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Review For Exam 2
Review For Exam 2
Eli Orchid can manufacture its newest pharmaceutical products in any of three
processes. One costs $14,000 per batch, requires 3 tons of one major ingredient and 1 ton
of the other, and yields 2 tons of output products. The second process costs $30,000 per
batch, requires 2 and 7 tons of the ingredients, respectively, and yields 5 tons of output
products. The third process costs $11,000 per batch, requires 9 and 2 tons of the
ingredients, respectively, and yields 1 ton of output products. Orchid wants to find the
least costly way to produce at least 50 tons of new products, given that there are 75 tons
of ingredient 1 and 60 tons of ingredient 2 on hand.
Answer each of the following questions the best you can after running the model on
Solver
(a) What is the marginal cost of production (per ton of output)?
(b) How much would it cost to produce:
i) 70 tons of the new output products?
(ii) 100 tons of the new output products?
(c) How much should Orchid be willing to pay to obtain 20 more tons of Ingredient 1?
How about Ingredient 2?
(d) How cheap would the third process have to become before it might be used in an
optimal solution?
(e) How much would the cost of the 50 tons of product change if process 2 actually cost
$32,000 per batch? How about $39,000?
(f) How much would the cost of the 50 tons of product change if process 1 cost $13,000
per batch? If it cost $10,000 per batch?
(g) Suppose that the engineering department is thinking about a new process that
produces 6 tons of product using 3 tons of each of the two original ingredients. At
what cost would this new process be economical?
(h) Orchid is considering the upgrade of two processes, which will save $1000 per batch
of output in process 2 and $2000 per batch in process 3. This will cost though $3.5K.
Should Orchid pursue this investment?
(i) Orchid is trying to improve its position by increasing the required production to 55
tons while increasing the amount of the two ingredients available to 80 tons and 65
tons respectively. Answer without re-running the model (if you can): Would these
changes improve Orchids position?
2. Analyze the following time series. Compare the following four forecasting
techniques, and determine which one you would use to make a forecast.
(i) The exponential smoothing
(ii) The weighted moving average
(iii)The Holts method
(v) The linear programming model.
(a) Write down each optimized model.
(b) Perform a forecast by hand for period 61 and 62 using the template results.
(c) Show how you would calculate MAD for the first 4 periods of each technique.
Solution
X1, X2, X3 = how many batches are produced by process 1, 2, 3 respectively.
X1 X2 X3 Sumproduct
5.555556 7.777778 0
MinCost 14000 30000 11000 311111.1
TotalProd 2 5 1 50 >= 50
Ingredient1 3 2 9 32.22222 <= 75
Ingredient2 1 7 2 60 <= 60
Adjustable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$B$
2 X1 5.555555556 0 14000 1E+30 2000
$C$
2 X2 7.777777778 0 30000 5000 1E+30
$D$
2 X3 0 5666.666667 11000 1E+30 5666.666667
Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$E$
4 Total Prod 50 7555.5556 50 20.2631 7.1428
$E$
5 Ingredient1 32.2222 0 75 1E+30 42.7778
$E$
6 Ingredient2 60 -1111.1111 60 10 35
Answers: