EM 602 Management Science

Practice Problems – with Solutions

Problem 1.

A chemical company manufactures three chemicals: A, B, and C. These chemicals are produced via two
production processes: 1 and 2. Running process 1 for an hour costs $400 and yields 300 units of A, 100
units of B, and 100 units of C. Running process 2 for an hour costs $100 and yields 100 units of A and 100
units of B. To meet customer demands, at least 1000 units of A, 500 units of B, and 300 units of C must
be produced daily.

Question: Determine a daily production plan that minimizes the cost of meeting the company’s daily
demands.

Solution:

Process 1 Process 2
Cost per
$400 $100
hour

Output production per hour

Process 1 Process 2 Chemical required
Chemical A 300 100 >= 1000
Chemical B 100 100 >= 500
Chemical C 100 0 >= 300
 Process 2

Optimal solution: (3,2)

Process 1

Process 1 Process 2
Hours run 3 2

Total cost $1,400

Problem 2.

A manufacturing company makes two products. Each product can be made on either of two machines.
The time (in hours) required to make each product on each machine is listed below.

Machine 1 Machine 2
Product 1 0.4 0.3
Product 2 0.7 0.4

Each month, 500 hours of time are available on each machine. Each month, customers are willing to buy
up to the quantities of each product at the prices given in a table below.

Demands and prices

Demands Prices
Month 1 Month 2 Month 1 Month 2
Product 1 1000 1900 $55 $12
Product 2 1400 1300 $65 $32

The company’s goal is to maximize the revenue obtained from selling units during the next two months.
Determine how the company can meet this goal. Assume that it will not produce any units in a month
that it cannot sell in that month.

Solution:

!x1=product 1 month 1 on m1
!x2=product 1 month 1 on m2
!x3=product 2 month 1 on m1
!x4=product 2 month 1 on m2

!x5=product 1 month 2 on m1
!x6=product 1 month 2 on m2
!x7=product 2 month 2 on m1
!x8=product 2 month 2 on m2
! maximize the revenue for next 2 months

Max 55x1+55x2+65x3+65x4+12x5+12x6+32x7+32x8

subject to

! 500 hours available on ech machine (month 1)

0.4x1+0.7x3<=500
0.3x2+0.4x4<=500

! 500 hours available on ech machine (month 2)

0.4x5+0.7x7<=500
0.3x6+0.4x8<=500

!Demand month 1
x1+x2<=1000
x3+x4<=1400

!Demand month 2
x5+x6<=1900
x7+x8<=1300

end
Problem 3.

Texaco Oil produces two types of gasoline, gas 1 and gas 2, from two types of crude oil, crude 1 and crude
2. Gas 1 is allowed to contain up to 4% impurities, and gas 2 is allowed to contain up to 3% impurities.
Gas 1 sells for $8 per barrel, whereas gas 2 sells for $12 per barrel. Up to 4,200 barrels of gas 1 and
up to 4,300 barrels of gas 2 can be sold.

The cost per barrel of each crude, availability, and the level of impurities in each crude are as shown in
Table below.

Before blending the crude oil into gas, any amount of each crude can be “purified” for a cost of $0.50 per
barrel. Purification eliminates half the impurities in the crude oil.

Oil Cost Per Barrel ($) Impurity Level (%) Availability (Barrels)

Crude 1 6 10% 5,000

Crude 2 8 2% 4,500

Formulate the problem to maximize profit.

Solution:

!x1=gas 1 crude 1
!x2=gas 1 crude 2
!x3=gas 2 crude 1
!x4=gas 2 crude 2

!x5=gas 1 crude 1 purified

!x6=gas 1 crude 2 purified
!x7=gas 2 crude 1 purified
!x8=gas 2 crude 2 purified
! maximize the profit
!revenue !Cost of crude !purification cost
Max 8x1+8x3+8x5+8x7+12x2+12x4+12x6+12x8-6x1-6x3-6x5-6x7-8x2-8x4-8x6-8x8-0.5x5-0.5x6-0.5x7-
0.5x8

subject to

!crude availability
x1+x3+x5+x7<=5000
x2+x4+x6+x8<=4500

!Blending and purification decision

x1+x2+x5+x6<=4200

x3+x4+x7+x8<=4300

!Impurity constraint
!50% ( 0.1x1+0.02x2) !0.04*4200
0.1x1+0.02x2+0.05x5+0.01x6 <=168

50%( 0.1x1+0.02x2) !0.03*4300

0.1x3+0.02x4+0.05x7+0.01x8 <=129

end
Problem 4.

The cost of producing 1,000 tools at a plant and shipping them to a customer is given in Table below.
Customers 1 and 3 pay $200 per thousand tools; customer 2 pays $150 per thousand tools. To produce
1,000 tools at plant 1, 200 hours of labor are needed, while 300 hours are needed at plant 2. A total of
5,500 hours of labor are available for use at the two plants. Additional labor hours can be purchased at
$20 per labor hour. Plant 1 can produce up to 10,000 tools and plant 2, up to 12,000 tools. Demand by
each customer is assumed unlimited. If we let Xij = tools (in thousands) produced at plant i and shipped
to customer j then the companys’ solution of the problem is shown in the LINDO printout below.

Customers
Plant 1 2 3
1 60 30 160
2 130 70 170

Use this printout to answer the following questions:

a) If it costs $70 to produce 1,000 tools at plant 1 and ship them to customer 1, what would be the
new solution to the problem?
b) If the price of an additional hour of labor were reduced to $4, would the company purchase any
additional labor?
c) A consultant offers to increase plant 1’s production capacity by 5,000 tools for a cost of $400.
Should the company take her offer?
d) If the company were given 5 extra hours of labor, what would its profit become?
Solution:

a) This decreases objective function coefficient for X11 by 10, and current basis remains optimal.
Decision variables remain same but optimal z-value drops by 10(10) = $100 to $2233.33
b) AI for L = 19.73. We are increasing objective function coefficient for L by 16, so current basis
remains optimal and no labor is used.
c) At a cost of $500 we can increase z by 5(86.67) = $433.35. Thus we should not take the deal.
d) 2333.33 + 5(Row 4 Dual Price) = $2334.67

Problem 5.

You are presented with a following LP:

Maximize 30 Xl + 23 X2 + 29 X3

Subject to:

6 X1 + 5 X2 + 3 X3 ≤ 52

4 X1 + 2 X2 + 5 X3 ≤ 14

X1 , X2 , X3 ≥ 0

a) Apply the simplex method to solve the problem and calculate the optimal values of the objective
function and decision variables.
b) Write the dual problem of the above primal. Determine the solutions for the dual problem
(objective function and dual variables).

Solution:

The LP is first transformed to canonical form:

Max Z = 30 Xl + 23 X2 + 29 X3 + 0 S1 + 0 S2

S.t. 6 X1 + 5 X2 + 3 X3 + S1 = 52

4 X1 + 2 X2 + 5 X3 + S2 = 14

X 1 , X 2 , X 3 , S 1, S 2 ≥ 0
Let the initial basic solution be: X1 = X2 = X3 = 0, S1=52, S2=14, Z = 0. The initial simplex
tableau looks as follows:

Row Basic Var. RHS X1 X2 X3 S1 S2 Ratio (Test)

(0) Z 0 -30 -23 -29 0 0 --
(1) S1 52 6 5 3 1 0 8.67
(2) S2 14 4 2 5 0 1 3.5

Variable X1 is selected to enter the basis as the non-basic variable with the most
negative value in row 0. Based on the Ratio Test, it will replace variable S2 in the basis.
After the EROs, the new tableau looks as follows:

Row Basic Var. RHS X1 X2 X3 S1 S2 Ratio (Test)

(0’) Z 105 0 -8 8.5 0 7.5 --
(1’) S1 31 0 2 -4.5 1 -1.5 15.5
(2’) X1 3.5 1 0.5 1.25 0 0.25 7

Variable X2 is selected to enter the basis as the non-basic variable with the most
negative value in row 0. Based on the Ratio Test, it will replace variable X1 in the basis.
After the EROs, the new tableau looks as follows:
Row Basic Var. RHS X2 X3 S1 S2 Ratio (Test)
(0”) Z 161 16 0 28.5 0 11.5 --
(1”) S1 17 -4 0 -9.5 1 -2.5
(2”) X2 7 2 1 2.5 0 0.5

Since all values in row 0 are positive, we reached the optimal solution and this is the
optimal tableau. The optimal solution is as follows:

X1 = 0; X2 = 7; X3 = 0; S1=17; S2 = 0; Z = 161.

The dual of this LP problem is the

following: Min Z = 52 Yl + 14 Y2
S.t. 6 Y1 + 4 Y2 ≥ 30

5 Y1 + 2 Y2 ≥ 23
 3 Y1 + 5 Y2 ≥ 29

Y1 , Y2 ≥ 0

Based on the top row of the final tableau of the primal, the optimal solution of the dual are:
Z = 161; Y1 = 0; Y2 = 11.5.

Problem 6.

Given the problem to:

Max Z = 2Xl – X2 + X3

Subject to:

3X1 + X2 + X3 ≤ 60
X1 – X2 + 2X3 ≤ 10 X1 + X2
– X3 ≤ 20
X1 , X2 , X3 ≥ 0

a) Solve the problem. What is the optimal value of the objective function (OF)? Decision
variables?
b) Write the dual problem of the above primal. Determine the solutions for the dual
problem (objective function and dual variables) from the final tableau of the primal
problem.

Solution:

a) The simplex method can be applied to solve this problem. First, write the problem in
canonical form:
MAX 2Xl – 1X2 + 1X3 + 0S1 + 0S2 +
0S3 = Z

ST

3X1 + 1X2 + 1X3 + 1S1 = 60

1X1 – 1X2 + 2X3 + 1S2 = 10

1X1 + 1X2 – 1X3 + 1S3 = 20
X1 , X2 , X3, S1, S2, S3 ≥ 0

Then form the initial simplex tableau for the initial BFS: X1 = X2 = X3 = 0, S1 =
60, S2 = 10, and S3 = 20. Apply the ratio test and select the variable to enter the
basis:

Row Basic Var. RHS X X X S S S Ratio (Test)

1 2 3 1 2 3

(0) Z 0 -2 1 -1 0 0 0 --
(1) S 60 3 1 1 1 0 0 60/3 = 20
1

(2) S 10 1 -1 2 0 1 0 10/1 = 10
2

(3) S 20 1 1 -1 0 0 1 20/1 = 20
3

X1 should replace S2 in the basis. Apply pivoting and produce the next tableau.

Row Basic Var. RHS X X X S S S Ratio (Test)

1 2 3 1 2 3

(0’) Z 20 0 -1 3 0 2 0 --
(1’) S 30 0 4 -5 1 -3 0 15/2
1

(2’) X 10 1 -1 2 0 1 0 --
1

(3’) S 10 0 2 -3 0 -1 1 10/2 = 5
3

After applying the ratio test it becomes obvious that X2 should replace S3 in the
basis. Apply pivoting and produce the next tableau.
 Row Basic Var. RHS X X X S S S Ratio (Test)
1 2 3 1 2 3

(0”) Z 25 0 0 3/2 0 3/2 1/2 All ≥ 0

(1”) S 10 0 0 1 1 -1 -2
1

(2”) X 15 1 0 1/2 0 1/2 1/2

1

(3”) X 5 0 1 -3/2 0 -1/2 1/2

2

This is optimal tableau (all coefficients are ≥ 0). The optimal value of the objective function is 25.
The values of the decision variables are: X1 = 15, X2 = 5, X3 = 0.

b) The dual problem can be written as follows:

MIN Z = 60Yl + 10Y2 + 20Y3

Subject to:

3Y1 + Y2 + Y3 ≥ 2
Y1 – Y2 + Y3 ≥ -1
Y1 + 2Y2 – Y3 ≥ 1

Y1 , Y2 , Y3 ≥ 0

Based on the top row of the final tableau of the primal, the optimal solution of the dual are:

Z= 25; Y1 = 0; Y2 = 1.5; Y3 = 0.5.