How to interpret the matrix:

In the following illustration, a detailed explanation of the different terms in the

simplex table, their meaning and what they represent is given. How we move
along from one point to another (as explained in the previous paragraph) to
reach the optimum solution will be explained clearly.

Illustration:
D company produces two products X and Y. The requirements and constrains
with regard to its production is given below.
Product X Product Y
Material 8 units
Labour 6 hrs
Machine hours - 4
Contribution - 14
Material 4 units
Labour 8 hrs
Machine hours - 6
Contribution - 16
During the forthcoming accounting period the availability of labour hrs will be
restricted to 2880 hrs. Material availability is limited to 3440 units. The
machine has the capacity to run for 2760 hrs. The marketing manager expects
the maximum sales potential for X is 420 units with respect to Product Y there
is no sales Limitations.
Formulate an LPP and find the optimum number of units to be produced.

Solution:
The LPP is as follows:

Maximize C = 14x+16y subject to
8x + 4y 3440 ( Material constraint)
6x + 8y 2880 ( Labour constraint)
4x + 6y 2760 ( Machine hour constraint)
x 420 (Sales constraint)

When we convert these into equalities the equations become:
8x + 4y + S
1
= 3440
6x + 8y + S
2
= 2880
4x + 6y + S
3
= 2760
x + S
4
= 420



Slack variables:
S
1
, S
2
, S
3
and S
4
are called slack variables. Slack variables represent the unused
amount of resources. Here S
1
represents unused amount of raw-materials, S
2
-
unused labour hours, S
3
unused machine hours and S
4
represents unutilized
sales potential.

Suppose we consider a situation when we are producing only 1 unit of x & y
each, we would be consuming 12 (i.e. 8+4) units of material. So, out of the 3440
units of material available, after the consumption of 12 units 3428 units will
remain unutilized. This is the material slack. This can be found out by
substituting x=1 & y=1 in the material constraint equation and solving for S
1
.
Material constraint - 8x + 4y + S
1
= 3440
= 8(1) + 4(1) + S
1
= 3440 (substituting x=1, y=1)
= 12 + S
1
= 3440
= S
1
= 3428
S
1
is material slack, so it gives the unutilized amount of material for the given
situation (1,1). Similarly substituting the values for a given situation in the other
equations will tell us how much of those resources remain unutilized.

Contents of the table:
C
j
:
The first row is the C
j
row. It tells us how much profit we can get by increasing
the value of the variables by 1 unit. [Refer Table 1].We have 14 written on top
of x. This means 1unit of X will fetch us 14 Rs profit. Similarly, 1unit of Y will
fetch us 16 Rs profit. However the slack variables can never fetch any profit,
hence their values are 0 each.


Iteration Table 1:


Each table explains the situation under a given circumstance. As already
explained, we always start with the origin in the simplex procedure. So the first
table examines the situation at the origin (i.e. x=0 & y =0). In other words it
examines the situation when we are not producing anything.
(In the second column, we can find only the values S
1
, S
2
, S
3
and S
4
. X & Y are
missing. This means that x & y are zero.



Iteration Table 1:



Solution:
The values in the Solution column (3440, 2880 ) are the values of the
variables in the second column (S
1
, S
2
, S
3
and S
4
). So we have to read the table
as S
1
=3440, S
2
= 2880, etc. This is nothing but the slack when we are producing
nothing. (Remember the given situation for the first table is (0,0). (If we are not
producing anything, the entire 3440 units of materials remain unutilized. Thats
why S
1
= 3440)

Columns x, y, S
1
, S
2
, S
3
and S
4
:
The values under these columns tell us the impact of the respective variables on
the values in the solution column (keeping other variables constant). In other
words it tells how many units of each of the resources will be consumed by each
of the products.




Under Column x Row S
1
, we have the number 8. This means if we increase
the value of x by 1, the value of S
1
will come down by 8. (Each unit of X
consumes 8 units of raw materials. So if we produce one unit of X, our material
slack reduces by 8).

In the same row under Column y, we have the number 4. This means each unit
of y will decrease the value of S
1
by 4.
Similarly, Column y Row S
3
says 6. This means each unit of y will reduce the
value of S
3
(machine hours slack) by 6 units from the current value of 2760.
Column S
3
Row S
4
says 0. This is because S
3
does not have any impact on the
value of S
4
.

(In the first table we are assuming x & y as zero. Hence we need to see only the
columns under x & y. The remaining columns will be zeros and ones. So we can
ignore them.)

Column C
B

It indicates how much profit each variable in the second column earns. S
1
, S
2
,
S
3
and S
4
do not fetch any profit. Hence they are all zeros.

Row Z
j
:
This indicates how much profit is lost if we increase the values of x, y, S
1
, S
2
,
S
3
and S
4
. As of now we do not lose any profit with the increase of these
variables. Hence they are all zeros.

Row C
j
-

Z
j
:
This gives the effective increase in profits when we increase the values of the
variables by 1.
C
j
tells us how much additional profit we can get. Z
j
tell us how much we lose.
So C
j
Z
j
gives the net increase/decrease.

Each unit of x gives 14 profit (C
j
) and what we lose is 0(Z
j
). Therefore the net
effect is an increase in the profit by 14. But if we produce y we can get an
additional profit of 16. So obviously we would choose to produce Y instead of
X.

(Graphically this can be interpreted as we choose to move along the Y axis
instead of the X axis, as the rate of change is higher while moving towards A)

This is the reason why we choose the highest positive value among the C
j
-

Z
j
values and mark them.

Ratio:
Now that we choose to produce Y, the question is - how many units of y can we
produce?

Each of the constraints is a limiting factor that restricts the production of the
units. So we check, with the remaining units of each of the resources, how many
units of y we can produce. We have 3440 units of materials. Each unit of y takes
4 units. So we can produce 3440/4=860units.
Labour we have 2880 hrs left. Each unit of y takes 8. So we can produce
2880/8=360units.

So we divide the solution column (which tells how much units are left) with the
y column (which tells how many units are consumed) to know the ratio (i.e.
how many units can be produced).

The material constraint allows us to produce 860units. But the labour
constraints restricts us to just 360units. So the defining constraint would be the
one with the lowest ratio. That is the reason why we choose the minimum
positive ratio.

The sales constraint does not restrict the production of Y. Hence the ratio
is . So ratio indicates the maximum units that can be produced keeping in
mind the particular constraint. The least ratio indicates the maximum qty that
can be produced.

(Graphical interpretation the ratio indicates the maximum distance we can go
along the chosen line yet stay within the feasible region. It indicates that we
cannot go beyond the point A)

For all further calculations, the labour constraint is what matters the most, as it
has been completely used up. The other resources however are still available in
plenty. Hence we circle that row and take that as the point of reference for the
next table.

Iteration Table 2:
Now we have decided to produce 360units of Y. The second table examines the
situation when x=0 & y=360. Since all available units of labour is used up, the
labour slack (S
2
) is zero. So in this table, in the second column, Y replaces S
2
.








Iteration Table 2:





Solution:
When 360 units of Y are produced, it consumes 360*4=1440 units of material.
So out of 3440 only 2000 (i.e. 3440-1440) will be left. So the material slack for
the given situation is 2000. Hence the table reads S
1
= 2000. Similarly S3=600
& S4=420.

Columns x, y, S
1
, S
2
, S
3
and S
4
:
The intersection in the first table is at 8. We divide the whole row by 8 and this
forms the second row in the second table. This row is called the main row.

If we have to increase the value of any other variable, say you want to produce
some units of x, you can do it only if you forego the production of some units of
Y. And how many units of Y need to be foregone depends on the units of labour
consumed by X & Y, as labour is completely exhausted.
1 unit of X requires 6 units of labour. One units of Y requires 8 units. So X
consumes 3/4
th
the labour that Y consumes. So, to produce 1units of X we need
to forego the production of 3/4
th
unit of Y. We can say that 1 unit of X is
equivalent of unit of Y. This is what is given in the main row.
The main row gives the equivalent value of all other variables in terms of 1 unit
of Y.




Main row: If we increase the value of X by 1, Y will come down by . If we
increase the value of S2 by 1, the value of Y will come down by 1/8.

Row S
1
: If we increase the value of X by 1, S
1
will come down by 5
#
. If we
increase the value of S2 by 1, the value of S
1
will go up by 1/2
##
. (Positive
values indicate consumption/decrease in value. Negative values indicate
increase in value)

Note:
#
- To produce one unit of X, we will have to forego the production of 3/4
th
unit
of Y. When we forego this, we will get back 3 units (3/4
th
of 4) of material. But
to produce one unit of x we consume 8 units. Thus the net effect is an additional
consumption of 8-3=5 units in the materials.

##
Similarly if we were to increase the value of S
2
by 1, we need to decrease Y by
1/8
th
. When we do this we get 4*1/8=1/2 units of material back. But increasing
S2 does not consume any material. So the net effect is an increase in the
materials by units which is indicated by -1/2 in the table.

Row S
3
: The values in the row S
3
are the net effect on the solution values, after
considering the decreasing in the value of Y, which is now required to increase
any other variable.

Column C
B

It indicates how much profit each variable in the second column earns. S
1
,
S
3
and S
4
do not fetch any profit. Hence they are all zeros. But Y fetches a profit
of Rs. 16.

Row Z
j
:
This indicates how much profit is lost if we increase the values of x, y, S
1
, S
2
,
S
3
and S
4
.

If we increase X, we will be foregoing 3/4
th
unit of Y. Along with this we will
also be foregoing the profit from 3/4
th
unit of Y. That is *16=12. So 12 is the
opportunity cost of producing one unit of X. (Opportunity cost - The
profit/opportunity foregone while making another choice)

Increasing one unit of Y is possible only if we decrease another unit of Y. So
we will lose 16. (Column X & S
2
only needs to be considered. Others can be
ignored). Increasing one unit of S
2
will lead to loss of profit to the extent of
1/8*16=2.


Row C
j
-

Z
j
:

Each unit of x gives 14 profit (C
j
) and what we lose(opportunity cost) is 12(Z
j
).
Therefore the net effect is an increase in the profit by 2. Each unit of S
2
gives
0profit (C
j
) and what we lose is 2(Z
j
). Therefore the net effect is a decrease in
the profit by 2. So we choose the value with the highest positive integer - X.
(On producing Y you get 16, at the same time on foregoing you lose 16. So the
net effect is 0.)

Ratio:
Now again the question is - how many units of X can we produce?
We check how many units of X we can produce before one of the resources run
out. We have 2000 units of materials. Each unit of X will consume an additional
5 units. So we can produce 2000/5=400units.

The sales constraint allows us to produce 420 units. But the labour material
constraint restricts us to just 400 units. So now the defining constraint would be
the material constraint (negative values to be ignore)

(Graphical interpretation the ratio indicates that we wil have to stop at the
point B)

For the next table the material constraint is what matters, as it will be
completely used up. The other resources, (excluding labour) are now available.
Hence we circle that row and take that as the point of reference.

Final Matrix (Table 3):
Now we are producing 400 units of X and 60 units of Y (to produce X we had
to decrease the production of Y). This table examines the situation when x=400
& y=60. Since all available units of material are used up, the material slack (S
1
)
is zero. So, in this table in the first column, X replaces S
1
. We do not find S
1
&
S
2
in the second row, indicating that they have been completely utilized.
In every table two variables will take be assigned zero as the value. These are
called non-basic variables as they do not appear in the basic solution. So the
variables that appear in the basic solution (second column) are the ones that
are not completely utilized.









Iteration Table 3:



Solution:
When 400 units of X and 60units of Y are produced 800 units of machine hours
and 20 units of sales potential still remains unutilized. 6560 is the profit that can
be made in the current decision.

Columns x, y, S
1
, S
2
, S
3
and S
4
:
The interpretation is the same as the other table. Here we need to consider only
S
1
and S
2
, the rest will be just zeros and ones. Column S
1
indicates, to increase
the value of S
1
by 1 unit (i.e. release 1 unit form production), we will have to
forego the production of X by 1/5 unit. And this will result in increase the
production of Y by 1/7
th
unit and also S
4
to increase by 1/5
th
unit.
Similarly we can infer that we were to release one unit of labour (yet keep the
materials at zero), we wil have to decrease the production of Y by 1/5
th
unit and
increase the production of X by 1/10
th
unit. This will result in the increase of
S
4
by 4/5
th
unit.

Row Z
j
:
If we increase S
1
or S
2
we will lose profits. It is anyway quite obvious that we
will lose profits if we try to increase slack.

Row C
j
-

Z
j
:
This row has only negative values and zeros. The negative values indicate that
increasing those variables will decrease the profit. Nothing can be done to
increase profits further, thus indicating that we have reached the optimum
solution.

(Moving to either point A or C from the current point B will only decrease the
value of Z. so we decide to stay there)

So the optimum solution is to produce 400 units of x and 60 units of Y.