Overview

Table A Machine-hours: Requirements and Availability

Table B Standard Product Costs

Overview
Table C Overhead Budget for 1988
Constraint

Let Model 101 be X1 and Model 102 be X2

Objective function

Objective(Maximize profit Z) = 3,000X1+ 5,000X2

By Simplex
Q1 a)
Variables
Model 101 ($) Model 102 ($) Objective ($)
2000 1000 11000000

The best production mix given the constraints would be 2,000

units of Model 101 truck and 1,000 units of Model 102 truck
which would lead to a contribution $ 11,000,000.
Graph For the Model
Q1 b)
Variables
Model 101 ($) Model 102 ($) Objective ($)
1999 1001 11002000

A unit increase in engine assembly capacity is worth $ 2,000. Model 101

assembly and model 102 assembly have 1,000 and 2,000 unutilized
resources respectively. Therefore, to get a better mix, that adds this value to
the contribution, given an increase in a unit of assembly time, we forgo a unit
of model 101 and produce an additional unit of model 102 and hence the net
contribution will be $ (- 3,000 + 5,000) =$ 2,000.
Q1 c)

Variables
Model 101 ($) Model 102 ($) Objective
1900 1100 11200000

If the engine assembly capacity is increased to 4,100 machine hours,

the contribution would increase by $ 2,000 * 100 to $ 11,200,000. This
trend will continue until the increase in machine engine capacity
surpass the upper boundary of $ 4,500; therefore the engine assembly
can be increased by 500 before the value changes.
 Q1 (C).
According to questions
New constraints are;-
Max Z= 3000X1 + 5000X2 - 86,00,000
Such that;
X1 + 2X2 <= 4100
2X1 + 2X2 <= 6000
2X1 <= 5000
3X2 <= 4500

Hence best product mix for this problem is;- CORNER POINTS OBJECTIVE FUNCTION VALUES
#Model 101 = 1900
#Model 102 = 1100 O(0,0) 3000X0+5000X0=0
from (b) we get;
X1= 2000- β A(2500,0) 3000X2500+5000X0=0
X2= 1000+ β B(2500,500) 300X2500+5000X500=10,00,000
where β = increase in engine assembly capacity
C(1900,1100) 3000X1900+5000X1100=11,20,000

D(0,2050) 3000X0+5000X2500=10,25,000
MAX Z at C(1900,1100)
Q1 d)
500 units of Engine Assembly capacity can be added before it capacity
worth changes.

Profit At 4500 &4501 is same i.e. production decision does not change.
Q2

Maximum, we can have 500hr increase in capacity and profit

contribution increases 2000$ per hr. Therefore, the rent should not
exceed the $ 2,000 per engine assembly hour.
However, it could be expanded to 4,500 hours and therefore it is
prudent for the company to purchase additional (to a maximum of)
500 hours at a cost of $ 2,000 per hour.
Q3) Constraint

Let Model 101 be X1, Model 102 be X2, Model 103 be X3

Objective(Maximize profit Z) = 3,000X1+ 5000X2 + 2000X3

By Simplex
Q3 a)
 We should not produce Model 103

Variables
Model 101 Model 102 Model 103 Objective
2000 1000 0 11000000
Q3 b)

Model 103 should be more than >2350 in order to make it worthy of production

 With the coefficient of X3 from 2000 to 2351

 Remaining all the constraints are same

Objective(Maximize profit Z) = 3,000X1+ 5000X2 + 2351X3
By Simplex
Variables
Model 101 Model 102 Model 103 Objective
0 857.1429 2857.1429 11002857.1429
Q4) Constraint
When we introduce the
overtime, for the 2,000
hours engine assembly,
the direct labor cost for
Model 101 and Model 102
will increase by $ 600 and
$ 1,200 respectively.
Therefore the
contributions will decrease
to $ 2,400 and $ 3,800
respectively.

Let, the units Model 101 and Model 102 produced during the overtime as X3
and X4 respectively.

Objective(Maximize profit Z) = 3,000X1+ 5,000X2 + 2,400X3+3800X4

By Simplex
Q4)
Variables
Model 101 Model 102 X4 Objective
1500 1250 250 11700000

 The optimal solution, given the constraints, gives a contribution of $

11,700,000 with 1500 model 101 trucks and 1250 model 102
produced in regular time and 250 model 102 produced in over time
(No production of model 101 in overtime). This is an increase in
contribution by $ 700,000, which is relatively good. However, adoption
of this would lead to an increase in fixed overheads by $ 750,000
which is greater than the marginal increase in contribution, and hence
overtime operations in engine assembly should not be adopted.
 Q5) Constraint

Management proposal to
produce 101 Models at least 3
times the number of Model 102.
Therefore we have a new
constraint of X1 ≥ 3X2 which
transforms to X1-3X2 ≥ 0.

Objective(Maximize profit Z) = 3,000X1+ 5,000X2

By Simplex
Q5)

Variables
Model 101 Model 102 Objectives
2250 750 10500000

 The output yields a contribution of $ 10,500,000 with 2,250

units of Model 101 and 750 units of Model 102 which is
lower than the initial contribution of $ 11,000,000 and
therefore it is not a worthy idea.
Q5 (graph)

FEASIBLE REGION
Introduction of Model 103 (X3)

Merton Truck Company Product Mix

Problem

Model 101 (x1) Model 102 (x2) Model 103 (x3)

Profit ($) 3000 5000 2000

Hours Required to Hours Required to Hours Constraints Hours

produce X1 produce X2 Used type Available

Engine Assembly Department 1 2 0.8 4000 <= 4000

Metal Stamping Department 2 2 1.5 6000 <= 6000
Model 101 Assembly 2 0 1 4000 <= 5000
Model 102 Assembly 0 3 0 3000 <= 4500

Model 101 (x1) Model 102 (x2) Model 103 (x3) Profit
Product Mix Produced 2000 1000 0 11000000
Merton Truck Company Product Mix
Problem
Model 102
with
Model 101 with overtime
Model 101 (x1) Model 102 (x2) overtime (X3) (X4)
Profit ($) 3000 5000 2400 3800

Overtime
Prodn
Hours Hours Overtime Hours
Required to Required to Prodn Hours Required Constraints
produce X1 produce X2 Required (X3) (X4) Hours Used type Hours Available

Engine Assembly Department 1 2 0 0 4000 <= 4000

Metal Stamping Department 2 2 2 2 6000 <= 6000
Model 101 Assembly 2 0 2 0 3000 <= 5000
Model 102 Assembly 0 3 0 3 4500 <= 4500

Over Production Engine Assembly 0 0 1 2 500 <= 2000

Model 102
with
Model 101 with overtime
Model 101 (x1) Model 102 (x2) overtime (X3) (X4) Profit
Product Mix Produced 1000 1500 500 0 11700000
 42

Introduction to Linear Programming

Problem (LPP)
 Toolsof operations research
 Scientific approach to decision making
 Used to manage scarce resources effectively
 George B Dantzig first paper was titled
“Programming in Linear Structure”
 Koopmans coined the term “Linear
Programming” in 1948
 Simplex Method was published by Dantzig in
1949
 43

Introduction to Linear Programming

Problem(LPP)
 Linear programming
 Programming means planning
 Model contains linear mathematical functions

 An application of linear programming

 Allocating limited resources among competing
activities in the best possible way
Example 1: Product Mix Problem
 Consider a small Computer manufacturer
making two types of dolls
 Two resources are required to make these dolls
 Each unit of doll 1 requires one unit of resource
1 and three units of resource 2
 Each unit of doll 2 requires one unit of resource
1 and two units of resource 2
 The manufacturer has 5 units of resource 1 and
12 units of resource 2 available with them
 They also make profit of Rs. 6 per unit of doll 1
sold and Rs. 5 per unit of doll 2 sold
Descriptive Problem
44
 45

Example 1: Product Mix Problem

Resources

R1 R2

X1 Rs. 6/-
Profit per
Decision unit of
Variables product
X2 Rs. 5/- sold

5 12

Resource
Availability
Example 1: Product Mix Problem
X1: No. of units of doll type 1 produced Decision
X2: No. of units of doll type 2 produced Variables

Profit: Z = 6X1 + 5X2 Objective Function

Maximize Z = 6X1 + 5X2

St. X1 + X2 ≤ 5
3X1 + 2X2 ≤12 Constraints

X1, X2 ≥ 0

Mathematical Form

46
 47

Problem Formulation
Problem Formulation Step

- Identify decision variables

- Identify objective of an organization and write the objective
function
- Write the constraints
- Write the non-negativity restrictions

The objective function and the constraints are linear function of

decision variables

Therefore, the model we formulated is called the linear

programming problem (LPP)
 48

Linear Programming Problem (LPP)

A LPP always has

- A linear objective function

- Constraints are linear
- Non-negativity restrictions for all decision variables (DV’s)