IESL College of Engineering

Engineering Graduate Diploma Study Programme

Assignment III

Level Graduate Diploma Level

Module Code MN 4001

Module Title Management III

Student Name K M N Samarasinghe (076 5434571)

Registration No. 174017

Field of Specialization Electronic and Telecommunication Engineering

Type of Assessment Assignment

Assignment No. 03

Lecturer’s Name Eng. R I Senaratna

Deadline for submission

For Examiner’s use only

Marks
QUESTION 01

Solve the following linear programming (LP) problems using the Simplex method and graphically
verify your answers using the LP concept of Basic Solution.

a) Maximize 4𝑥 + 3𝑦 subject to
𝑥 + 3.5𝑦 ≤ 9
2𝑥 + 𝑦 ≤ 8
𝑥+𝑦 ≤ 6

b) Maximize 4𝑥 + 𝑦 subject to
𝑥 + 2𝑦 ≤ 5
3𝑥 + 2𝑦 ≤ 4

ANSWERS

a) The Simplex Method

Consider 𝑧, 𝐴, 𝐵, 𝐶 are constant.

𝑧 = 4𝑥 + 3𝑦 is Objective Function

𝑥 + 3.5𝑦 ≤ 9 => 𝑥 + 3.5𝑦 + 𝐴 = 9

2𝑥 + 𝑦 ≤ 8 => 2𝑥 + 𝑦 + 𝐵 = 8
𝑥+𝑦 ≤ 6 => 𝑥 + 𝑦 + 𝐶 = 6

Tableau 1
1 x y ratio
z 0 4 3
A 9 -1 -3.5 9
B 8 -2 -1 4
C 6 -1 -1 6

Tableau 2
1 B y ratio
z 16 -2 1
A 5 0.5 -3 1.66667
x 4 -0.5 -0.5 8
C 2 0.5 -0.5 4

Tableau 3
1 B A
z 17.66667 -1.83333 -0.33333
y 1.66667 0.16667 -0.33333
x 3.16667 -0.58333 0.16667
C 1.16667 0.41667 0.16667

𝑥 = 3.16667
𝑦 = 1.66667
𝑧 = 17.66667
 The Graphical Method

Graph 1

By considering the graph 1, all the Feasible Solutions are within the quadrilateral ABCD.

Basic Solutions are found only at the four points 𝐴, 𝐵, 𝐶 𝑎𝑛𝑑 𝐷.

To find the Optimum Solution, we have to substitute x and y values at the points 𝐴, 𝐵, 𝐶 𝑎𝑛𝑑 𝐷 in to
Objective Function 𝑧 and identify the point that gives the largest 𝑧.

x y z
A 0 2.57143 7.71429
B 3.16667 1.66667 17.66669
C 4 0 16
D 0 0 0

Here we can see that Optimum value for z is obtained at the point B.

Therefore,

𝑥 = 3.16667
𝑦 = 1.66667
𝑧 = 17.66667

b) The Simplex Method

Consider 𝑧, 𝐴, 𝐵 are constant.

𝑧 = 4𝑥 + 𝑦 is Objective Function

𝑥 + 2𝑦 ≤ 5 => 𝑥 + 2𝑦 + 𝐴 = 5
3𝑥 + 2𝑦 ≤ 4 => 3𝑥 + 2𝑦 + 𝐵 = 4
 Tableau 1
1 x y ratio
z 0 4 1
A 5 -1 -2 -5
B 4 -3 -2 -1.3333

Tableau 2
1 B y
z 5.33333 -1.3333 -1.6667
A 3.66667 0.33333 -1.3333
x 1.33333 -0.3333 -0.6667

𝑥 = 1.33333
𝑦=0
𝑧 = 5.33333

The Graphical Method

Graph 2

By considering the graph 2, all the Feasible Solutions are within the triangle ABC.

Basic Solutions are found only at the four points 𝐴, 𝐵 𝑎𝑛𝑑 𝐶.

To find the Optimum Solution, we have to substitute x and y values at the points 𝐴, 𝐵 𝑎𝑛𝑑 𝐶 in to
Objective Function 𝑧 and identify the point that gives the largest 𝑧.

x y z
A 0 2 2
B 1.33333 0 5.33332
C 0 0 0
Here we can see that Optimum value for z is obtained at the point B.

Therefore,

𝑥 = 1.33333
𝑦=0
𝑧 = 5.33333

QUESTION 02

A firm plans to manufacture three products A, B, and C which are expected to give daily net profit
contributions of 3, 7, and 6 (in Rs.’000) per unit respectively. A unit of each product requires 2.0 m2
of steel. There is a JIT delivery of 8.0 m2 of steel every morning. Also, following completion of
production, each unit of A and B require 1.0 m2 space for storage until they are sent to the
customers in the evening (C does not require storage space). The total storage space available is 3.0
m2. Calculate the maximum possible total daily profit.

ANSWERS

The Simplex Method

Consider 𝑃, 𝑆𝑡, 𝑆𝑝 are constant. (𝑃: 𝑃𝑟𝑜𝑓𝑖𝑡, 𝑆𝑡: 𝑆𝑡𝑒𝑒𝑙, 𝑆𝑝: 𝑆𝑝𝑎𝑐𝑒)

𝑃 = 3𝐴 + 7𝐵 + 6𝐶 is Objective Function

2𝐴 + 2𝐵 + 2𝐶 ≤ 8 => 2𝐴 + 2𝐵 + 2𝐶 + 𝑆𝑡 = 8
𝐴+𝐵 ≤ 3 => 𝐴 + 𝐵 + 𝑆𝑝 = 3

Tableau 1
1 A B C Ratio
P 0 3 7 6
St 8 -2 -2 -2 4
Sp 3 -1 -1 0 3

Tableau 2
1 A Sp C Ratio
P 21 -4 -7 6
St 2 0 2 -2 -1
B 3 -1 -1 0 ∞

Tableau 3
1 A Sp St
P 27 -4 -1 -3
B 1 0 1 -0.5
C 3 -1 -1 0
𝑃 = 27
𝐴=0
𝐵=3
𝐶=1

These answers are re-checked with the MS Excel ‘Solver’.

QUESTION 03

The total construction cost of an irrigation engineering project with a life-span of 10 years is Rs.100
million. The annual sale value of the agricultural produce due to this project is Rs. 20 million. At the
end of 10 years, the machinery purchased for this project, now fully depreciated, is sold for Rs.10
million. Assuming a tax rate of 40% and negligible expenditure on maintenance, calculate the
internal rate of return (IRR) of this project using MS Excel ‘Solver’. Attach a copy of your Excel
solution sheet.

If the interest rate was 10%, using PVIF/PVIFA tables, calculate the NPV of the project.

ANSWERS

Check the attached MS Excel Work Book.