Operations research – Group 2

Roll nos.
1709- Chaitanya Samant 1714- Elsina Dbritto
1710- Chriselle D’souza 1715 - Elton Pinto
1711- Christelle Pereira 1716 -Hiren Mali
1712- Claudia Andrades 1758- Silvia Gorge
1713- Diya David
CASE STUDY II:
The Juicy Fruits Co. manufactures and packs three orange extracts: juice
concentrate,
regular juice and jam. The products, which are intended for commercial use are
manufactured in 5 litre cans. Jam uses Grade I oranges, and the remaining two
products
use Grade II oranges. The following table lists the usages of orange as well as
the year’s
demand:
Product Orange Grade Kilograms of Maximum
Oranges per 5-Litre demand
Can (cans)
Jam I 5 10000
Concentrate II 30 12000
Juice II 15 40000
A market survey shows that demand for regular juice is at least twice as high as
that for the
concentrate.
In the past, the company bought Grade I and Grade II oranges separately at the
respective
prices of 25 cents and 20 cents per kg. This year, an unexpected cold wave
forced the
farmers to harvest and sell the crop early without sorting it into Grades I and II.
For this
reason, the crop is being offered at the uniform discount price of 19 cents per
kg. It is
estimated that 30% of the 3000000 kg crop falls into Grade I and the 60% into
Grade II.
The balance 10% crop will be discarded as below standard. The Juicy Fruits Co.
estimates
the cost of sorting the oranges into Grades I and II will cost the company about
2.15 cents
a kg.
For the purpose of cost allocation, the Accounting department uses the
following logic to
estimate the cost per kg of Grade I and Grade II oranges. Since 10% of the crop
will be
below Grade II standard, the effective average cost per kg can be worked out as
(19+2.15)/ 0.9 = 23.5 cents. Since the ratio of Grade I to Grade II oranges in the
purchased lot is 1 to 2, the corresponding average cost per kg based on the old
prices is (
20*2 + 25*1)/ 3 = 21.67 cents. Thus the increase in the average cost (23.5 –
21.67 = 1.83
cents) should be re- allocated to the two grades in the 1:2 ratio, yielding a Grade
I cost per
kg of 25 + 1.83*(1/3) = 21.22 cents and a Grade II cost per kg of 20 + 1.83*
(2/3) = 21.22
cents. By using this information, the Accounting department compiles the
following
profitability sheet for the three products:

($)
Product (5 Litre can)
Jam Concentrate Juice
Sales price 15.50 30.25 20.75
Variable costs 9.85 21.05 13.28
Allocated overheads 1.05 2.15 1.96
Total cost 10.90 23.20 15.24
Net profit 4.60 7.05 5.51
Formulate as a linear programming problem to establish a production plan for
the company
and obtain the solution. For the solution you develop, attach your model and the
solution
obtained through using a software.
Solution
Let,
x1 = Number of 5-Litre cans of concentrate to be produced
x2 = Number of 5-Litre cans of jam to be produced
x3 = Number of 5-Litre cans of juice to be produced

Objective function to maximize the net profit:

Maximize
Z=4.60X1+5.51X2+7.05X3
Subject to,
Orange Usage Constraint for Concentrate:
0.05X1+0.30X3≤3000000
Orange Usage Constraint for Jam:
X2≤90000 (0.1*0.3*3000000)
Orange Usage Constraint for Juice:
0.15X3+0.15X2≤540000 (0.6*0.3*3000000)
Demand Constraint for Concentrate:
X1≤10000
Demand Constraint for Jam:
X2≤40000
Demand Constraint for Juice (Considering at least twice the demand of
Concentrate):
X3≥2X1
Non-negativity Constraint:
X1, X2, X3 ≥ 0

In Lindo, Max 4.60X1 + 5.51X2 + 7.05X3

SUBJECT TO
0.05X1+0.3X3<=3000000
X2<=90000
0.15X3+0.15X2<=540000
X1>=0
X2>=0
X3>=0
X1<=10000
X2<=40000
X3>=2X1

LINDO OUTPUT-

Global optimal solution found.

Objective value: 0.2542600E+08
Infeasibilities: 0.000000
Total solver iterations: 1
Elapsed runtime seconds: 3.74

Model Class: LP

Total variables: 3
Nonlinear variables: 0
Integer variables: 0

Total constraints: 10
Nonlinear constraints: 0

Total nonzeros: 14
Nonlinear nonzeros: 0
Variable Value Reduced Cost
X1 10000.00 0.000000
X2 0.000000 1.540000
X3 3600000. 0.000000

Row Slack or Surplus Dual Price

1 0.2542600E+08 1.000000
2 1919500. 0.000000
3 90000.00 0.000000
4 0.000000 47.00000
5 10000.00 0.000000
6 0.000000 0.000000
7 3600000. 0.000000
8 0.000000 4.600000
9 40000.00 0.000000
10 3599998. 0.000000