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Lab Tutorial 2: Sensitivity Analysis

Chapter 4: Q10.
Zippy motorcycle manufacturing produces two popular pocket bikes: Razor and Zoomer. In the coming
week, the manufacturer wants to produce up to 700 bikes and wants to ensure the number of Razors
produced does not exceed the number of Zoomers by more than 300. Each Razor can be sold for a $70
profit, while each Zoomer can be sold for a profit of $40. Each Razors trim requires 2 pounds of
polymer and 3 hours of production time, while each Zoomer requires 1 pound of polymer and 4 hours of
production time. Assume that 900 pounds of polymer and 2,400 labor hours are available for production
in the coming week.
1. Formulate an LP model for this problem.
2. Use Solver to create Sensitivity Report to answer the following questions:
a. If the profit on Razors decreased to $35, would the optimal solution change?
b. If the profit on Zoomers decreased to $30, would the optimal solution change?
c. Interpret the shadow price for the supply of polymer.
d. Why is the shadow price $0 for the constraint limiting the production of bikes to be no more than
700 units?
e. Suppose the company could obtain 300 additional labor hours in production. What would the new
optimal profit be?
f. Suppose the marginal profit on Razors decreases by $10. What is the maximum profit that can be
earned on Zoomers without changing the optimal solution?
g. Suppose the amount of production time required on Razors is increased to 4 hours. Does this
change the optimal solution? Why and why not?
ANS:
1. Define R = number of Razors produced,
Z = number of Zoomers produced
MAX 70 R + 40 Z
ST
2 R + 1 Z 900 (Polymer)
3 R + 4 Z 2400 (Production hour)
R + Z 700
R Z 300
R, Z 0
2.
Adjustable Cells
Cell

Name

Final

Reduced

Objective

Allowable

Allowable

Value

Cost

Coefficient

Increase

Decrease

$C$5

Razors

240

70

10

40

$D$5

Zoomers

420

40

53.33

Constraints
Cell

Name

$E$9

Polymer Used

$E$10
$E$11
$E$12

Product Mix Used

Final

Shadow

Constraint

Allowable

Allowable

Value

Price

R.H. Side

Increase

Decrease

900

32

900

200

300

Production Time Used

2400

Total Production Used

660

2400

200

800

700

1E+30

40

-180

300

1E+30

480

a. No, it could decrease to $30 without changing the solution.


b. Yes. The decrease of $10 is more than the allowable decrease of 5. The optimal solution would
change.
c. Each additional unit of polymer (up to 200) would increase profit by $32, each unit decrease of
polymer (up to 300) would decrease profit by $32.
d. This is a non-binding constraint. The optimal solution is 40 units below the constraint so
increasing the constraint would not change the solution or allow for additional profit.
e. The allowable increase on the shadow price for labor is 200 units. So we cant say what profit
would result from a 300 unit increase in lable without resolving the problem.
f. Let X = the increase in the price of Zoomer. We can be sure the optimal solution will not
change as long as 10/40 + X/53.33 < 1 or X < 40. So the maximum profit on Zoomers would
be $40+$40 = $80.
g. The new reduced cost on Razors would be 70 (232+24 )= -2. Thus, it would be
unprofitable to produce Razors in the new optimal solution. Thus, the optimal solution would
change.

Chapter 4: Q11
Electro-Poly is a leading maker of slip-rings. A $750,000 order has just been received for three types of
slip rings. The company has 10,000 hours of wiring capacity and 5,000 hours of harnessing capacity.
The per-unit cost to make and cost to buy as well as the resource requirements for making the three
models are summarized the following table. Electro-Poly wants to determine the number of slip rings to
make and the number to buy in order to fill the customer order at the least possible cost. For more
details, please refer to Electro-Polys make vs. buy problem in Section 3.9 of Chapter 3.
Model 1
Model 2
Model 3
Number ordered
3,000
2,000
900
Hours of wiring/unit
2
1.5
3
Hours of harnessing/unit 1
2
1
Cost to Make
$50
$83
$130
Cost to Buy
$61
$97
$145
Create a sensitivity report for this problem, and answer the following questions:
a. Is the solution degenerate?
b. How much can the cost of making model 1 slip rings increase before it becomes more
economical to buy some of them?
c. Suppose the cost of making model 2 slip rings decreases by $9 per unit. Would the optimal
solution change?
d. Assume workers in the wiring area normally make $12 per hour and get 50% more when they
work overtime. Should Electro-Poly schedule these employees to work overtime to complete
this job? If so, how much money would this save?
e. Assume workers in the harnessing area normally make $12 per hour and get 50% more when
they work overtime. Should Electro-Poly schedule these employees to work overtime to
complete this job? If so, how much money would this save?

Adjustable Cells
Cell
$B$6
$C$6
$D$6
$B$7
$C$7
$D$7
Constraints

Name
- Make Model 1
- Make Model 2
- Make Model 3
- Buy Model 1
- Buy Model 2
- Buy Model 3

Final
Value
3,000
550
900
0
1,450
0

Cell
$B$13
$C$13
$D$13
$E$17
$E$18

Name
# Available Model 1
# Available Model 2
# Available Model 3
- Wiring Used
- Harnessing Used

Final
Value
3,000
2,000
900
9,525
5,000

Reduced
Cost
0.00
0.00
0.00
4.00
0.00
8.00

Objective
Coefficient
50
83
130
61
97
145

Allowable
Increase
4
14
8
1E+30
8
1E+30

Allowable
Decrease
57
8
137
4
14
8

Shadow
Price
57.00
97.00
137.00
0.00
-7.00

Constraint
R.H. Side
3000
2000
900
10000
5000

Allowable
Increase
380
1E+30
211.1111
1E+30
633.3333

Allowable
Decrease
2900
1450
900
475
1100

ANS:
a. No. None of the Allowable Increase and Allowable Decrease Columns of the RHS value of the
resources constraint is zero.
b. The cost of making model 1 slip rings can increase by $4 without changing the solution.
c. Yes. The allowable decrease on the objective coefficient for making model 2 slip rings is $8.
d. No. There is presently a surplus of 475 hours in the wiring department. Overtime would only
add to this surplus.
e. Yes. Harnessing represents a binding constraint with a shadow price of -$7. Each additional
unit of this resource (up to 633.33) will reduce costs by $7. Since workers are paid an additional
$6 per hour for overtime, the company could save $633.33.