55815 Quantitative Models

Exercise 5

1. The Bakery Problem: The ‘Cookie Company’ is organizing their production plan for the
next week. Using linear programming, they have produced the following model:

max 0.4𝑥1 + 0.5𝑥 2 + 0.9𝑥3 + 1.1𝑥4

s.t. 𝑥1 + 𝑥 2 + 𝑥 3 + 𝑥4 ≤ 1500 number of oven hours available
7𝑥1 + 5𝑥2 + 3𝑥3 + 2𝑥4 ≤ 12000 flour requirements
3𝑥1 + 5𝑥2 + 10𝑥3 + 15𝑥4 ≤ 10000 sugar requirements
𝑥1 , 𝑥2 , 𝑥3 , 𝑥4 ≥ 0.

where 𝑥 𝑖 = number of cookies of type 𝑖 and the objective function maximizes net profits.
Solve the problem using a program and answer the following questions:

a) How many cookies of which type will we bake and what is the profit from the optimal
solution?
b) By how much could we be mistaken with respect to the net profit of cookie type 3
without affecting the optimal solution?
c) If the profits from cookie type 1 increased by $0.05 as a result of improving the
production efficiency, how would this impact the optimal solution?
d) One of our competitors is offering to sell us up to 200 hours of use of their oven, which
is identical to our own oven, at a cost of $0.15 per hour. Is this offer worthwhile and
what would be the impact of such an agreement?
e) After testing the supplies, we have discovered that 1,500 grams of sugar is of insuffi-
cient quality and needs to be thrown away. How will this impact out profits?
f) If we are required to produce cookies of type 4, how will this impact our profits?

2. Recall the problem from assignment 3 and its graphical solution:

• Objective Function:
Min 𝑥1 + 2𝑥2

• Constraints:
2𝑥 1 + 𝑥2 ≥ 12
2𝑥 1 + 3𝑥2 ≥ 30
2𝑥 1 − 𝑥2 ≥ 0
𝑥 1 − 2𝑥2 ≥ 0
𝑥1 , 𝑥2 ≥ 0

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 Lecture 5. Sensitivity Analysis

• Graph:

15

10

𝑥2
5 𝐴

𝐵
0
0 2 4 6 8 10 12 14
𝑥1

• The corner points:

𝐴(8.57, 4.29)
𝐵(15, 0)

• Preferred points:
None of the points is dominant on the other
• Checking the value of the objective function:

𝐴(8.57, 4.29) 𝑍 = 17.14

𝐵(15, 0) 𝑍 = 15

Conclusion: Point B is optimal.

• Optimal Solution:

𝑥1∗ = 15 𝑥2∗ = 0
𝑍 ∗ = 15

a) Find the optimality range for the coefficients of the objective function 𝑐 1 and 𝑐2 .
b) Find the reduced cost of 𝑥2 .
c) For each constraint, determine whether it is binding or not and what is the slack of
each.
d) Determine the shadow price for each constraint.
e) Determine the range of feasibility for each constraint.

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 Lecture 5. Sensitivity Analysis

f) What would be the optimal solution if we turn the problem into a maximization
problem?
g) Solve the problem in Solver and check your answers.

3. (*This problem has a recorded solution) A Scheduling Problem: The management of

Bezeq Customer Service found that the load of incoming calls remains the same from day
to day but differs during the day. The number of operators required during the day is as
follows:

Time Number of operators required

midnight – 4 AM 4
4 AM – 8 AM 6
8 AM – noon 90
noon – 4 PM 85
4 PM – 8 PM 55
8 PM – midnight 20

Operators work an 8-hour continuous shift but begin work at midnight, 4 AM, 8 AM, and
so on.
Bezeq would like to schedule its work shifts to minimize the number of operators on
the payroll. Formulate the problem as linear programming and solve it using Solver (no
sensitivity analysis here).

4. (**Optional question) National Steel Corporation Problem: National Steel Corporation

(NSC) produces a special-purpose steel used in the aircraft and aerospace industries. The
sales department has received orders for the next four months:

January February March April

Demand (tons) 2300 2000 3100 3000

NSC can meet demand by producing the steel, by drawing from its inventory, or a com-
bination of these. Inventory at the beginning of January is zero. Production costs are
expected to rise in February and March. Production and inventory costs are:

January February March April

Prod. cost 3000 3300 3600 3600
Inv. cost 250 250 250 250

Production costs are in $ per ton. Inventory costs are in $ per ton per month. For example,
1 ton in inventory for 1 month costs $250, for 2 months, it costs $500.
NSC can produce at most 3000 tons of steel per month.

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 Lecture 5. Sensitivity Analysis

a) What production plan meets demand at minimum cost?

b) If we could increase production temporarily in January to 4,000 tons, would we be
interested and if yes, how would this impact our optimal solution?
c) If the inventory costs increased by 10%, how would this impact our solution?
d) By how much would the production costs in March need to decrease in order for us
to change the optimal solution? Explain why.

Quantitative models 4 Amir Brudner