NAME:
I/C NUMBER:
TEACHER NAME:
INTRODUCTION
In linear programming, a shadow price for a right hand side value (or resource limit) is
the amount the objective function will change per unit increase in the right hand side value of a
constraint, assuming all other coefficient values remain constant.
In the coursework, we have to use simplex method to find the optimal tableau and
solution to maximise the profit. Without changing the optimal basis, we need to determine the
allowable changes for the range of profit margin per unit P1 and P2. We will also find the range of
availability of raw material A can be vary without changing the optimal basis and the increment
of optimal profit if 40 additional units of raw material A are available. Then, we need to investigate
the effect of a new variable.
METHODOLOGY
In this coursework, we were given that 4 different products denoted by P1, P2, P3 and P4
are the variables and the raw material A and B are the constraints for this question.
First of all, we need to use the information given in the question to create linear equations
such as objective function and constraint functions and then convert it into tableau form. The
sample of tableau is shown as below.
Basis z P1 P2 P3 P4 S1 S2 RHS
z
S1
S2
Then, we need to improve the initial solution until we achieve the optimal solution which
contains no negative value in the objective function. By using simplex method, we are able to
determine the entering variable, leaving variable, pivot column, pivot row and pivot element.
Hence, we can adjust the value of those variables and constraints in order to obtain the optimal
solution and optimal tableau.
From the optimal tableau, we can find out the units of products that need to be produced
to maximise the profit by observing the basis column and RHS values.
Next, given that 20 units of P3 were produced by mistake, we can calculate the resulting
decrease of it by substituting the new value of the products produced into the equations of
objective function and constraint functions.
Sensitivity analysis will be used to investigate the range of profit margin per unit of P1 and
P2 can be vary without changing the optimal basis. The value of coefficient of P1 and P2 in objective
function will be changed by adding an unknown, Δ to it. However, we must assure that the
reduced cost remains its nonnegativity in optimal tableau.
After that, the same technique as above will be used in finding the range of availability of
raw material A can be vary without changing the optimal basis. In this case, it will be going through
the process of right hand side changes. We will be adding the values of S1 × ∆ to their respective
row of original RHS value while assuring the objective function remains its nonnegativity.
As there are 40 additional units of raw material available, a new optimal profit can be
obtained. We use the right hand side changes process to find the new optimal profit. We form
new values of RHS by adding S1 × ∆ to their respective row of RHS then substitute 40 as the ∆ in
the new value of RHS of objective function.
There is a new variable which is a new product, P5 under consideration of its production.
In order to avoid loss to the company after producing P5, minimum profit margin needed on it will
calculated through a new formula which is 𝛌1 ∗ ∆ + 𝛌2 ∗ ∆ as 𝛌1 represents raw material A (slack
variable) and 𝛌2 represents raw material B (slack variable). We apply the concept of shadow price
in this case.
RESULTS
In this coursework, the information of producing four different products was given. For
example, the raw material required for a unit of each product and its maximum availability as well
as the profit margins per unit of the products. Hence, we express them in linear equations and
then find the optimal tableau for optimization of profit by using simplex method. The working
steps were showed below.
By using simplex method to find the optimal tableau, slack variables (𝑆1 , 𝑆2 ) were introduced to
the equations above.
Then, the system of linear equations was converted into tableau form.
Tableau 1 :
P3 was the pivot column because it was the most negative coefficient (10) of the objective
function, z. Ratio was found by dividing RHS from its respective pivot column value.
300 400
Ratio of 𝑆1 = 8
Ratio of 𝑆2 = 5
1
= 37 2 = 80
The row with the lowest value of ratio became the pivot row, which was S1. In this case, the “8”
under pivot column and pivot row became the pivot element. P3 was the entering variable and S1
was the leaving basis variable.
𝑜𝑙𝑑 𝑣𝑎𝑙𝑢𝑒
New row (entering variable), 𝑃3 =
𝑝𝑖𝑣𝑜𝑡 𝑒𝑙𝑒𝑚𝑒𝑛𝑡
Tableau 2 :
3
P4 was the pivot column because it was the most negative coefficient ( ) of the objective function,
2
z. Ratio was found by dividing RHS from its respective pivot column value.
1 1
37 212
2 2
Ratio of 𝑃3 = 3 Ratio of 𝑆2 = 13
4 4
5
= 50 = 65 13
3
The row with the lowest value of ratio became the pivot row, which was P4. In this case, the “ 4 ”
under pivot column and pivot row became the pivot element. P4 was the entering variable and P3
was the leaving basis variable.
𝑜𝑙𝑑 𝑣𝑎𝑙𝑢𝑒
New row (entering variable), 𝑃4 = 𝑝𝑖𝑣𝑜𝑡 𝑒𝑙𝑒𝑚𝑒𝑛𝑡
Basis z P1 P2 P3 P4 S1 S2 RHS
z 1 2 0 2 0 3 0 450
2
P4 0 2 2 4 1 1 0 50
3 3 3 6
S2 0 4 8 13 0 7 1 50
3
6
3 3
Tableau 3 was the optimal tableau for this coursework, because the objective function doesn’t
have any negative value. This tableau was different from the optimal tableau given in the question.
Hence, we already showed that there were two different optimal tableau, and the tableau given
was one of the optimal tableaus.
Using alternative method, the optimal tableau given can be obtained through choosing another
pivot column in Tableau 2, which is P2 that have 1 as its coefficient of the objective function.
Alternative method :
Tableau A :
P3 was the pivot column because it was the most negative coefficient (10) of the objective
function, z. Ratio was found by dividing RHS from its respective pivot column value.
300 400
Ratio of 𝑆1 = 8
Ratio of 𝑆2 = 5
1
= 37 = 80
2
The row with the lowest value of ratio became the pivot row, which was S1. In this case, the “8”
under pivot column and pivot row became the pivot element. P3 was the entering variable and S1
was the leaving basis variable.
Tableau B:
P1 was the pivot column because it was negative coefficient (1) of the objective function, z. Ratio
was found by dividing RHS from its respective pivot column value.
1 1
37 212
2 2
Ratio of 𝑃3 = 1 Ratio of 𝑆2 = 1
−
2 2
= 75 = −425
1
The row with the lowest value of ratio became the pivot row, which was P2. In this case, the “ 2 ”
under pivot column and pivot row became the pivot element. P2 was the entering variable and P3
was the leaving basis variable.
𝑜𝑙𝑑 𝑣𝑎𝑙𝑢𝑒
New row (entering variable), 𝑃2 = 𝑝𝑖𝑣𝑜𝑡 𝑒𝑙𝑒𝑚𝑒𝑛𝑡
Tableau C :
Basis z P1 P2 P3 P4 S1 S2 RHS
z 1 2 0 2 0 3 0 450
2
P2 0 1 1 2 3 1 0 75
2 4
S2 0 4 0 1 4 1 1 250
2
An assumption of 20 units of P3 have been produced by mistake was made. It will cause a
decrease in total profit. The resulting decrease in profit was calculated as the following steps.
Availability and requirement of raw material A, 4𝑃1 + 4𝑃2 + 8𝑃3 + 6𝑃4 ≤ 300
Availability and requirement of raw material B, 6𝑃1 + 2𝑃2 + 5𝑃3 + 7𝑃4 ≤ 400
𝑃1 , 𝑃2 , 𝑃3 , 𝑃4 ≥ 0
According to the optimal tableau, maximum profit can be obtained by producing 75 units of P2
and no other products.
Hence, we can calculate the usage of raw material A, B and maximum profit with the equations
above. As P1=0, P2=75, P3=0, P4=0 ,
Usage of raw material A, 4𝑃1 + 4𝑃2 + 8𝑃3 + 6𝑃4 = 4(0) + 4(75) + 8(0) + 6(0)
= 300
Usage of raw material B, 6𝑃1 + 2𝑃2 + 5𝑃3 + 7𝑃4 = 6(0) + 2(75) + 5(0) + 7(0)
= 150
= 450
When 20 units of P3 were accidentally produced and we assumed that other products
except P2 were not produced, we can find how many units of P2 can be produced as below.
Basis z P1 P2 P3 P4 RHS
z 1 4 6 10 9 0
Raw Material A 0 4 4 8 6 300
Raw Material B 0 3 2 5 7 400
As P1=0, P3=20, P4=0
Therefore, the results above showed that we can actually still produce 35 units of P2 while 20 units
of P3 were produced.
= 410
The profit we can get by producing 35 units of P2 and 20 units of P3 is RM410. It is lesser than the
profit we can get by producing 75 units of P2 which was RM450. The resulting decrease is RM40.
= RM40
Without changing the optimal basis, the range of profit margin per unit of P1 can be vary
was found by using sensitivity analysis. Original profit margin of P1 is 4 while new profit margin
of P1 showed in optimal tableau is 2. Let ∆ represents changes.
We let 4 + ∆ be the new profit margin of P1 and 2 − ∆ ≥ 0 to ensure that the reduced cost of P1
remains its nonnegativity in optimal tableau.
2−∆≥0
∆≤2
4+∆= 4+2
=6
This showed that as long as the profit margin on P1 is less than or equal to 6, the optimal basis will
remain unchanged.
With the same method as above, we are able to deduce the range of profit margin per
unit of P2 can be vary without changing the optimal basis. Original profit margin of P2 is 6 while P2
in optimal tableau is basic.
We let 6 + ∆ be the new profit margin of P1. Since P2 is basic, we need to restore a correct basis
by adding ( ∆ × Row 1) to Row 0. This can help us to affect the reduced costs of the nonbasic
variables, namely P1, P3 and P4. All these reduced costs must be nonnegative, hence
2+∆≥0
∆ ≥ −2
2 + 2∆ ≥ 0
∆ ≥ −1
0 + 1.5∆ ≥ 0
∆≥0
1.5 + 0.25∆ ≥ 0
∆ ≥ −6
6+∆= 6+0
=6
This meant that as long as the profit margin on P2 is greater than or equal to 6, the optimal basis
remains unchanged.
To know the range of the availability of raw material A can be vary without changing the
optimal basis, we used the same technique as above. Original availability of raw material A is 300
and the unused material A in optimal tableau is 0.25 in Row 1 and 0.50 in Row 2.
We let 300 + ∆ be the new availability of raw material A. The resulting RHS in the optimal tableau
become 75 + 0.25∆ in Row 1 and 250 − 0.50∆ in Row 2.
75 + 0.25∆ ≥ 0
∆ ≥ −300
250 − 0.50∆ ≥ 0
∆ ≤ 500
Hence, the range for ∆ is −300 ≤ ∆ ≤ 500. The quantities must be nonnegativity so that the
optimal basis won’t change. Therefore, the range of the availability of raw material A can be vary
is 0 ≤ ∆ + 300 ≤ 800.
An assumption of additional 40 units of raw material A were available was made. It able
to increase the units of products that can be produced and then cause a growth in total profit.
The resulting growth in optimal profit was calculated as the following steps.
Then, the system of linear equations was converted into tableau form.
Tableau i :
P3 was the pivot column because it was the most negative coefficient (10) of the objective
function, z. Ratio was found by dividing RHS from its respective pivot column value.
300 400
Ratio of 𝑆1 = 8
Ratio of 𝑆2 = 5
1
= 37 2 = 80
The row with the lowest value of ratio became the pivot row, which was S1. In this case, the “8”
under pivot column and pivot row became the pivot element. P3 was the entering variable and S1
was the leaving basis variable.
𝑜𝑙𝑑 𝑣𝑎𝑙𝑢𝑒
New row (entering variable), 𝑃3 =
𝑝𝑖𝑣𝑜𝑡 𝑒𝑙𝑒𝑚𝑒𝑛𝑡
𝑟𝑒𝑠𝑝𝑒𝑐𝑡𝑖𝑣𝑒 𝑝𝑖𝑣𝑜𝑡 𝑟𝑜𝑤 𝑣𝑎𝑙𝑢𝑒 × 𝑟𝑒𝑠𝑝𝑒𝑐𝑡𝑖𝑣𝑒 𝑝𝑖𝑣𝑜𝑡 𝑐𝑜𝑙𝑢𝑚𝑛 𝑣𝑎𝑙𝑢𝑒
New remaining row,𝑆2 = 𝑜𝑙𝑑 𝑣𝑎𝑙𝑢𝑒 − 𝑝𝑖𝑣𝑜𝑡 𝑒𝑙𝑒𝑚𝑒𝑛𝑡
Tableau ii :
P1 was the pivot column because it was negative coefficient (1) of the objective function, z. Ratio
was found by dividing RHS from its respective pivot column value.
1 1
37 212
2 2
Ratio of 𝑃3 = 1 Ratio of 𝑆2 = 1
−
2 2
= 75 = −425
1
The row with the lowest value of ratio became the pivot row, which was P2. In this case, the “ 2 ”
under pivot column and pivot row became the pivot element. P2 was the entering variable and P3
was the leaving basis variable.
𝑜𝑙𝑑 𝑣𝑎𝑙𝑢𝑒
New row (entering variable), 𝑃2 = 𝑝𝑖𝑣𝑜𝑡 𝑒𝑙𝑒𝑚𝑒𝑛𝑡
Tableau iii :
Basis z P1 P2 P3 P4 S1 S2 RHS
z 1 2 0 2 0 3 0 450
2
P2 0 1 1 2 3 1 0 75
2 4
S2 0 4 0 1 4 1 1 250

2
Tableau iii was the optimal tableau, because the objective function doesn’t have any negative
value.
The RHS value of the given constraint which was S1, raw material A changes to (300 + ∆). Then, a
new optimal tableau was formed. The values of S1 × ∆ were added to their respective row of
original RHS value.
Basis z P1 P2 P3 P4 S1 S2 RHS
z 1 2 0 2 0 3 0 450 + 1.50∆
2
P2 0 1 1 2 3 1 0 75 + 0.25∆
2 4
S2 0 4 0 1 4 1 1 250 − 0.25∆
−
2
There is a concept about Right Hand Side Changes which said that if the RHS of constraint i
changes by ∆ in the original formulation, the original objective value will change by λ1*∆. The
shadow price λ1* can be found in the optimal tableau. It is the reduced cost of the slack variable,
S1.
75 + 0.25∆ ≥ 0
∆ ≥ −300
250 − 0.50∆ ≥ 0
∆ ≤ 500
This showed that the value of ∆ needed to be −300 ≤ ∆ ≤ 500, so that the basis will not change.
Thus, the optimal objective will remain as 450 + 1.50∆ for any change of ∆ within its range.
When the RHS of raw material A changes by ∆ in the original formulation, the original objective
value will change by 1.5∆.
1.5∆ = 1.5(40)
= 60
Hence, the optimal profit will increase RM60 after having additional 40 units of raw material A.
A new product, P5 that required 6 units of raw material A and 5 units of raw material B to
produce one unit of P5 was under management consideration about its production. The minimum
profit margin needed on this new product to make P5 worth producing was calculated.
The shadow prices can be used for this situation to determine the effect of new product before
calculating its minimum profit margin.
Raw material A is the constraint, S1 and raw material B is the constraint, S2.
𝛌1 ∗ ∆ + 𝛌2 ∗ ∆ = 1.5(6𝑃5 ) + 0(5𝑃5 )
= 9𝑃5
The profit margin of P5 must be sufficient to offset this, so that P5 can be produced without having
any loss of profit.
The profit margin of P5 must be at least 9 in order to produce P5 without any loss. To make this
new product worth producing, minimum profit margin of it is greater than or equal to RM9.
CONCLUSION
Optimal tableaus for this coursework were found by using simplex method.
Through the optimal tableaus, we can know the units of products need to be produced in
order to obtain maximum profit by referring to the values of basis column and RHS. From
the result, we knew that when some products were produced by mistake, it will cause a
decrease in profit.
Sensitivity analysis was used to determine the allowable changes of profit margin with
the optimal basis remains unchanged. It can analyze changes in objective function coefficient
(OFC). After knowing the range of the profit margin per unit of P1 and P2 can be vary, we can
conclude that any value in the range become the profit margin of the product would not cause
any changes to the optimal basis and vice versa. In another similar situation, when any value
between the range of the availability of raw material A can be vary is used for the availability of
raw material A, the optimal basis would not be affected and vice versa.
Through the sensitivity analysis that helps to analyze changes in right hand side value of
a constraint, the effect of the changes can be determined. When additional units of raw material
A (constraint) are available, the optimal profit will increase because more products can be
produced. If a new product wanted to be produced, the minimum profit margin per unit of it need
to be calculated and applied. Hence, the company won’t face any loss when producing P5.
Minimum profit margin is able to be found by using the concept of shadow price.
Simplex Method
https://www.britannica.com/topic/simplexmethod
Sensitivity Analysis
https://www.investopedia.com/terms/s/sensitivityanalysis.asp
Shadow Price
https://www.coursehero.com/file/p28lktq/A1unitchangeintheRHSofthenon
bindingconstraintineitherdirection/
DECLARATION
This is to certify that the assignment report submitted is based on my own work.
Signature,
Name :
I/C Number :
Date :