Linear Programming

LINEAR PROGRAMMING
CASE STUDIES AND SOLUTIONS
Vassilis Kostoglou
E-mail: vkostogl@it.teithe.gr
URL: www.it.teithe.gr/~vkostogl
LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS
Case study 1
Portfolio selection
Select a portfolio package from a set of alternative investments
Maximization of the expected return or minimization of the risk
Available capital
Companys policy
Duration of investments economic life, potential growth rate, danger, liquidity
Return data
Expected annual return of investments
Investment
Expected annual return rate (%)
Share A manufacturing sector
15.4
Share B - manufacturing sector
19.2
Share C - food and beverage sector
18.7
Share D food and beverage sector
13.5
Mutual fund E
17.8
Mutual fund Z
16.3
Requirements
Total amount = 90000
Amount in shares of a sector no larger than 50% of total available
Amount in shares with the larger return of a sector less or equal to 80% of sectors
total amount
Amount in manufacturing company less or equal to 10% of the whole share

amount
Amount in mutual funds less or equal to 25% of the amount in manufacturing

shares
Solution
Decision variables
x1 = invested amount in share A of the manufacturing sector
x2 = invested amount in share B of the manufacturing sector
x3 = invested amount in share C of the food and beverage sector
x4 = invested amount in share D of the food and beverage sector
x5 = invested amount in mutual fund E
x6 = invested amount in mutual fund Z
Summary of the model

Max z = 0.154x1 + 0.192x2 + 0.187x3 + 0.135 x4 + 0.178x5 + 0.163x6
with constraints:
1.
2.
3.
4.
5.
6.
7.
x1
x1
-0.8 x1
-0.1 x1
-0.25 x1
+
+
+
+
-
x2
x2
x3
x4
x3
x4
0.2 x3
0.1 x3
0.8 x4
0.1 x4
x5
x6 <=
<=
<=
<=
<=
<=
<=
0.2 x2
0.9 x2
0.25 x2
x5
x6
90.000
45.000
45.000
0
0
0
0
and
xi >= 0, i = 1, 2,, 6
Summary of results
Results of optimal solution
Investment
(1)
Amount invested
(2)
Annual return rate

expected (%)
(3)
Total expected return of

the investment
(4) = (2) x (3)
Share A
27900
15.4
4296.6
Share B
8100
19.2
1555.2
Share C
36000
18.7
6732
Share D
9000
13.5
1215
Mutual fund E
9000
Mutual fund Z
Total
90000
17.8
16.3
17.11
1602
0
15400.8
Solution with QSB
QSB+
|---QSB+-------------- Solution Summary for case study 1--------------------|
|----------------------------------------------------------------------------|
| Variable | Variable |
|Opportuni-| Minimum | Current | Maximum |
| Number |
Name
| Solution | ty Cost |Obj. Coef.|Obj. Coef.|Obj. Coef.|
|----------+----------+----------+----------+----------+----------+----------|
|
1
|
X1
|
27900 |
0 | -.070777 |
.154 | .1764444|
|
2
|
X2
|
8100 |
0 |
.154 |
.192 |
.394|
|
3
|
X3
|
36000 |
0 |
.1638 |
.187 |
M|
|
4
|
X4
|
9000 |
0 | 0.042199 |
.135 |
.187|
|
5
|
X5
|
9000 |
0 |
.163 |
.178 | .2708001|
|
6
|
X6
|
0 |
.015 |
-M |
.163 |
.178|
|----------------------------------------------------------------------------|
|
Maximized OBJ = 15400.8 Iteration = 7 Elapsed CPU seconds = 0
|
|----------------------------------------------------------------------------|
|----------------------------------------------------------------------------|
|---------------- Constraint Summary for 3.2 ------------------------|
|----------------------------------------------------------------------------|
|Constraint|Constraint| Shadow | Surplus | Minimum | Current | Maximum |
| Number | Status | Price
|
| R. H. S. | R. H. S. | R. H. S. |
|----------+----------+----------+----------+----------+----------+----------|
|
1
|Tight (<)|
.16184 |
0 | 53035.71 |
90000 |
101250 |
|
2
|Loose (<)|
0 |
9000 |
36000 |
45000 |
M |
|
3
|Tight (<)| 0.018560 |
0 |
33750 |
45000 | 76363.63 |
|
4
|Loose (<)|
0 |
20700 |
-20700 |
0 |
M |
|
5
|Tight (<)|
.052 |
0 |
-36000 |
0 |
9000 |
|
6
|Tight (<)|
.038 |
0 |
-8100 |
0 |
20700 |
|
7
|Tight (<)|
.01616 |
0 |
-11250 |
0 | 36964.29 |
|----------------------------------------------------------------------------|
9
Solution with LINDO
10
LINDO results (1)

LP OPTIMUM FOUND AT STEP
6
OBJECTIVE FUNCTION VALUE
1)
15400.80
VARIABLE
VALUE
REDUCED COST
X1
27900.000000
0.000000
X2
8100.000000
0.000000
X3
36000.000000
0.000000
X4
9000.000000
0.000000
X5
9000.000000
0.000000
X6
0.000000
0.015000
ROW SLACK OR SURPLUS DUAL PRICES
1)
0.000000
0.161840
2)
9000.000000
0.000000
3)
0.000000
0.018560
4)
20700.000000
0.000000
5)
0.000000
0.052000
6)
0.000000
0.038000
7)
0.000000
0.016160
NO. ITERATIONS=
6
11
LINDO results (2)

RANGES IN WHICH THE BASIS IS UNCHANGED:
OBJ COEFFICIENT RANGES
VARIABLE
CURRENT
ALLOWABLE
ALLOWABLE
COEF
INCREASE
DECREASE
X1
0.154000
0.022444
0.224778
X2
0.192000
0.202000
0.038000
X3
0.187000
INFINITY
0.023200
X4
0.135000
0.052000
0.092800
X5
0.178000
0.092800
0.015000
X6
0.163000
0.015000
INFINITY
ROW
1
2
3
4
5
6
7
CURRENT
RHS
90000.000000
45000.000000
45000.000000
0.000000
0.000000
0.000000
0.000000
RIGHTHAND SIDE RANGES

ALLOWABLE
ALLOWABLE
INCREASE
DECREASE
11250.000000
36964.285156
INFINITY
9000.000000
31363.634766
11250.000000
INFINITY
20700.000000
9000.000000
36000.000000
20700.000000
8100.000000
36964.285156
11250.000000
12
Solution with Excel
13
Solution window
14
Answer report
15
Sensitivity analysis
16
Case Study 2
Financial programming problem
Initial amount: 80000
Timeframe of investments decisions: 4 months
Two-month government bonds: return 3%
Three-month government bills: return 6.5%
Bank deposits: interest 1%
At the beginning of the 5th month at least 40000 are needed
Maximum amount in two-month or three-month bonds: 32000

17
Decision variables
j = amount to be invested in government bonds at the beginning of the month j
Cj = amount to be invested in government bills at the beginning of the month j
Dj= amount to be invested in bank deposits at the beginning of the month j
18
Objective function (total return)

Max z
0.03B1
0.03B2
0.03B3
0.03B4
0.065C1
0.065C2
0.065C3
0.065C4
0.01D1
0.01C2
0.01C3
0.01D4
Basic rule of capital flow:

Invested amount (start t) + Cash available (start t) =
Available amount (end t-1) + Cash available (end t-1)
19
Mathematical model
1.
B1
2.
B2
3. - 1.03B1
4. - 1.03B2
5.
1.03B3
6.
B1
7.
B1
8.
B2
9.
B3
10.
C1
11.
C1
12.
C1
13.
C2
+
C1
+
C2
+
B3
+
B4
+ 1.065C1
+
+
+
+
+
+
+
+
D1
1.01D1 +
+
C3 - 1.065C1 +
+ 1.01D4
D2
1.01D2 +
C4 -
D3
1.01D3 +
B2
B3
B4
C2
C2 +
C3 +
C3
C4
=
=
=
D4 =
>=
<=
<=
<=
<=
<=
<=
<=
<=
80000
0
0
0
40000
32000
32000
32000
32000
32000
32000
32000
32000
Bi, Ci, Di >= 0, for i = 1, 2, 3, 4

20
An alternative objective function

Maximization of final value:
(the intermediate returns are included after their reinvestment)
Max Z = 1.03B3+ 1.03B4 + 1.065C2 + 1.065C3 + 1.065C4 + 1.01D4
21
Summarized results
Results of optimal solution
Investment
(1)
B1
B3
B4
C1
C4
D1
D2
D3
D4
Amount invested
(2)
32000.000
19557.842
12442.157
32000.000
32000.000
16000.000
16160.000
29723.750
19658.834
Investment return Total return

(3)
(4) = (2) x (3)
0.03
960.000
0.03
586.735
0.03
373.265
0.065
2080.000
0.065
2080.000
0.01
160.000
0.01
161.600
0.01
297.237
0.01
196.588
Total
6895.425
22
Solution with QSB (1st)
23
Solution with QSB (2nd)
24
Solution with QSB (3rd alternative)
25
QSB+ (1-1)
|------------------ Solution Summary for case study 2------------------------|
|----------------------------------------------------------------------------|
| Number |
Name
|----------+----------+----------+----------+----------+----------+----------|
|
1
|
1
|
32000 |
0 | 0.029899 |
.03 |
M|
|
2
|
2
|
0 |
0 | 0.019901 |
.03 |0.03010097|
|
3
|
3
| 19557.84 |
0 | 0.019903 |
.03 |
.0401|
|
4
|
4
| 12442.16 |
0 |
.0199 |
.03 |0.07543910|
|
5
|
1
|
32000 |
0 | 0.029606 |
.065 |
M|
|
6
|
2
|
0 | 0.045348 |
-M |
.065 | .1103485|
|
7
|
3
|
0 | 0.010200 |
-M |
.065 |0.07520001|
|
8
|
4
|
32000 |
0 | 0.054799 |
.065 |
M|
|
9
|
1
|
16000 |
0 |
-M |
.01 |0.01010097|
|
10
|
2
|
16160 |
0 | -9.90E19 |
.01 |0.02009801|
|
11
|
3
| 29723.76 |
0 | 0.009900 |
.01 |0.02009603|
|
12
|
4
| 19658.84 |
0 | -.999996 |
.01 |
.0199|
|----------------------------------------------------------------------------|
| Maximized OBJ = 6895.425 Iteration = 13 Elapsed CPU seconds = .0546875 |
|----------------------------------------------------------------------------|
26
QSB+ (1-2)
|---------------- Constraint Summary for case study 2 -----------------------|
|----------------------------------------------------------------------------|
|
| R. H. S. | R. H. S. | R. H. S. |
|----------+----------+----------+----------+----------+----------+----------|
|
1
|Tight (=)| 0.050909 |
0 | 67805.39 |
80000 | 99168.72 |
|
2
|Tight (=)| .040504 |
0 | -12316.5 |
0 | 19360.4 |
|
3
|Tight (=)| 0.030201 |
0 | -12439.7 |
0 | 19554.01 |
|
4
|Tight (=)| 0.020001 |
0 | -12564.1 |
0 | 19749.54 |
|
5
|Tight (>)| -0.00990 |
0 | 20052.96 |
40000 | 52689.76 |
|
6
|Tight (<)| 0.000100 |
0 | 19559.06 |
32000 |
32000 |
|
7
|Tight (<)| 0.010098 |
0 |
32000 |
32000 | 44565.35 |
|
8
|Loose (<)|
0 | 12442.16 | 19557.84 |
32000 |
M |
|
9
|Tight (<)| 0.009998 |
0 | 12250.46 |
32000 | 44564.12 |
|
10
|Tight (<)|
0 |
0 |
32000 |
32000 |
M |
|
11
|Tight (<)| 0.035393 |
0 |
0 |
32000 |
32000 |
|
12
|Tight (<)|
0 |
0 |
32000 |
32000 |
M |
|
13
|Tight (<)| 0.044998 |
0 | 12250.46 |
32000 | 44564.12 |
|----------------------------------------------------------------------------|
| Maximized OBJ = 6895.425 Iteration = 13 Elapsed CPU seconds = .0546875 |
|----------------------------------------------------------------------------|
27
QSB+ (2-1)
|--------------------- Solution Summary for case study 2---------------------|
|----------------------------------------------------------------------------|
| Number |
Name
|----------+----------+----------+----------+----------+----------+----------|
|
1
|
1
|
32000 |
0 | -0.00010 |
0 |
M|
|
2
|
2
|
0 |
0 | -0.01009 |
0 |0.00010097|
|
3
|
3
| 19557.84 |
0 | 1.019904 |
1.03 |
1.0401|
|
4
|
4
| 12442.16 |
0 |
1.0199 |
1.03 | 1.075439|
|
5
|
1
|
32000 |
0 | -0.03539 |
0 |
M|
|
6
|
2
|
0 | 0.045348 |
-M |
1.065 | 1.110349|
|
7
|
3
|
0 | 0.010200 |
-M |
1.065 |
1.0752|
|
8
|
4
|
32000 |
0 |
1.0548 |
1.065 |
M|
|
9
|
1
|
16000 |
0 |
-M |
0 |0.00010097|
|
10
|
2
|
16160 |
0 | -9.90E19 |
0 |0.01009800|
|
11
|
3
| 29723.76 |
0 | -0.00009 |
0 |0.01009602|
|
12
|
4
| 19658.84 |
0 | 0.000001 |
1.01 |
1.0199|
|----------------------------------------------------------------------------|
| Maximized OBJ = 86895.42 Iteration = 13 Elapsed CPU seconds = 0.058593 |
|----------------------------------------------------------------------------|
|----------------------------------------------------------------------------|
28
Alternative objective function

QSB+ (2-2)
|-------------------- Constraint Summary for case study 2--------------------|
|----------------------------------------------------------------------------|
|
| R. H. S. | R. H. S. | R. H. S. |
|----------+----------+----------+----------+----------+----------+----------|
|
1
|Tight (=)| 1.050909 |
0 | 67805.39 |
80000 | 99168.72 |
|
2
|Tight (=)| 1.040504 |
0 | -12316.5 |
0 | 19360.4 |
|
3
|Tight (=)| 1.030202 |
0 | -12439.7 |
0 | 19554.01 |
|
4
|Tight (=)| 1.020002 |
0 | -12564.1 |
0 | 19749.54 |
|
5
|Tight (>)| -0.00990 |
0 | 20052.96 |
40000 | 52689.76 |
|
6
|Tight (<)| 0.000100 |
0 | 19559.06 |
32000 |
32000 |
|
7
|Tight (<)| 0.010098 |
0 |
32000 |
32000 | 44565.35 |
|
8
|Loose (<)|
0 | 12442.16 | 19557.84 |
32000 |
M |
|
9
|Tight (<)| 0.009998 |
0 | 12250.46 |
32000 | 44564.12 |
|
10
|Tight (<)|
0 |
0 |
32000 |
32000 |
M |
|
11
|Tight (<)| 0.035393 |
0 |
0 |
32000 |
32000 |
|
12
|Tight (<)|
0 |
0 |
32000 |
32000 |
M |
|
13
|Tight (<)| 0.044998 |
0 | 12250.46 |
32000 | 44564.12 |
|----------------------------------------------------------------------------|
| Maximized OBJ = 86895.42 Iteration = 13 Elapsed CPU seconds = 0.058593 |
|----------------------------------------------------------------------------|
|----------------------------------------------------------------------------|
29
Solution with Excel
30
Solution window
31
Answer report
32
33
Case Study 3
Investment choice problem in a limited capitals status
There are five independent investments
Maximization of the total present net value
Satisfaction of budget limitations
Cash inflows of the investments
Cash outflows of the investments
Each investment is divisible (investment rate)

34
Inflow data
Cash inflows
Year
Investment
1
38
11
17
25
41
16
24
11
28
3
4
54
-
15
20
29
-
13
19
35
46
35
Outflow data
Cash outflows
Year
Investment
Amount
Available
0
1
34
13
10
5
16
8
9
4
31
10
55
28
2
3
14
17
6
6
10
11
6
7
13
12
30
37
16
30
36
Table of cash flows

Cash flows of the problem
Year
0
1
2
3
4
NPV
Investment
1
-34
25
27
37
38.14
2
-10
6
10
9
12
18.67
3
-16
9
14
18
17.26
10% discount rate of

the interest
4
-9
4
5
6
14
12.83
5
-31
15
15
23
30
32.79
1.000
0.909
30.826
0.751
0.683
Net Present Value1 (NPV1) = -34 *1 + 25 0.909 + 27 0.826 + 37 0.751 = 38.14
37
Decision variables Objective function

xj = investment rate j (j = 1, 2, 3, 4, 5) which is accepted in the optimum solution
Max z = 38.14x1 + 18.67x2 + 17.26x3 +12.83x4 + 32.79x5
38
Constraints
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
34x1
13x1
14x1
17 x1
+
+
+
+
x1
+
-
10x2
5x2
6x2
6x 2
8x 2
+
+
+
+
16x3
8x 3
10x3
11x3
+
+
+
+
+
31x4
4x 4
6x4
7x4
5x 4
x2
+
+
+
+
+
31x5
10x5
13x5
12x5
16x5
x5
<=
<=
<=
<=
<=
<=
<=
x3
x4
x5
55
28
30
37
30
1
1
1
1
1
xj >= 0, j = 1, 2, 5
39
Summarized results
Optimal solution results
Variable
(1)
x1
x2
x3
x4
x5
Variable value
(2)
1
1
0.125
1
1
NPV (* 1000)
(3)
38.14
18.67
17.26
12.83
32.79
Total
Total NPV (* 1000)

(4) = (2) x (3)
38.14
18.67
2.1575
12.83
0
71.7975
40
Solution with QSB
41
QSB+
|-QSB+------------ Solution Summary for case study 3 ------------------------|
| Number |
Name
|----------+----------+----------+----------+----------+----------+----------|
|
1
|
X1
|
1 |
0 | 36.6775 |
38.14 |
M|
|
2
|
X2
|
1 |
0 | 10.7875 |
18.67 |
M|
|
3
|
X3
|
.125 |
0 | 16.92387 |
17.26 | 17.94823|
|
4
|
X4
|
1 |
0 | 9.70875 |
12.83 |
M|
|
5
|
X5
|
0 | .6512495 |
-M |
32.79 | 33.44125|
|----------------------------------------------------------------------------|
|
Maximized OBJ = 71.7975 Iteration = 5 Elapsed CPU seconds = 0
|
|----------------------------------------------------------------------------|
|----------------- Constraint Summary for 3.4 -----------------------|
|----------------------------------------------------------------------------|
|
| R. H. S. | R. H. S. | R. H. S. |
|----------+----------+----------+----------+----------+----------+----------|
|
1
|Tight (<)| 1.07875 |
0 |
53 |
55 |
59.4 |
|
2
|Loose (<)|
0 |
5 |
23 |
28 |
M |
|
3
|Loose (<)|
0 |
2.75 |
27.25 |
30 |
M |
|
4
|Loose (<)|
0 |
5.625 |
31.375 |
37 |
M |
|
5
|Loose (<)|
0 |
17 |
13 |
30 |
M |
|
6
|Tight (<)| 1.462499 |
0 | .6206896 |
1 | 1.058824 |
|
7
|Tight (<)|
7.8825 |
0 |
0 |
1 |
1.2 |
|
8
|Loose (<)|
0 |
.875 |
.125 |
1 |
M |
|
9
|Tight (<)| 3.12125 |
0 |
0 |
1 | 1.222222 |
|
10
|Loose (<)|
0 |
1 |
0 |
1 |
M |
42
Solution with Excel
43
Solution window
44
Answer window
45
Sensitivity analysis window
46
Case study 4
Advertising media selection
Problem data
Advertising media
1.
2.
3.
4.
5.
6.
Friday day
Saturday day
Sunday day
Friday night
Saturday night
Sunday - night
Cost of one view

(in )
400
450
450
500
550
550
Units of expected audience

rate of one view
5000
5500
5700
7500
8200
8400
47
Other relevant data
Goal: Determination of views / records in order to maximize the total audience rate
Total available amount: 45000
Maximum amount for Friday: 11000
Maximum amount for Saturday: 14400
Total daily view number: at least 20
Total nightly view number: at least 50% of the total
Maximum view number: each day 12, each night 18

48
Decision variables
1 = number of views on Friday (day)
2 = number of views on Saturday (day)
3 = number of views on Sunday (day)
4 = number of views on Friday (night)
5 = number of views on Saturday (night)
6 = number of views on Sunday (night)
49
Mathematical model
Max z = 5000x1 + 5500x2 + 5700x3 + 7500x4 + 8200x5 + 8400x6
with constraints:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
400x1 +
400x1
x1 +
-0.5x1 x1
450x2 + 450x3 +
+
450x2
x2 +
0.5x2 -
x3
0.5x3 +
500x4
500x4
0.5x4
550x5
550x5
0.5x5
550x6
0.5x6
x2
x3
x4
x5
x6
<=
<=
<=
>=
>=
<=
<=
<=
<=
<=
<=
45000
11000
14400
20
0
12
12
12
18
18
18
xj >= 0, j = 1, 2, 5
50
Results
Variable
(1)
x1
x2
x3
x4
x5
x6
Value
(number of views)
(2)
5
10
12
18
18
18
Units of view
Total audience rate
audience rate
of views
(3)
(4) = (2) x (3)
5000
25000
5500
55000
5700
68400
7500
135000
8200
147600
8400
151200
Total
582200
51
Solution with QSB
52
QSB+
|-QSB+------------ Solution Summary for case study 4 ------------------------|
|----------------------------------------------------------------------------|
| Number |
Name
|----------+----------+----------+----------+----------+----------+----------|
|
1
|
X1
|
5 |
0 |
0 |
5000 |
6000|
|
2
|
X2
|
10 |
0 |
0 |
5500 | 6709.091|
|
3
|
X3
|
12 |
0 |
0 |
5700 |
M|
|
4
|
X4
|
18 |
0 |
6250 |
7500 |
M|
|
5
|
X5
|
18 |
0 | 6722.222 |
8200 |
M|
|
6
|
X6
|
18 |
0 |
0 |
8400 |
M|
|----------------------------------------------------------------------------|
|
Maximized OBJ = 582200 Iteration = 8 Elapsed CPU seconds = .0625
|
|----------------------------------------------------------------------------|
|----------------------------------------------------------------------------|
|----------------------------------------------------------------------------|
|
| R. H. S. | R. H. S. | R. H. S. |
|----------+----------+----------+----------+----------+----------+----------|
|
1
|Loose (<)|
0 |
4300 |
40700 |
45000 |
M |
|
2
|Tight (<)|
12.5 |
0 |
9000 |
11000 |
13800 |
|
3
|Tight (<)| 12.22222 |
0 |
11250 |
14400 |
15300 |
|
4
|Loose (>)|
0 |
7 |
-M |
20 |
27 |
|
5
|Loose (>)|
0 |
13.5 |
-M |
0 |
13.5 |
|
6
|Loose (<)|
0 |
7 |
5 |
12 |
M |
|
7
|Loose (<)|
0 |
2 |
10 |
12 |
M |
|
8
|Tight (<)|
5700 |
0 |
5 |
12 | 21.55556 |
|
9
|Tight (<)|
1250 |
0 |
12.4 |
18 |
22 |
|
10
|Tight (<)| 1477.778 |
0 | 16.36364 |
18 | 23.72727 |
|
11
|Tight (<)|
8400 |
0 |
0 |
18 | 25.81818 |
|----------------------------------------------------------------------------|
53
Solution with LINDO
54
LINDO results (1)

7
1)
582200.0
VARIABLE
X1
X2
X3
X4
X5
X6
VALUE
5.000000
10.000000
12.000000
18.000000
18.000000
18.000000
ROW
SLACK OR SURPLUS
1)
4300.000000
2)
0.000000
3)
0.000000
4)
7.000000
5)
13.500000
6)
7.000000
7)
2.000000
8)
0.000000
9)
0.000000
10)
0.000000
11)
0.000000
NO. ITERATIONS=
7
REDUCED COST
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
DUAL PRICES
0.000000
12.500000
12.222222
0.000000
0.000000
0.000000
0.000000
5700.000000
1250.000000
1477.777832
8400.000000
55
LINDO results (2)

VARIABLE
CURRENT
ALLOWABLE
ALLOWABLE
COEF
INCREASE
DECREASE
X1
5000.000000
1000.000000
5000.000000
X2
5500.000000
1209.090942
5500.000000
X3
5700.000000
INFINITY
5700.000000
X4
7500.000000
INFINITY
1250.000000
X5
8200.000000
INFINITY
1477.777832
X6
8400.000000
INFINITY
8400.000000
ROW
CURRENT
ALLOWABLE
ALLOWABLE
RHS
INCREASE
DECREASE
1
45000.000000
INFINITY
4300.000000
2
11000.000000
2800.000000
2000.000000
3
14400.000000
900.000000
3150.000000
4
20.000000
7.000000
INFINITY
5
0.000000
13.500000
INFINITY
6
12.000000
INFINITY
7.000000
7
12.000000
INFINITY
2.000000
8
12.000000
9.555555
7.000000
9
18.000000
4.000000
5.600000
10
18.000000
5.727273
1.636364
11
18.000000
7.818182
18.000000
56
Results with Excel
57
Solution window
58
Answer report
59
60
Case study 5
Marketing research
Personal interviews, Daily (D) and Nightly (N)
Households: with children, without children, of one person
Sample = 800 households
At least: 400 with children, 200 without children, 100 of one person
Respondents Night > Respondents Day
To be done during: At least 50% of interviews to households with children

At least 60% of interviews to households without children
At least 70% of interviews to households of one person
61
Cost elements
Interview cost (in monetary units)
Household category
With children
Without children
One person
Day
1500
1300
1000
Night
1800
1600
1200
62
Decision variables
x11 = Number of interviews to households with children carried out during the day
x12 = Number of interviews to households with children carried out during the night
x21= Number of interviews to households without children carried out during the day
x22 = Number of interviews to households without children carried out during the night
x31 = Number of interviews to households of one person carried out during the day
x32 = Number of interviews to households of one person carried out during the night
63
Mathematical model
Min z = 1.500x11 + 1.800x12 + 1.300x21 + 1.600x22 + 1.000x31 + 1.200x32
with constraints:
1.
x11 +
x12 +
x21
2.
x11 +
x12
3.
x21
4.
5.
-x11 +
x12 x21
6. -0.5x11 + 0.5x12
7.
- 0.6x21
8.
x22 +
x22 +
+
+
x22 -
x31 +
x32
x31 +
x31 +
x32
x32
0.4x22
-
0.7x31 + 0.3 x32
=
>=
>=
>=
>=
>=
>=
>=
800
400
200
100
0
0
0
0
and xjj >= 0, for i = 1, 2, 3 and j =1, 2
64
Summarized results
Variable
(1)
x11
x12
x21
x22
x31
x32
Total
Number of interviews
(2)
200
200
80
120
60
140
800
Interview cost
(3)
1500
1800
1300
1600
1000
1200
Total interview cost

(4) = (2) x (3)
300000
360000
104000
192000
60000
168000
1184000
65
Solution with QSB
66
QSB+
|-------------------- Solution Summary for case study 5 ---------------------|
|----------------------------------------------------------------------------|
| Number |
Name
|----------+----------+----------+----------+----------+----------+----------|
|
1
|
x11
|
200 |
0 |
480 |
1500 |
1800|
|
2
|
x12
|
200 |
0 |
1500 |
1800 |
M|
|
3
|
x21
|
80 |
0 |
450 |
1300 |
1600|
|
4
|
x22
|
120 |
0 |
1300 |
1600 |
M|
|
5
|
x31
|
60 |
0 |
-M |
1000 |
1200|
|
6
|
x32
|
140 |
0 |
1000 |
1200 | 1685.714|
|----------------------------------------------------------------------------|
|
Minimized OBJ = 1184000 Iteration = 9 Elapsed CPU seconds = 0
|
|----------------------------------------------------------------------------|
|
| R. H. S. | R. H. S. | R. H. S. |
|----------+----------+----------+----------+----------+----------+----------|
|
1
|Tight (=)|
1140 |
0 |
700 |
800 |
M |
|
2
|Tight (>)|
510 |
0 |
0 |
400 |
500 |
|
3
|Tight (>)|
340 |
0 | 0.000015 |
200 |
300 |
|
4
|Loose (>)|
0 |
100 |
-M |
100 |
200 |
|
5
|Loose (>)|
0 |
120 |
-M |
0 |
120 |
|
6
|Tight (>)|
-300 |
0 |
-60 |
0 |
200 |
|
7
|Tight (>)|
-300 |
0 |
-60 |
0 |
80 |
|
8
|Tight (>)|
-200 |
0 |
-60 |
0 |
60 |
67
Solution with LINDO
68
LINDO results (1)


1)
1184000.
VARIABLE
X11
X12
X21
X22
X31
X32
ROW
1)
2)
3)
4)
5)
6)
7)
8)
VALUE
200.000000
200.000000
80.000000
120.000000
60.000000
140.000000
SLACK OR SURPLUS
0.000000
0.000000
0.000000
100.000000
120.000000
0.000000
0.000000
0.000000
NO. ITERATIONS=
REDUCED COST
0.000000
0.000000
0.000000
0.000000
0.000000
0.000000
DUAL PRICES
-1140.000000
-510.000000
-340.000000
0.000000
0.000000
-300.000000
-300.000000
-200.000000
8
69
LINDO results (2)

VARIABLE
X11
X12
X21
X22
X31
X32
ROW
1
2
3
4
5
6
7
8
CURRENT
COEF
1500.000000
1800.000000
1300.000000
1600.000000
1000.000000
1200.000000

ALLOWABLE
ALLOWABLE
INCREASE
DECREASE
300.000000
1020.000000
INFINITY
300.000000
300.000000
850.000000
INFINITY
300.000000
200.000000
INFINITY
485.714294
200.000000
CURRENT
RHS
800.000000
400.000000
200.000000
100.000000
0.000000
0.000000
0.000000
0.000000

ALLOWABLE
ALLOWABLE
INCREASE
DECREASE
INFINITY
100.000000
100.000000
400.000000
100.000000
199.999985
100.000000
INFINITY
120.000000
INFINITY
200.000000
60.000000
80.000000
60.000000
60.000000
60.000000
70
Results with Excel
71
Solution window
72
Answer report
73
Sensitivity analysis report
74
Case study 6
Human resources management
Allocation of available human resources to different departments, work centers,
shifts etc.
Recruitment of seasonal staff
Allocation of staff to shifts
Minimizing the number of employees who should work in various time periods
during the day
75
Problems data
Time period
07 a.m. 09 a.m.
09 a.m. 11 a.m.
11 a.m. 13 p.m.
13 p.m. 15 p.m.
15 p.m. 17 p.m.
17 p.m. 19 p.m.
19 p.m. 21 p.m.
21 p.m. 23 p.m.
23 p.m. 07 a.m.
Gross employee cost
per day (in )
1
+
+
+
+
230
2
+
+
+
+
220
Shift
3
+
+
+
+
225
+
+
+
+
240
+
260
Minimum number of
required employees
35
68
60
57
65
63
72
33
12
76
Mathematical model
xj = number of employees starting in shift j
Min z = 230x1 + 220x2 + 225x3 + 240x4 + 260x5
with constraints:
1.
2.
3.
4.
5.
6.
7.
8.
9.
x1
x1
x1
x1
+
+
+
x2
x2
x2
x2
+
+
x3
x3
x3
x3
+
+
+
x4
x4
x4
x4
x5
xj >= 0,
>=
>=
>=
>=
>=
>=
>=
>=
>=
35
68
60
57
65
63
72
33
12
(07 a.m. 09 a.m.)

(09 a.m. 11 a.m.)
(11 a.m. 13 p.m.)
(13 p.m. 15 p.m.)
(15 p.m. 17 p.m.)
(17 p.m. 19 p.m.)
(19 p.m. 21 p.m.)
(21 p.m. 23 p.m.)
(23 p.m. 07 a.m.)
j = 1, 2,,5
77
Model with less constraints

Min z = 230x1 + 220x2 + 225x3 + 240x4 + 260x5
with constraints:
1.
2.
3.
4.
5.
6.
7.
x1
x1
x1
+
+
x2
x2
x2
+
+
x3
x3
x3
+
+
x4
x4
x4
x5
xj >= 0,
>=
>=
>=
>=
>=
>=
>=
35
68
57
65
72
33
12
(07 a.m. 09 a.m.)

(09 a.m. 13 a.m.)
(13 p.m. 15 p.m.)
(15 p.m. 17 p.m.)
(17 p.m. 21 p.m.)
(21 p.m. 23 p.m.)
(23 p.m. 07 a.m.)
j = 1, 2,,5
78
Summarized results
Variable
Value
(1)
x1
x2
x3
x4
x5
(2)
35
33
39
33
12
Employee cost Total cost of employees

per day
per day
(3)
(4) = (2) x (3)
230
8050
220
7260
225
8770
240
7920
260
3120
Total
35125
79
Solution with QSB
80
QSB+
|----------------- Solution Summary for case study 6 ------------------------|
|----------------------------------------------------------------------------|
| Number |
Name
|----------+----------+----------+----------+----------+----------+----------|
|
1
|
X1
|
35 |
0 |
220 |
230 |
M|
|
2
|
X2
|
33 |
0 |
0 |
220 |
230|
|
3
|
X3
|
39 |
0 |
0 |
225 |
240|
|
4
|
X4
|
33 |
0 |
225 |
240 |
M|
|
5
|
X5
|
12 |
0 |
0 |
260 |
M|
|----------------------------------------------------------------------------|
|
|
|----------------------------------------------------------------------------|
|----------------------------------------------------------------------------|
|
| R. H. S. | R. H. S. | R. H. S. |
|----------+----------+----------+----------+----------+----------+----------|
|
1
|Tight (>)|
10 |
0 |
0 |
35 |
68 |
|
2
|Tight (>)|
220 |
0 |
35 |
68 |
M |
|
3
|Loose (>)|
0 |
50 |
-M |
57 |
107 |
|
4
|Loose (>)|
0 |
40 |
-M |
65 |
105 |
|
5
|Tight (>)|
225 |
0 |
33 |
72 |
M |
|
6
|Tight (>)|
15 |
0 |
0 |
33 |
72 |
|
7
|Tight (>)|
260 |
0 |
0 |
12 |
M |
|----------------------------------------------------------------------------|
81
Solution with LINDO
82
LINDO results (1)

6
1)
35125.00
VARIABLE
VALUE
REDUCED COST
X1
35.000000
0.000000
X2
33.000000
0.000000
X3
39.000000
0.000000
X4
33.000000
0.000000
X5
12.000000
0.000000
ROW
SLACK OR SURPLUS
1)
0.000000
2)
0.000000
3)
50.000000
4)
40.000000
5)
0.000000
6)
0.000000
7)
0.000000
NO. ITERATIONS=
6
DUAL PRICES
-10.000000
-220.000000
0.000000
0.000000
-225.000000
-15.000000
-260.000000
83
LINDO results (2)

VARIABLE
X1
X2
X3
X4
X5
ROW
1
2
3
4
5
6
7
CURRENT
COEF
230.000000
220.000000
225.000000
240.000000
260.000000
CURRENT
RHS
35.000000
68.000000
57.000000
65.000000
72.000000
33.000000
12.000000

ALLOWABLE
ALLOWABLE
INCREASE
DECREASE
INFINITY
10.000000
10.000000
220.000000
15.000000
225.000000
INFINITY
15.000000
INFINITY
260.000000
ALLOWABLE
INCREASE
33.000000
INFINITY
50.000000
40.000000
INFINITY
39.000000
INFINITY
ALLOWABLE
DECREASE
35.000000
33.000000
INFINITY
INFINITY
39.000000
33.000000
12.000000
84
Case study 7
Production planning
Planning horizon: A number of time periods
Problem: Having a forecast for each periods demand, determine the products
quantities that can be produced with feasible methods in order to satisfy the total
demand with the minimum cost.
For two products and , there are demand forecasts for January, February and
March.
Initial stock: 100 units of product A and 120 units of product B.
Minimum total required stock: 130 units of product and 110 of product
Unit production cost: = 20 and = 25
Maintenance cost per period and per unit: 2% on the unit production cost
85
Demand
Bicycle demand
Month
January
February
March
Total
Bicycle
A
700
900
1000
2600
B
800
600
900
2.300
86
Capacity
Systems capacity
Month
January
February
March
Machine capacity
(machine hours)
3000
2800
3600
Available work
(man-hours)
2500
2300
2400
87
Use of resources
Required resources per product unit
Bicycle
A
B
Machine hours
1.5
1.6
Man-hours
1.1
1.2
88
Decision variables
xIJ = number of units of product I produced during month J,
where I = A, B and J = 1, 2, 3
IIJ = number of units of product I maintained in stock at the end of the month J,
where I = A, B and J = 1, 2, 3
J = 1 January
J = 2 February
J = 3 March
89
Objective function
Min z = 20XA1 + 20XA2 + 20XA3 + 25XB1 + 25XB2 + 25XB3 + 0.41IA1 + 0.41IA2 +
0.41IA3 + 0.5IB1 + 0.5IB2 + 0.5IB3
with the constraints:
Stock (end t-1) + Production (t) = Demand (t) + Reserve (end t)
90
Mathematical model
Min z = 20XA1 + 20XA2 + 20XA3 + 25XB1 + 25XB2 + 25XB3 + 0.41IA1 + 0.41IA2 +
0.41IA3 + 0.5IB1 + 0.5IB2 + 0.5IB3
with constraints:
1.
XA1
- IA1
=
600
January demand
2.
XB1
- IB1
=
680
January demand
3.
XA2
+ IA1
- IA2
=
900
February demand
4.
XB2
+ IB1
- IB2
=
600
February demand
5.
XA3
+ IA2
- IA3
=
1000
March demand
6.
XB3
+ IB2
- IB3
=
900
March demand
7.
IA3 >= 130
Total stock in March
8.
IB3 >= 110
Total stock in March
9.
1.5XA1
+ 1.6XB1
<=
3000
Machine hours
10.
1.5XA2
+ 1.6XB2
<=
2800
Machine hours
11.
1.5XA3
+ 1.6XB3
<=
3600
Machine hours
12.
1.1XA1
+ 1.2XB1
<=
2500
Man-hours
13.
1.1XA2
+ 1.2XB2
<=
2300
Man-hours
14.
1.1XA3
+ 1.2XB3
<=
2400
Man-hours
Xij >= 0,
i = A, B and j = 1,2,3
Iij >= 0,
i = A, B and j = 1,2,3
91
Summary results
Variable
Value
XA1
600
XA2
950
XA3
1080
XB1
680
XB2
600
XB3
1010
IA1
0
IA2
50
IA3
130
IB1
0
IB2
0
IB3
110
Cost per product unit

20
20
20
25
25
25
0.4
0.4
0.4
0.5
0.5
0.5
Total
Total product cost

12000
19000
21600
17000
15000
25250
0
20
52
0
0
55
109997
92
Solution with QSB (1)
93
Solution with QSB (2)
94
QSB+ (1)
|---------------- Solution Summary for case study 7 ------------------------|
|----------------------------------------------------------------------------|
| Number |
Name
|----------+----------+----------+----------+----------+----------+----------|
|
1
|
XA1
|
600 |
0 |
19.6 |
20 |
M|
|
2
|
XA2
| 950.0001 |
0 |
19.6 |
20 | 20.05833|
|
3
|
XA3
|
1080 |
0 | 19.94167 |
20 |
20.4|
|
4
|
XB1
|
680 |
0 |
24.5 |
25 |
M|
|
5
|
XB2
|
600 |
0 | 24.93636 |
25 |
25.5|
|
6
|
XB3
|
1010 |
0 | -.936363 |
25 | 25.06364|
|
7
|
IA1
|
0 |
.4 |
0 |
.4 |
M|
|
8
|
IA2
| 50.00007 |
0 | -2.98E-8 |
.4 | .4583333|
|
9
|
IA3
|
130 |
0 |
-20.4 |
.4 |
M|
|
10
|
IB1
|
0 |
.5 |
0 |
.5 |
M|
|
11
|
IB2
|
0 | 0.063636 | .4363636 |
.5 |
M|
|
12
|
IB3
|
110 |
0 | -25.4363 |
.5 |
M|
|----------------------------------------------------------------------------|
|
|
|----------------------------------------------------------------------------|
|----------------------------------------------------------------------------|
95
QSB+ (2)
|----------------------------------------------------------------------------|
|
| R. H. S. | R. H. S. | R. H. S. |
|----------+----------+----------+----------+----------+----------+----------|
|
1
|Tight (=)|
20 |
0 |
0 |
600 | 1274.667 |
|
2
|Tight (=)|
25 |
0 |
0 |
680 |
1312.5 |
|
3
|Tight (=)|
20 |
0 | -50.0000 |
900 | 1176.667 |
|
4
|Tight (=)|
25 |
0 |
0 |
600 | 859.3749 |
|
5
|Tight (=)|
20.4 |
0 | 949.9999 |
1000 | 1276.667 |
|
6
|Tight (=)| 25.43636 |
0 | 854.1666 |
900 | 1153.611 |
|
7
|Tight (>)|
20.8 |
0 | 79.99993 |
130 | 406.6666 |
|
8
|Tight (>)| 25.93636 |
0 | 64.16661 |
110 | 363.611 |
|
9
|Loose (<)|
0 |
1012 |
1988 |
3000 |
M |
|
10
|Loose (<)|
0 | 414.9999 |
2385 |
2800 |
M |
|
11
|Loose (<)|
0 | 364.0001 |
3236 |
3600 |
M |
|
12
|Loose (<)|
0 |
1024 |
1476 |
2500 |
M |
|
13
|Loose (<)|
0 | 534.9999 |
1765 |
2300 |
M |
|
14
|Loose (<)|
0 |
1024 | 2095.667 |
2400 |
2455 |
|----------------------------------------------------------------------------|
|
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|
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96
Solution with LINDO (1)

6
1)
109977.0
VARIABLE
VALUE
REDUCED COST
XA1
600.000000
0.000000
XA2
950.000000
0.000000
XA3
1080.000000
0.000000
XB1
680.000000
0.000000
XB2
600.000000
0.000000
XB3
1010.000000
0.000000
IA1
0.000000
0.400000
IA2
50.000000
0.000000
IA3
130.000000
0.000000
IB1
0.000000
0.500000
IB2
0.000000
0.063636
IB3
110.000000
0.000000
ROW
SLACK OR SURPLUS
1)
0.000000
2)
0.000000
3)
0.000000
4)
0.000000
5)
0.000000
6)
0.000000
7)
0.000000
8)
0.000000
9)
1012.000000
10)
415.000000
11)
364.000000
12)
1024.000000
13)
535.000000
14)
0.000000
NO. ITERATIONS=
6
DUAL PRICES
-20.000000
-25.000000
-20.000000
-25.000000
-20.400000
-25.436363
-20.799999
-25.936363
0.000000
0.000000
0.000000
0.000000
0.000000
0.363636
97

VARIABLE
CURRENT
ALLOWABLE
ALLOWABLE
COEF
INCREASE
DECREASE
XA1
20.000000
INFINITY
0.400000
XA2
20.000000
0.058334
0.400000
XA3
20.000000
0.400000
0.058334
XB1
25.000000
INFINITY
0.500000
XB2
25.000000
0.500000
0.063637
XB3
25.000000
0.063637
25.936363
IA1
0.400000
INFINITY
0.400000
IA2
0.400000
0.058334
0.400000
IA3
0.400000
INFINITY
20.799999
IB1
0.500000
INFINITY
0.500000
IB2
0.500000
INFINITY
0.063637
IB3
0.500000
INFINITY
25.936363
ROW
CURRENT
ALLOWABLE
ALLOWABLE
RHS
INCREASE
DECREASE
1
600.000000
674.666687
600.000000
2
680.000000
632.500000
680.000000
3
900.000000
276.666656
950.000000
4
600.000000
259.375000
600.000000
5
1000.000000
276.666656
50.000000
6
900.000000
253.611115
45.833332
7
130.000000
276.666656
50.000000
8
110.000000
253.611115
45.833332
9
3000.000000
INFINITY
1012.000000
10
2800.000000
INFINITY
415.000000
11
3600.000000
INFINITY
364.000000
12
2500.000000
INFINITY
1024.000000
13
2300.000000
INFINITY
535.000000
14
2400.000000
55.000000
304.333344
98
Case study 8
Diet problem
Identification of a diet or of a prescription meeting specific dietary requirements
Criterion: minimum cost
Xj = the amount of ingredient j for the production of one unit of animal feed
99
Problems data
Required nutritional
ingredient
Vitamin A
Vitamin C
Vitamin E
Proteins
Calories
Unit cost
Number of nutritional ingredients

per ingredient unit
Ingredient
1
2
3
4
80
115
100
90
110
90
85
100
50
70
105
80
250
300
210
240
480
510
470
530
180
160
145
200
Nutritional requirement
per animal feed unit
>= 80
>= 100
>= 60
>= 260
<= 2300
100
Mathematical model
Min z = 180x1 + 160x2 + 145x3 + 200x4
with constraints:
1.
2.
80x1 +
110x1 +
115x2 +
90x2 +
100x3 +
85x3 +
90x4 + >=
100x4 + >=
80
100
3.
4.
50x1 +
250x1 +
70x2 +
300x2 +
105x3 +
210x3 +
80x4 + >=
240x4 + >=
60
260
5.
6.
480x1 +
x1 +
510x2 +
x2 +
470x3 +
x3 +
530x4 + >=
x4 + >=
2300
1
xj >=
0,
for
j = 1,2,3,4
101
Summarized results
Variable
(1)
x1
x2
x3
x4
Total
Value
(2)
0.537
0.317
0.146
0
1
Unit cost
(3)
180
160
145
200
Total variable cost

(4) = (2) x (3)
96.66
50.72
21.17
0
168.55
102
Solution with QSB
103
QSB+
|----------------- Solution Summary for case study 8 ------------------------|
|----------------------------------------------------------------------------|
| Number |
Name
|----------+----------+----------+----------+----------+----------+----------|
|
1
|
X1
| .5365854 |
0 | 151.6667 |
180 |
220|
|
2
|
X2
| .3170732 |
0 |
152 |
160 |
223.75|
|
3
|
X3
| .1463415 |
0 |
-M |
145 |
155|
|
4
|
X4
|
0 | 33.41463 | 166.5854 |
200 |
M|
|----------------------------------------------------------------------------|
|
Minimized OBJ = 168.5366 Iteration = 8 Elapsed CPU seconds = 0
|
|----------------------------------------------------------------------------|
|----------------------------------------------------------------------------|
|
| R. H. S. | R. H. S. | R. H. S. |
|----------+----------+----------+----------+----------+----------+----------|
|
1
|Loose (>)|
0 | 14.02439 |
-M |
80 | 94.02439 |
|
2
|Tight (>)| 1.243902 |
0 | 87.77778 |
100 | 102.5352 |
|
3
|Loose (>)|
0 | 4.390244 |
-M |
60 | 64.39024 |
|
4
|Tight (>)| 0.097560 |
0 |
234 |
260 |
275 |
|
5
|Loose (<)|
0 | 1811.951 | 488.0488 |
2300 |
M |
|
6
|Tight (=)| 18.78049 |
0 | .9860031 |
1 | 1.166667 |
|----------------------------------------------------------------------------|
|
Minimized OBJ = 168.5366 Iteration = 8 Elapsed CPU seconds = 0
|
|----------------------------------------------------------------------------|
104

5
1)
168.5366
VARIABLE
VALUE
REDUCED COST
X1
0.536585
0.000000
X2
0.317073
0.000000
X3
0.146341
0.000000
X4
0.000000
33.414635
ROW
1)
2)
3)
4)
5)
6)
SLACK OR SURPLUS
14.024390
0.000000
4.390244
0.000000
1811.951172
0.000000
NO. ITERATIONS=
DUAL PRICES
0.000000
-1.243902
0.000000
-0.097561
0.000000
-18.780487
5
105

VARIABLE
CURRENT
ALLOWABLE
ALLOWABLE
COEF
INCREASE
DECREASE
X1
180.000000
40.000000
28.333334
X2
160.000000
63.750000
8.000000
X3
145.000000
10.000000
INFINITY
X4
200.000000
INFINITY
33.414635
ROW
1
2
3
4
5
6
CURRENT
RHS
80.000000
100.000000
60.000000
260.000000
2300.000000
1.000000

ALLOWABLE
ALLOWABLE
INCREASE
DECREASE
14.024390
INFINITY
2.535211
12.222223
4.390244
INFINITY
14.999999
26.000000
INFINITY
1811.951172
0.166667
0.013997
106
Case study 9
Mix problem
Determination of the best mix program of raw material for the production of final
products
Three main ingredients , and C
Three products: super fuel, unleaded, super unleaded
Minimum required octane number
Maximization of the total daily profit
Available quantities of main ingredients
Minimum required product quantities

107
Problems data
Main ingredient
Octane number
Cost per ton ()
A
B
C
120
90
130
38
42
105
Maximum daily
available quantity (tones)
1000
1200
700
108
Demand data
Fuel
A
B
C
Octane number
94
92
96
Cost per ton ()

85
80
88
Daily demand (tones)

800
1100
500
109
Decision variables
Xij = quantity of ingredient i mixed for the production of one tone of product j
for i = A, B, C and j = 1, 2, 3
j = 1 fuel super
j = 2 unleaded fuel
j = 3 super unleaded fuel
110
Consumption of resources and produced quantities

XA1 + XA2 + XA3 = daily used quantity of ingredient A
XB1 + XB2 + XB3 = daily used quantity of ingredient B
XC1 + XC2 + XC3 = daily used quantity of ingredient C
XA1 + XB1 + XC1 = daily poduced quantity of super fuel
XA2 + XB2 + XC2 = daily poduced quantity of unleaded fuel
XA3 + XB3 + XC3 = daily poduced quantity of super unleaded fuel
111
Income and cost functions

Daily income = 85(XA1 + XB1 + XC1) + 80(XA2 + XB2 + XC2) + 88(XA3 + XB3 + XC3)
Daily relative cost = 38(XA1 + XA2 + XA3) + 42(XB1 + XB2 + XB3) + 105(XC1 + XC2 + XC3)
112
Objective function
Z=
(85 38)XA1 + (80 38)XA2 + (88 38)XA3

+ (85 42)XB1 + (80 42)XB2 + (88 42)XB3
+ (85 105)XC1 + (80 105)XC2 + (88 105)XC3,
Max z = 47XA1 +42XA2 +50XA3 + 43XB1 +38XB2 + 46XB3 20XC1 25XC2 17XC3
113
Proportion (mix) constraints

Octanes of super fuel:
(120XA1 + 90XB1 + 130XC1) / (XA1 + XB1 + XC1) >= 94
Octanes of unleaded fuel:
(120XA1 + 90XB1 + 130XC1) / (XA2 + XB2 + XC2) >= 92
Octanes of super unleaded:
(120XA1 + 90XB1 + 130XC1) / (XA3 + XB3 + XC3) >= 96
114
All constraints
1.
2.
3.
26XA1
28XA2
24XA3
- 4XB1
- 2XB2
+ 6XB3
+
+
+
36XC1
38XC2
34XC3
>=
>=
>=
0
0
0
4.
5.
6.
XA1
XB1
XC1
+ XA2
+ XB2
+ XC2
+
+
+
XA3
XB3
XC3
<=
<=
<=
1000
1200
700
7.
8.
9.
XA1
XA2
XA3
+ XB1
+ XB2
+ XB3
+
+
+
XC1
XC2
XC3
>=
>=
>=
800
1100
500
Xij
>= 0,
i = A,B,C and
Minimum number
of octanes
Ingredients
consumption
Products demand
j = 1,2,3
115
Summarized results
Variable
Value (tones)
(1)
XA1
(2)
0
500
500
720
480
0
80
120
0
XA2
XA3
XB1
XB2
XB3
XC1
XC2
XC3
Unit contribution to Total contribution ()

the profit ()
(3)
(4) = (2) x (3)
47
0
42
21000
50
25000
43
30960
38
18240
46
0
-20
-1600
-25
-3000
-17
0
Total
90600
116
Solutions with QSB
117
QSB+ (1)
|---------------- Solution Summary for case study 9 -------------------------|
|----------------------------------------------------------------------------|
| Number |
Name
|----------+----------+----------+----------+----------+----------+----------|
|
1
|
XA1
|
0 |
0 |
-M |
47 |
47|
|
2
|
XA2
|
500 |
0 |
42 |
42 |
42|
|
3
|
XA3
|
500 |
0 |
50 |
50 |
67|
|
4
|
XB1
|
720 |
0 |
43 |
43 | 65.22222|
|
5
|
XB2
|
480 |
0 |
38 |
38 |
38|
|
6
|
XB3
|
0 |
0 |
-M |
46 |
46|
|
7
|
XC1
|
80 |
0 |
-20 |
-20 |
-20|
|
8
|
XC2
|
120 |
0 |
-25 |
-25 |
-25|
|
9
|
XC3
|
0 |
0 |
-M |
-17 |
-17|
|----------------------------------------------------------------------------|
|
Maximized OBJ = 90600 Iteration = 7 Elapsed CPU seconds = 0
|
|----------------------------------------------------------------------------|
118
QSB+ (2)
|----------------------------------------------------------------------------|
|
| R. H. S. | R. H. S. | R. H. S. |
|----------+----------+----------+----------+----------+----------+----------|
|
1
|Tight (>)|
0 |
0 |
-3200 |
0 |
4800 |
|
2
|Loose (>)|
0 |
17600 |
-M |
0 |
17600 |
|
3
|Loose (>)|
0 |
12000 |
-M |
0 |
12000 |
|
4
|Tight (<)|
67 |
0 |
500 |
1000 |
1120 |
|
5
|Tight (<)|
63 |
0 |
720 |
1200 |
1320 |
|
6
|Loose (<)|
0 |
500 |
200 |
700 |
M |
|
7
|Tight (>)|
-20 |
0 | 666.6666 |
800 |
1300 |
|
8
|Tight (>)|
-25 |
0 |
980 |
1100 |
1600 |
|
9
|Tight (>)|
-17 |
0 |
380 |
500 |
1000 |
|----------------------------------------------------------------------------|
|
Maximized OBJ = 90600 Iteration = 7 Elapsed CPU seconds = 0
|
|----------------------------------------------------------------------------|
|----------------------------------------------------------------------------|
119

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CASE STUDIES AND SOLUTIONS

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

Select a portfolio package from a set of alternative investments

Maximization of the expected return or minimization of the risk

Duration of investments economic life, potential growth rate, danger, liquidity

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

Expected annual return rate (%)

Share A manufacturing sector

Share B - manufacturing sector

Share C - food and beverage sector

Share D food and beverage sector

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

Total amount = 90000

Amount in shares of a sector no larger than 50% of total available

Amount in manufacturing company less or equal to 10% of the whole share

Amount in mutual funds less or equal to 25% of the amount in manufacturing

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

Summary of the model

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

Annual return rate

Total expected return of

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

Solution with QSB

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

Solution with LINDO

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

LINDO results (1)

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

LINDO results (2)

RIGHTHAND SIDE RANGES

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

Solution with Excel

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

Initial amount: 80000

Timeframe of investments decisions: 4 months

Two-month government bonds: return 3%

Three-month government bills: return 6.5%

Bank deposits: interest 1%

At the beginning of the 5th month at least 40000 are needed

Maximum amount in two-month or three-month bonds: 32000

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

Objective function (total return)

Basic rule of capital flow:

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

Bi, Ci, Di >= 0, for i = 1, 2, 3, 4

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

An alternative objective function

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

Investment return Total return

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

Solution with QSB (1st)

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

Solution with QSB (2nd)

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS

Solution with QSB (3rd alternative)

LINEAR PROGRAMMING CASE STUDIES AND SOLUTIONS