Problem influenced by example published in Journal of Algorithms and Computational Technology

Vol. 3 No. 4

Two companies L1and L2, both owned by the same conglomerate, the first company L1 produces three
kinds of products A1, A2 and A3 Each Ai, i= 1, 2, 3 can yield a profit of 3, 4 and 1 dollar per unit
respectively. However the company needs 1, 2 and 1 as an employment hours needed to produce one
unit of the above products. If the objectives of this company is to maximize the profit and also to
maximize the employment hours needed. Giving that for manufacturing process the company has only
one raw material and suppose the material needed per pounds for above products is 2, 3 and 2 pounds
for each product respectively with supply of this material restricted to 600 pounds .

The second company L2 produces the same three kinds of products A 1, A2, A3 with a profit of 3, 1
dollar per unit respectively. However the company needs one hour as an employment hours for each
one unit of the above products. The objectives of this company is to maximize the profit and also to
maximize the employment hours needed .This company has two raw materials for manufacturing and
suppose the material needed per pounds for the first raw material per pound are 1, 2 and the supply for
this raw material is restricted to 600 pounds and for the second raw the material needed per pounds
are 3 ,2 with supply for this raw material restricted to 450 pounds.

Additionally, since labour needs to be shared between the companies, the total work hours for one
cannot exceed the other by 100. Having been previously warned by ILO regarding their extensive
work hours, both companies now have to limit it. Therefore, the limit for company L 1 has been
mandated at 480 hours while for L2, it is 1200 hours.

3. Competitive Approach

The competitive approach tries to maximise the minimum gains for the entire company, and therefore
significantly raises the total output for company 1. Although labour limits have been reached for the
first company, none of the other parameters have reached their maximum potential in this approach.

4. Compensatory Approach

Here, the approach is to maximise the average for all. Thus, this increases the potential output for
company 2, which is seen to be more profitable, at the cost of total profit for company 1 which despite
using all its labour hours, cannot produce as much as it did in the competitive approach.