MODELING EXAMPLES

LESSON 5

LINEAR PROGRAMMING

Instructor: Ms. DANA A. FLORENDO, CPA, MM

 In the previous presentation of Linear Programming, we
demonstrate model formulation and graphical solution for
Simplex Method of MAXIMIZATION and MINIMIZATION
problems. These models were very straightforward, consisting
of only two decision variables and two constraints. They were
necessarily simple models so that the linear programming
topics being introduced could be easily understood.

Now, we will have a more complex examples of model

formulation to illustrate some of the more popular application
areas of linear programming. 2
 Illustration 1

A PRODUCT MIX EXAMPLE

Quick-Screen is a clothing manufacturing company that specializes in
producing commemorative shirts immediately following major sporting
events such as the World Series, Super Bowl, and Final Four. The
company has been contracted to produce a standard set of shirts for the
winning team, either State University or Tech, following a college football
bowl game on New Year’s Day. The items produced include two
sweatshirts, one with silk-screen printing on the front and one with print
on both sides, and two T-shirts of the same configuration.

The company has to complete all production within 72 hours after the
game, at which time a trailer truck will pick up the shirts. The company
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will work around the clock.

 Illustration 1

A PRODUCT MIX EXAMPLE

The truck has enough capacity to accommodate 1,200 standard-size
boxes. A standard-size box holds 12 T-shirts, and a box of 12 sweatshirts
is three times the size of a standard box.

The company has budgeted $25,000 for the production run.

It has 500 dozen blank sweatshirts and T-shirts each in stock, ready for
production.

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 Illustration 1

A PRODUCT MIX EXAMPLE

The resource requirements, unit costs, and profit per dozen for each type
of shirt are shown in the following table:
Processing Time (hr) Cost per Profit per
per Dozen Dozen Dozen
Sweatshirt - F 0.10 $36 $90
Sweatshirt – B/F 0.25 48 125
T-Shirt - F 0.08 25 45
T-Shirt – B/F 0.21 35 65
The company wants to know how many dozen (boxes) of each type of
shirt to produce in order to maximize profit.
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 REVIEW OF LP MODEL FORMULATION STEPS

Step 1: Define the decision How many (dozens of) T-shirts and
variables sweatshirts of each type to produce

Step 2: Define the objective Maximize profit

function
Step 3: Define the constraints
The resources available, including
processing time, blank shirts, budget,
and shipping capacity
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 Illustration 1

1. Decision variables

�1 = sweatshirts, front printing

�2 = sweatshirts, back and front printing
�3 = T-shirts, front printing
�4 = T-shirts, back and front printing

2. Define the objective function

maximize Z = 90�1 + 125�2 + 45�3 + 65�4

Where Z is the profit.

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 Illustration 1

3. Define the constraints

• Constraint for processing time:
0.10�1 + 0.25�2 + 0.08�3 + 0.21�4 ≤72 hr

• Constraint for available shipping capacity:

3�1 + 3�2 + �3 + �4 ≤1,200

• Constraint for cost budget:

$36�1 + 48�2 + 25�3 + 35�4 ≤$25,000

• Constraint for available blank sweatshirts and T-shirt:

�1 + �2 ≤500
�3 + �4 ≤500
• Nonnegativity constraint
�1 + �2 + �3 + �4 ≥ 0
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Illustration 1

LP Model Summary

maximize Z = +90�1 + 125�2 + 45�3 + 65�4

subject to
0.10�1 + 0.25�2 + 0.08�3 + 0.21�4 ≤ 72
3�1 + 3�2 + �3 + �4 ≤ 1200
$36�1 + 48�2 + 25�3 + 35�4 ≤ $25,000
�1 + �2 ≤ 500
�3 + �4 ≤ 500
�1 + �2 + �3 + �4 ≥ 0
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 Illustration 2

A DIET EXAMPLE
Breathers, a health and fitness center, operates a morning fitness
program for senior citizens. The program includes aerobic exercise,
either swimming or step exercise, followed by a healthy breakfast in the
dining room. Breathers’ dietitian wants to develop a breakfast that will
be high in calories, calcium, protein, and fiber, which are especially
important to senior citizens, but low in fat and cholesterol. She also
wants to minimize cost.

She has selected the following possible food items, whose individual
nutrient contributions and cost from which to develop a standard
breakfast menu are shown in the following table:
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 Illustration 2

A DIET EXAMPLE
Fat Cholesterol Iron Calcium Protein Fiber
Breakfast food Calories Cost
(g) (mg) (mg) (mg) (g) (g)
1. Bran cereal (cup) 90 0 0 6 20 3 5 $0.18
2. Dry cereal (cup) 110 2 0 4 48 4 2 0.22
3. Oatmeal (cup) 100 2 0 2 12 5 3 0.10
4. Oat bran (cup) 90 2 0 3 8 6 4 0.12
5. Egg 75 5 270 1 30 7 0 0.10
6. Bacon (slice) 35 3 8 0 0 2 0 0.09
7. Orange 65 0 0 1 52 1 1 0.40
8. Milk—2% (cup) 100 4 12 0 250 9 0 0.16
9. Orange juice (cup) 120 0 0 0 3 1 0 0.50
10. Wheat toast (slice) 65 1 0 1 26 3 3 0.07
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 Illustration 2

A DIET EXAMPLE
The dietitian wants the breakfast to include at least 420 calories, 5
milligrams of iron, 400 milligrams of calcium, 20 grams of protein, and 12
grams of fiber. Furthermore, she wants to limit fat to no more than 20
grams and cholesterol to 30 milligrams.

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 Illustration 2

1. Decision variables

�1 = cups of bran cereal �6 = slices of bacon

�2 = cups of dry cereal �7 = oranges
�3 = cups of oatmeal �8 = cups of milk
�4 = cups of oat bran �9 = cups of orange juice
�5 = eggs �10 = slices of wheat toast

2. Define the objective function

minimize Z = 0.18�1 + 0.22�2 + 0.10�3 + 0.12�4 +

0.10�5 + 0.09�6 + 0.40�7 + 0.16�8 +
0.50�9 + 0.07�10
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Where Z is the cost for preparing a breakfast meal.

 Illustration 2

3. Define the constraints

90�1 + 110�2 +100�3 + 90�4 +75�5 + 35�6 + 65�7 +100�8 +120�9 + 65�10 ≥ 420 calories
6�1 + 4�2 +2�3 + 3�4 +�5 + �7 +0�8 +1 �10 ≥ 5mg of iron
20�1 + 48�2 +12�3 + 8�4 +30�5 + 52�7 +250�8 +3�9 +26 �10 ≥ 400mg of calcium
3�1 + 4�2 +5�3 + 6�4 +7�5 + 2�6 + �7 +9�8 +�9 +3 �10 ≥ 20g of protein
5�1 + 2�2 +3�3 + 4�4 +�7 +3�10 ≥ 12g of fiber
2�2 +2�3 + 2�4 +5�5 + 3�6 + 4�8 +�10 ≤ 20g of fat
270�5 + 8�6 + 12�8 ≤ 30mg of cholesterol
�� ≥ 0

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 Illustration 2

LP Model Summary

minimize Z = 0.18�1 + 0.22�2 + 0.10�3 + 0.12�4 + 0.10�5 + 0.09�6 + 0.40�7 + 0.16�8

+ 0.50�9 + 0.07�10
subject to
90�1 + 110�2 +100�3 + 90�4 +75�5 + 35�6 + 65�7 +100�8 +120�9 + ≥ 420
65�10
6�1 + 4�2 +2�3 + 3�4 +�5 + �7 +0�8 +1 �10 ≥ 5
20�1 + 48�2 +12�3 + 8�4 +30�5 + 52�7 +250�8 +3�9 +26 �10 ≥ 400
3�1 + 4�2 +5�3 + 6�4 +7�5 + 2�6 + �7 +9�8 +�9 +3 �10 ≥ 20
5�1 + 2�2 +3�3 + 4�4 +�7 +3�10 ≥ 12
2�2 +2�3 + 2�4 +5�5 + 3�6 + 4�8 +�10 ≤ 20
270�5 + 8�6 + 12�8 ≤ 30
�� ≥ 0
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 Illustration 3

AN INVESTMENT EXAMPLE
Kathleen Allen, an individual investor, has $70,000 to divide among
several investments. The alternative investments are municipal bonds
with an 8.5% annual return, certificates of deposit with a 5% return,
treasury bills with a 6.5% return, and a growth stock fund with a 13%
annual return. The investments are all evaluated after 1 year.

However, each investment alternative has a different perceived risk to the

investor; thus, it is advisable to diversify. Kathleen wants to know how
much to invest in each alternative in order to maximize the return.

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 Illustration 3

AN INVESTMENT EXAMPLE
The following guidelines have been established for diversifying the
investments and lessening the risk perceived by the investor:
1. No more than 20% of the total investment should be in municipal bonds.
2. The amount invested in certificates of deposit should not exceed the
amount invested in the other three alternatives.
3. At least 30% of the investment should be in treasury bills and certificates
of deposit.
4. To be safe, more should be invested in CDs and treasury bills than in
municipal bonds and the growth stock fund, by a ratio of at least 1.2 to 1.

Kathleen wants to invest the entire $70,000.

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 Illustration 3

1. Decision variables

�1 = amount ($) invested in municipal bonds with 8.5% return p.a.

�2 = amount ($) invested in certificates of deposit with 5% return
�3 = amount ($) invested in treasury bills with 6.5% return
�4 = amount ($) invested in growth stock fund with 13% return p.a.

2. Define the objective function

maximize Z = 0.85�1 + 0.05�2 + 0.065�3 + 0.13�4

Where Z is the ����� ������ ���� ����������� .
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 Illustration 3

3. Define the constraints

• Constraint for municipal bonds That is, 20% of total investment of

�1 ≤ 14,000 $70,000 is $14,000.

• Constraint for certificate of deposits

�2 ≤ �1 + �3 + �4 or Standard form requires all variables
to be to the left of the inequality and
�2 - �1 - �3 - �4 ≤ 0 numeric values to the right.

• Constraint for treasury bills and certificate of deposits

�2 + �3 ≥ 21,000 That is, 30% of total investment of
$70,000 is $21,000.

• Ratio of the amount invested in CD and TB to the amount invested in municipal

bonds and the growth stock fund
That is, convert to �2 + �3 = 1.2 (�3 + �4 ). Then
[(�2 + �3 ) /(�3 + �4 )] = 1.2 or
to standard form where all variables are to be to
-1.2�3 +�2 + �3 -1.2�4 = 0
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the left of the inequality.

Illustration 3

LP Model Summary

maximize Z = 0.85�1 + 0.05�2 + 0.065�3 + 0.13�4

subject to
�1 ≤ 14,000
�2 - �1 - �3 - �4 ≤ 0
�2 + �3 ≥ 21,000
-1.2�3 +�2 + �3 -1.2�4 = 0
�1 , �2 , �3 , �4 ≥ 0

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 Illustration 4

A MARKETING EXAMPLE
The Biggs Department Store chain has hired an advertising firm to
determine the types and amount of advertising it should invest in for its
stores.

The three types of advertising available are television and radio

commercials and newspaper ads.

The retail chain desires to know the number of each type of

advertisement it should purchase in order to maximize exposure.

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 Illustration 4

A MARKETING EXAMPLE
It is estimated that each ad or commercial will reach the following
potential audience and cost the following amount:

Exposure Cost
(people/ad or commercial)
Television commercial 20,000 $15,000
Radio commercial 12,000 6,000
Newspaper ad 9,000 4,000

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 Illustration 4

A MARKETING EXAMPLE
The company must consider the following resource constraints:

1. The budget limit for advertising is $100,000.

2. The television station has time available for 4 commercials.
3. The radio station has time available for 10 commercials.
4. The newspaper has space available for 7 ads.
5. The advertising agency has time and staff available for producing no
more than a total of 15 commercials and/or ads.

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 Illustration 4

1. Decision variables

�1 = number of television commercials

�2 = number of radio commercials
�3 = number of newspaper ads

2. Define the objective function

maximize Z = 20,000�1 +12,000�2 + 9,000�3

Where Z is the number of audience exposure.
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 Illustration 4

3. Define the constraints

• Constraint for budget limit

15000�1 + 6000�2 + 4000�3 ≤ 100,000

• Constraint for available time and space ads

�1 ≤ 4 television commercials
�2 ≤ 10 radio commercials
�3 ≤ 7 newspaper ads

• Constraint for limitation of advertising firm

�1 + �2 + �3 ≤ 15
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Illustration 4

LP Model Summary

maximize Z = 20,000�1 +12,000�2 + 9,000�3

subject to
15000�1 + 6000�2 + 4000�3 ≤ 100,000
�1 ≤ 4
�2 ≤ 10
�3 ≤ 7
�1 + �2 + �3 ≤ 15
�1 , �2 , �3 ≥ 0
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Illustration 5

A BLEND EXAMPLE
A petroleum company produces three grades of motor oil—super,
premium, and extra—from three components. The company wants to
determine the optimal mix of the three components in each grade of
motor oil that will maximize profit. The maximum quantities available of
each component and their cost per barrel are as follows:

Maximum Barrels
Component Cost/Barrel
Available/ Day
1 4,500 $12
2 2,700 10
3 3,500 14 27
Illustration 5

A BLEND EXAMPLE
To ensure the appropriate blend, each grade has certain general
specifications. Each grade must have a minimum amount of component 1
plus a combination of other components, as follows:
Selling Price/
Grade Component Specification
Barrel
Super At least 50% of 1 $23
Not more than 30% of 2
Premium At least 40% of 1 20
Not more than 25% of 3
Extra At least 60% of 1 18
At least 10% of 2

The company wants to produce at least 3,000 barrels of each grade of

motor oil.
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 Illustration 5

1. Decision variables
The decision variables for this problem must specify the quantity of each of the three
components used in each grade of motor oil.
This requires nine (9) decision variables:
��� = barrels of component i used in motor oil grade j per day,
Where i = 1, 2, 3 and j = s (super), p (premium), e (extra).

super : �1� + �2� + �3�

premium : �1� + �2� + �3�
extra : �1� + �2� + �3�

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 Illustration 5

2. Define the objective function

maximize Z = $23(�1� +�2� +�3� )+ 20(�1� + �2� + �3� )+ 18(�1� + �2� + �3� )
- 12(�1� +�1� +�1� )- 10(�2� + �2� + �2� )- 14(�3� + �3� + �3� )

Combining similar terms results to the following objective functions:

maximize Z = 11�1� +13�2� +9�3� + 8�1� + 10�2� + 6�3� + 6�1� + 8�2� + 4�3�

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 Illustration 5

3. Define the constraints This problem has several sets of constraints.

• The first set reflects the limited amount of each component available
on a daily basis:
�1� +�1� +�1� ≤ 4,500 bbl.
�2� + �2� + �2� ≤ 2,700 bbl.
�3� + �3� + �3� ≤ 3,500 bbl.

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 Illustration 5

3. Define the constraints This problem has several sets of constraints.

• Constraints for the blend specifications for each grade of motor oil.
Specifications for super:
Or rewriting to standard form:
�1�
≥ 0.50 0.50�1� - 0.50�2� - 0.50�3� ≥ 0
�1� + �2� + �3�

�2�
≤ 0.30 0.70�2� - 0.30�1� - 0.30�3� ≤ 0
�1� + �2� + �3�

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 Illustration 5

3. Define the constraints This problem has several sets of constraints.

• Constraints for the blend specifications for each grade of motor oil.
Specifications for premium:

0.60�1� - 0.40�2� - 0.40�3� ≥ 0

0.75�3� - 0.25�1� - 0.25�2� ≤ 0

Specifications for extra:

0.40�1� - 0.60�2� - 0.60�3� ≥ 0

0.90�2� - 0.10�1� - 0.10�3� ≤ 0
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 Illustration 5

3. Define the constraints

• Minimum requirement of each grade

�1� + �2� + �3� ≥ 3,000 bbl.

�1� + �2� + �3� ≥ 3,000 bbl.
�1� + �2� + �3� ≥ 3,000 bbl.

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 Illustration 5

LP Model Summary

maximize Z = 11�1� +13�2� +9�3� + 8�1� + 10�2� + 6�3� + 6�1� + 8�2� + 4�3�

subject to
�1� +�1� +�1� ≤ 4,500
�2� + �2� + �2� ≤ 2,700
�3� + �3� + �3� ≤ 3,500
0.50�1� - 0.50�2� - 0.50�3� ≥ 0
0.70�2� - 0.30�1� - 0.30�3� ≤ 0
0.60�1� - 0.40�2� - 0.40�3� ≥ 0
0.75�3� - 0.25�1� - 0.25�2� ≤ 0
0.40�1� - 0.60�2� - 0.60�3� ≥ 0
0.90�2� - 0.10�1� - 0.10�3� ≤ 0
�1� + �2� + �3� ≥ 3,000
�1� + �2� + �3� ≥ 3,000
�1� + �2� + �3� ≥ 3,000
��� ≥ 0

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