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HW 2. Chapter 4 (3, 4, 8, 9, 10)

3. Implement the following LP problem in a spreadsheet. Use Solver to solve the problem and
create a Sensitivity Report. Use this information to answer the following questions:
MAX: 4X1 + 2X2
Subject to: 2X1 + 4X2 < 20
3X1 + 5X2 < 15
X 1 ,X 2 > 0

a. What range of values can the objective function coefficient for variable X 1 assume without
changing the optimal solution?
(b. Is the optimal solution to this problem unique, or are there alternate optimal solutions?)
c. How much does the objective function coefficient for variable X2 have to increase before it
enters the optimal solution at a strictly positive level?
d. What is the optimal objective function value if X2 equals 1?
e. What is the optimal objective function value if the RHS value for the second constraint
changes from 15 to 25?
f. Is the current solution still optimal if the coefficient for X2 in the second constraint changes
from 5 to 1? Explain.

Solution:

Microsoft Excel 14.0 Sensitivity Report

Worksheet: [Prb4_3.xlsm]Problem 4-3
Report Created: 6/6/2012 4:08:19 PM
Engine: Standard LP/Quadratic
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a. The objective function coefficient for X1 can decrease by 2.8 (to 1.2) or increase by any
amount without changing the optimal solution.
(b. The optimal solution is unique. None of the allowable increase or decrease values for the
objective coefficients are zero.)
c. It has to increase by at least 4.666667
d. If X2 were forced to equal 1, the optimal objective function value would be approximately
20 - 4.67 = 15.33.
e. An increase of 10 in the RHS value of the second constraint is within the allowable range of
increase for the shadow price of this constraint. Therefore, if the RHS for the second
constraint increases from 15 to 25 the new objective function value would be approximately
20 + 1.33 ×10=33.33.
f. The new reduced cost for X2 would be 2 - (4 × 0 + 1 × 1.333) = 0.67. Therefore, it would
be profitable to increase the value of X2 and the current solution would no longer be
optimal – but we can’t say what the new solution would be without re-solving the problem.

4. Implement the following LP model in a spreadsheet. Use Solver to solve the problem and create
a Sensitivity Report. Use this information to answer the following
questions:
MAX: 2 X1 + 4X2
Subject to: - X1 + 2X2 < 8
X1 + 2X2 < 12
X1+ X2 > 2
X1,X 2 > 0
a. Which of the constraints are binding at the optimal solution?
(b. Is the optimal solution to this problem unique, or is there an alternate optimal, solution?)
c. What is the optimal solution to this problem if the value of the objective function
coefficient for variable X1 is zero?
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d. How much can the objective function coefficient for variable X2 decrease before changing
the optimal solution?
e. Given the objective in this problem, if management could increase the RHS value for any
of the constraints for identical costs, which would you choose to increase and why?

Solution:

Microsoft Excel 15.0 Sensitivity Report

Worksheet: [Prb4_4.xlsm]Problem 4-4
Report Created: 11/29/2013 10:32:29 AM
Engine: Standard LP/Quadratic

a. Constraint 2 is binding. (Note that this constraint is reflected by the third row in the
Constraints section of the report.)
(b. There is an alternate optimal solution. Variable X2 is at its lower bound (of zero) but also
has a reduced cost of zero. This indicates that the value of X2 could be increased while
having zero impact on the optimal objective function value.)
c. There is no way to answer this question directly from the sensitivity report. We know that
the optimal solution would change since the allowable decrease in the objective function
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value of X1 is zero, but we cannot tell what the new optimal solution would be. If we re-
solve the revised model the solution is X1=2, X2=5.
d. It can decrease by any amount without changing the solution.
e. Constraint 2 is the only binding constraint. Therefore, we would want to increase its RHS
value before any other.

Ch 2, Question 21,

Zippy motorcycle manufacturing produces two popular pocket bikes (miniature motorcycles with
49cc engines): the Razor and the Zoomer. In the coming week, the manufacturer wants to produce
up to 700 bikes and wants to ensure the number of Razors produced does not exceed the number of
Zoomers by more than 300. Each Razor produced and sold results in a profit of $70 while each
Zoomer results in a profit of $40. The bikes are identical mechanically and only differ in the
appearance of the polymer based trim around the fuel tank and seat. Each Razor's trim requires 2
pounds of polymer and 3 hours of production time while each Zoomer requires pound of polymer
and 4 hours of production time. Assume that 9700 pounds of polymer and 2,400 labor hours are
available for production of these items in the coming week
What is the optimal solution?

8. Use Solver to create Answer and Sensitivity Reports for question 21 at the end of Chapter 2,
and answer the following questions:
a. If the profit on Razors decreased to $35, would the optimal solution change?
b. If the profit on Zoomers decreased to $35, would the optimal solution change?
c. Interpret the shadow price for the supply of polymer.
d. Why is the shadow price $0 for the constraint limiting the production of pocket bikes
to no more than 700 units?
e. Suppose the company could obtain 300 additional labor hours in production? What
would the new optimal level of profit be?

Solution:

R = number of Razors produced, Z = number of Zoomers produced

MAX 70 R + 40 Z
ST R + Z £ 700
R – Z £ 300
2 R + 1 Z £ 900
3 R + 4 Z £ 2400
R, Z ³ 0
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Microsoft Excel 14.0 Sensitivity Report

Worksheet: [Prb4_8.xlsm]Zippy
Report Created: 6/6/2012 4:16:05 PM
Engine: Standard LP/Quadratic
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a. No, it could decrease by $40 without changing the solution.

b. It could. At a profit of $35 there could be alternate optimal solutions.
c. Each additional unit of polymer (up to 200 more) would increase profit by $32 per unit,
each unit decrease of polymer (up to 300 less) would decrease profit by $32 per unit.
d. This is a non-binding constraint. At the optimal solution, this constraint is 40 units below
its RHS value (700) so changing the constraint RHS value (within its allowable limits)
would not change the solution or allow for additional profit.
e. The allowable increase on the shadow price for labor is 200 units. So we can’t say what
profit would result from a 300 unit increase in labor without re-solving the problem.

Chapter 2, question 23

23. A farmer in Georgia has a 100-acre farm on which to plant watermelons and cantaloupes. Every
acre planted with watermelons requires 50 gallons of water per day and must be prepared for
planting with 20 pounds of fertilizer. Every acre planted with cantaloupes requires 75 gallons of
water per day and must be prepared for planting with 15 pounds of fertilizer. The farmer estimates
that it will take 2 hours of labor to harvest each acre planted with watermelons and 2.5 hours to
harvest each acre planted with cantaloupes. He believes that watermelons will sell for about $3
each, and cantaloupes will sell for about $1 each. Every acre planted with watermelons is expected
to yield 90 salable units. Every acre planted with cantaloupes is expected to yield 300 salable units.
The farmer can pump about 6,000 gallons of water per day for irrigation purposes from a shallow
well. He can buy as much fertilizer as he needs at a cost of $10 per 50-pound bag. Finally, the
farmer can hire laborers to harvest the fields at a rate of $5 per hour. if the farmer sells all the
watermelons and cantaloupes he produces, how many acres of each crop should the farmer plant in
order to maximize profits?
Find the optimal solution to the problem

9. Use Solver to create Answer and Sensitivity Reports for question 23 at the end of Chapter 2,
and answer the following questions:
a. How much can the price of watermelons drop before it is no longer optimal to j plant
any watermelons?
b. How much does the price of cantaloupes have to increase before it is optimal to j only
grow cantaloupes?
c. Suppose the price of watermelons drops by $60 per acre and the price of cantaloupes
increases by $50 per acre. Is the current solution still optimal?
d. Suppose the farmer can lease up to 20 acres of land from a neighboring farm to plant
additional crops. How many acres should the farmer lease, and what is the maximum
amount he should pay to lease each acre?

Solution:
X1 = acres planted in watermelons,
X2 = acres planted in cantaloupes

MAX 256 X1 + 284.5 X2

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ST 50 X1 + 75 X2 £ 6000
X1 + X2 £ 100
X1, X2 ³ 0

Microsoft Excel 14.0 Sensitivity Report

Worksheet: [Prb4_9.xlsm]Crop Planting Report
Report Created: 6/6/2012 9:22:47 PM
Engine: Standard LP/Quadratic

Total Profit = $26,740

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a. The profit per acre for watermelons can drop by $66.33 (to $189.67 per acre). That would
occur if the price of watermelons dropped to about $2.26 per unit.
b. The profit per acre of cantaloupes would have to increase by $99.50 ($384 per acre). That
would occur if the price of cantaloupes dropped to about $1.33 per unit.
c. 60/66.33 + 50/99.5 = 1.407 > 100%. Therefore we cannot guarantee that the solution is still
optimal.
d. The farmer should lease all 20 acres and be willing to pay up to $199 per acre (assuming he
can use his own water on the additional 20 acres or otherwise water it as needed for free).

10. Use Solver to create Answer and Sensitivity Reports for question 24 at the end of Chapter 2,
and answer the following questions:
a. If the profit on doors increased to $700, would the optimal solution change?
b. If the profit on windows decreased to $200, would the optimal solution change?
c. Explain the shadow price for the finishing process.
d. If 20 additional hours of cutting capacity became available, how much additional
profit could the company earn?
e. Suppose another company wanted to use 15 hours of Sanderson's sanding capacity and
was willing to pay $400 per hour to acquire it? Should Sanderson agree to this? How
(if at all) would your answer change if the company instead wanted 25 hours of
sanding capacity?

Solution:

D = number of doors produced,

W = number of windows produced

MAX 500 D + 400 W

ST 1 D + 0.5 W £ 40
0.5 D + 0.75 W £ 40
0.5 D + 1 W £ 60
D, W ³ 0
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Microsoft Excel 14.0 Sensitivity Report

Worksheet: [Prb4_10.xlsm]Sanderson
Report Created: 6/6/2012 9:41:07 PM
Engine: Standard LP/Quadratic

Total Profit = $26,000

a. No, the objective coefficient on doors could increase by $300 (to $800) without changing
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the optimal solution.

b. Yes, the objective coefficient on windows can only decrease by $150 (to $250) without
changing the optimal solution.
c. The shadow price (marginal value) is $0 because there is a surplus of this resource.
d. $350*20=$7000.
e. The shadow price on sanding is $300 / unit (within the allowable increase/decrease). The
allowable decrease is 20 units. So if another company was willing to pay $400 for 15 hours
of capacity, Sanderson would come out ahead by $1,500 (i.e., (400-300)*15). It would be
profitable to Sanderson to offer up to 20 hours of their sanding capacity for this purpose. If
the other company wanted 25 hours of capacity, the LP model would need to be modified to
see if this would be profitable. (And that analysis shows it would not be
economicallybeneficial to do so as total profit would drop from $26,000 to $25,000.)