 4,200 barrels of gas
1 and up to 4,300 barrels of gas 2 can be sold. The cost per barrel of each crude, availability, and the
level of impurities in each crude are as shown in Table below. Before blending the crude oil into gas, any
amount of each crude can be “purified” for a cost of $0.50 per barrel. Purification eliminates half the
impurities in the crude oil.

Oil Cost Per Barrel ($) Impurity Level (%) Availability (Barrels)
Crude 1 6 10% 5,000
Crude 2 8 2% 4,500

Formulate the problem to maximize profit.

Problem 4.

The cost of producing 1,000 tools at a plant and shipping them to a customer is given in Table below.
Customers 1 and 3 pay $200 per thousand tools; customer 2 pays $150 per thousand tools. To produce
1,000 tools at plant 1, 200 hours of labor are needed, while 300 hours are needed at plant 2. A total of
5,500 hours of labor are available for use at the two plants. Additional labor hours can be purchased at
$20 per labor hour. Plant 1 can produce up to 10,000 tools and plant 2, up to 12,000 tools. Demand by
each customer is assumed unlimited. If we let Xij = tools (in thousands) produced at plant i and shipped
to customer j then the companys’ solution of the problem is shown in the LINDO printout below.

Customers
Plant 1 2 3
1 60 30 160
2 130 70 170

Use this printout to answer the following questions:

a) If it costs $70 to produce 1,000 tools at plant 1 and ship them to customer 1, what would be the
new solution to the problem?
b) If the price of an additional hour of labor were reduced to $4, would the company purchase any
additional labor?
c) A consultant offers to increase plant 1’s production capacity by 5,000 tools for a cost of $400.
Should the company take her offer?
d) If the company were given 5 extra hours of labor, what would its profit become?
Problem 5.

You are presented with a following LP:

Maximize 30 Xl + 23 X2 + 29 X3

Subject to:

6 X1 + 5 X2 + 3 X3  52

4 X1 + 2 X2 + 5 X3 ≤ 14

X1 , X2 , X3  0

a) Apply the simplex method to solve the problem and calculate the optimal values of the objective
function and decision variables.
b) Write the dual problem of the above primal. Determine the solutions for the dual problem
(objective function and dual variables).