PROBLEM 1

Given the following linear programming model:

Minimize Z = 3000 x1 + 1000 x2
subject to
10 x1 + 10 x2 >= 400 A
60 x1 + 20 x2 >= 1200 B
40 x1 + 160 x2 >= 2400 C
x1, x2 >= 0

P-1a. LP MODEL GRAPH

70

60 A

50

Feasible
40 Region
(10, 30)
30

B
20

10

0
0 10 20 30 40 50 60 70

P-1b. x1 x2
UNIT PROFIT 3,000 1,000

INPUTS ACTUAL AVAILABLE

A 10 10 400 >= 400
B 60 20 1,200 >= 1,200
C 40 160 5,200 >= 2,400

x1 x2 Z
DECISION VARIABLES 10 30 60,000

A1: The optimal solution is to produce 10 unit of x1 and 30 units of x2 (Optimal Solution: x1 = 10 and x2 =
 C

OBJECTIVE FUNCTION

2 (Optimal Solution: x1 = 10 and x2 = 30).

PROBLEM 2
Capital Investment Corp. specializes in investment portfolios designed to meet the specific
risk tolerances of its clients. A client who contacted Capital has P2,500,000 available to invest.

Capital’s investment advisor recommends a portfolio consisting of two investment funds: the
Ecom fund and the Blue Chip fund. The Ecom fund has a projected annual return of 12%, and
the Blue Chip fund has a projected annual return of 9%.

The investment advisor requires that at most P1,750,000 of the client’s funds should be
invested in the Ecom fund. Capital’s services include a risk rating for each investment
alternative. The Ecom fund, which is the more risky of the two investment alternatives, has a
risk rating of 6 per P50,000 invested. The Blue Chip fund has a risk rating of 4 per P50,000
invested. For example, if P500,000 is invested in each of the two investment funds, Capital’s
risk rating for the portfolio would be 6(10) + 4(10) = 100.

Finally, Capital developed a questionnaire to measure each client’s risk tolerance. Based on
the responses, each client is classified as a conservative, moderate, or aggressive investor.
Suppose that the questionnaire results classified the client as a moderate investor. Capital
recommends that a client who is a moderate investor limit his or her portfolio to a maximum risk
rating of 240.

P-2a Linear Programming Model:

Max. AR = 0.12x + 0.09y
Subject to Constraints:
C <= ₱2,500,000.00
x <= ₱1,750,000.00
R <= 240
x, y >= 0
(where AR is the Annual Return, x is the money allocated to Ecom Fund and y is
(where C is the Capital)
(where x is the money allocated to Ecom Fund)
(where R is the Risk)

P-2b. CAPITAL INVESTMENT CORP.

ECOM FUND (x) BLUE CHIP FUND (y)

CAPITAL
ROI 12% 9%
MAX. INVESTMENT ₱1,750,000.00 0
RISK RATING (per peso) 0.00012 8E-05

ECOM FUND BLUE CHIP FUND

UNIT PROFIT ₱1,000,000.00 ₱1,500,000.00

A1: The recommended portfolio for this client would be to invest P1,000,000.00 to Ecom Fund and to inve
A2: The expected Annual Return for the portfolio would be a total of P225,000.00
able to invest.

ent funds: the

n of 12%, and

natives, has a

nds, Capital’s

e. Based on

o a maximum risk

ey allocated to Ecom Fund and y is the money allocated to Blue Chip Fund)

ORP.

ACTUAL LIMIT
₱2,500,000.00 <= ₱2,500,000.00

₱1,000,000.00 <= ₱1,750,000.00

240 <= 240

ANNUAL RETURN
₱255,000.00

000.00 to Ecom Fund and to invest P1,500,000.00 to Blue Chip Fund.

PROBLEM 3
Referring to Problem No. 2, suppose that a second client with P2,500,000 to invest has been
classified as an aggressive investor. Capital recommends that the maximum portfolio risk rating
for an aggressive investor is 320. What is the recommended investment portfolio for this
aggressive investor? What is the annual return for the portfolio?

P-3 CAPITAL INVESTMENT CORP.

ECOM FUND BLUE CHIP FUND ACTUAL

CAPITAL ₱2,500,000.00
ROI 12% 9%
MAX. INVESTMENT ₱1,750,000.00 0 ₱1,750,000.00
RISK RATING (per peso) 0.00012 8E-05 270

ECOM FUND BLUE CHIP FUND

UNIT PROFIT ₱1,750,000.00 ₱750,000.00

A1: The recommended portfolio for this client would be to invest P1,750,000.00 to Ecom Fund and to inve
A2: The expected Annual Return for the portfolio would be a total of P277,500.00.
 LIMIT
<= ₱2,500,000.00

<= ₱1,750,000.00
<= 320

RETURN
₱277,500.00

to Ecom Fund and to invest P750,000.00 to Blue Chip Fund.

PROBLEM 4
Best Haul Motors Inc. manufactures trucks. The production planner who oversees the
production of two of BHM’s truck models needs to determine how many of each to produce this
month. The two models, the Moderna and the Mega Hauler, each require a certain common
component. Each Moderna requires 10 of these components and each Mega requires 7. Only
49 components are available this month. The sales department requires that the total number
of trucks produced in a month must be at least 5 (i.e. the number Moderna plus the number
Mega must be at least 5). The profit for a Moderna is P2,500,000 and P1,700,000 for a Mega.

P-4a. BEST HAUL MOTORS INC.

MODERNA MEGA HAULER

UNIT PROFIT ₱2,500,000.00 ₱1,700,000.00

COMPONENTS USED PER UNIT USED

COMPONENT 10 7 49 <=
MINIMUM UNITS PRODUCED 0 7 7 >=

MODERNA MEGA HAULER

UNITS PRODUCED 0 7

A1: Best Haul Motors Inc. should produce 0 units of Moderna and 7 units of Mega Hauler in order to max

P-4b. BEST HAUL MOTORS INC.

MODERNA MEGA HAULER

UNIT PROFIT ₱2,500,000.00 ₱1,700,000.00

COMPONENTS USED PER UNIT USED

COMPONENT 10 7 49 <=
MINIMUM UNITS PRODUCED 4.66667 0.33333 5 >=

MODERNA MEGA HAULER

UNITS PRODUCED 4.66667 0.33333

A1: The optimal profit is P12,233,333.33.

A2: The optimal solution is to produce 4.67 units of Moderna and 0.33 units of Mega Hauler.

P-4c. BEST HAUL MOTORS INC.

MODERNA MEGA HAULER
UNIT PROFIT ₱2,500,000.00 ₱1,700,000.00

COMPONENTS USED PER UNIT USED

 COMPONENT 10 7 50 <=
MINIMUM UNITS PRODUCED 5 0 5 >=

MODERNA MEGA HAULER

UNITS PRODUCED 5 0

A1: When rounded off to the nearest whole number, the solution is demeed to not be feasible because of

P-4d. BEST HAUL MOTORS INC.

MODERNA MEGA HAULER
UNIT PROFIT ₱2,500,000.00 ₱1,700,000.00

COMPONENTS USED PER UNIT USED

COMPONENT 10 7 40 <=
MINIMUM UNITS PRODUCED 4 0 4 >=

MODERNA MEGA HAULER

UNITS PRODUCED 4 0

A1: It is feasible since all of the conditions of the constraints are met, but it not optimal.

P-4e. BEST HAUL MOTORS INC.

MODERNA MEGA HAULER

UNIT PROFIT ₱2,500,000.00 ₱1,700,000.00

COMPONENTS USED PER UNIT USED

COMPONENT 10 7 49 <=
MINIMUM UNITS PRODUCED 0 7 7 >=

MODERNA MEGA HAULER

UNITS PRODUCED 0 7

A1: The optimal profit would be a total of P11,900,000.00.

A2: Best Haul Motors Inc. should produce 0 units of Moderna and 7 units of Mega Hauler in order to max
h to produce this
ain common
quires 7. Only
e total number
the number
0 for a Mega.

AVAILABLE
49
5

PROFIT
₱11,900,000.00

of Mega Hauler in order to maximize their profit.

AVAILABLE
49
5

PROFIT
₱12,233,333.33

nits of Mega Hauler.

AVAILABLE
 49
5

PROFIT
₱12,500,000.00

ed to not be feasible because of the unmet condition of the component constraint.

AVAILABLE
49
5

PROFIT
₱10,000,000.00

it not optimal.

AVAILABLE
49
5

PROFIT
₱11,900,000.00

of Mega Hauler in order to maximize their profit.

PROBLEM 5
Agrochem Manufacturing Company makes a fertilizer using two chemicals that provide
nitrogen, phosphate, and potassium. A kilogram of ingredient 1 contributes 150 grams of
nitrogen and 90 grams of phosphate, while a kilogram of ingredient 2 contributes 30 grams of
nitrogen, 90 grams of phosphate, and 15 grams of potassium. Ingredient 1 costs P300 per
kilograms , and ingredient 2 costs P500 per kilogram. The company wants to know how many
kilogram of each chemical ingredient to put into a bag of fertilizer to meet the minimum
requirements of 600 grams of nitrogen, 1080 grams of phosphate, and 60 grams of potassium
while minimizing cost.

P-5a. Algebraic Model:

C = 300x + 500y (where C is the Cost, x represents how many kilos of ingredient 1 should be put into a bag of
150x + 30y >= 600
90x + 90y >= 1,080
15y >= 60
x, y >= 0

P-5b. AGROCHEM MANUFACTURING COMPANY

INGREDIENT 1 (x) INGREDIENT 2 (y)

UNIT PROFIT ₱300.00 ₱500.00

GRAMS OF CHEMICALS PER INGREDIENT USED

NITROGEN 150 30 1,320 >=
PHOSPHATE 90 90 1,080 >=
POTASSIUM 0 15 60 >=

INGREDIENT 1 (x) INGREDIENT 2 (y)

UNITS PRODUCED 8 4

A1: The optimal solution is to put 8 kilograms of ingredient 1 and 4 kilograms of ingredient 2 into a bag o
es 30 grams of

ow how many

s of potassium

redient 1 should be put into a bag of fertilizer and y represents how many kilos of ingredient 2 should be put into a bag of fertilizer)

AVAILABLE
600
1,080
60

COST
₱ 4,400.00

rams of ingredient 2 into a bag of fertilizer.

a bag of fertilizer)
PROBLEM 6
Glamorosa Jewelry Store makes necklaces and bracelets from gold and platinum. The store
has 500 grams of gold and 600 grams of platinum. Each necklace requires 90 grams of gold
and 60 grams of platinum, whereas each bracelet requires 60 grams of gold and 120 grams of
platinum. The demand for bracelets is no more than four. A necklace earns P15,000 in profit
and a bracelet, P20,000. Glamorosa wants to determine the number of necklaces and
bracelets to make in order to maximize profit.

P-6a. Algebraic Model:

P = 15000x + 20000y (where P is for Profit, x is for the unit of necklaces to be produced and y is for the unit of b
90x + 60y <= 500
60x + 120y <= 600
y <= 4
x,y >= 0

P-6b. GLAMOROSA JEWELRY STORE

NECKLACE (x) BRACELET (y)

UNIT PROFIT ₱ 15,000.00 ₱ 20,000.00

GRAMS OF MINERALS NEEDED PER UNIT USED

GOLD 90 60 500 <=
PLATINUM 60 120 600 <=

NECKLACE (x) BRACELET (y)

UNITS PRODUCED 3.33333333333333 3.33333333333333
<=
4

A1: The store should produce a total of 3.33 necklaces and 3.33 bracelets in order to maximize profit.

P-6c. Total Profit = P116,666.67

P-6d. A total of 500 grams of gold and 600 grams of platinum would be used to maximize profit.

P-6e. Slack for Gold = 0 grams (no slack)

Slack for Platinum = 0 grams (no slack)
uced and y is for the unit of bracelets to be produced)

AVAILABLE
500
600

PROFIT
₱ 116,666.67

der to maximize profit.

imize profit.
PROBLEM 7
 Referring to Problem No. 6:

P-7a. What is the effect on the optimal solution of increasing the profit contribution on a bracelet
from P20000 to P30000?
GLAMOROSA JEWELRY STORE

NECKLACE (x) BRACELET (y)

UNIT PROFIT ₱ 15,000.00 ₱ 30,000.00

GRAMS OF MINERALS NEEDED PER UNIT USED

GOLD 90 60 420 <=
PLATINUM 60 120 600 <=

NECKLACE (x) BRACELET (y)

UNITS PRODUCED 2 4
<=
4

A1: The optimal solution would result to the production of 2 units of necklace and 4 units of bracelets.

P-7b. What will be the effect of changing the platinum requirement for a necklace from 60 grams to
90 grams?
GLAMOROSA JEWELRY STORE

NECKLACE (x) BRACELET (y)

UNIT PROFIT ₱ 15,000.00 ₱ 20,000.00

GRAMS OF MINERALS NEEDED PER UNIT USED

GOLD 90 60 360 <=
PLATINUM 90 120 600 <=

NECKLACE (x) BRACELET (y)

UNITS PRODUCED 1.33333333333333 4
<=
4

A1: Actual Platinum used would be the same but actual gold would decrease by 140 grams. Lastly, Pro

P-7c The maximum demand for bracelets is four. If the store produces the optimal number of
bracelets and necklaces, will the maximum demand for bracelets be met? If not, by how much
will it be missed?
A1: The maximum demand for bracelets would be met using the optimal solution.

P-7d What profit for a necklace would result in no bracelets being produced, and what would be
the optimal solution for this profit?
Variable Cells
Final Reduced Objective
Cell Name Value Cost Coefficient
$C$26 UNITS PRODUCED NECKL 3.33333333333333 0 15000
$D$26 UNITS PRODUCED BRACE 3.33333333333333 0 20000

Constraints
Final Shadow Constraint
Cell Name Value Price R.H. Side
$E$22 GOLD USED 500 83.33333 500
$E$23 PLATINUM USED 600 125 600

GLAMOROSA JEWELRY STORE

NECKLACE (x) BRACELET (y)

UNIT PROFIT ₱ 30,000.00 ₱ 20,000.00

GRAMS OF MINERALS NEEDED PER UNIT USED

GOLD 90 60 500 <=
PLATINUM 60 120 333.3333 <=

NECKLACE (x) BRACELET (y)

UNITS PRODUCED 5.55556 0
<=
4

A1: The profit of ₱166,666.67 would result in no bracelets being produced. Whereas,
the optimal solution for this profit is to produce 5.56 units of necklace and 0 unit of bracelets.
Based on the sensitivity report, the ₱15,000 allowable increase of necklace reported was applied
to the unit profit for necklace. Accordingly, the effect of increasing the profit contribution on necklace
to the optimal solution resulted to 5.56 necklace and 0 bracelets being produced.
 AVAILABLE
500
600

PROFIT
₱ 150,000.00

d 4 units of bracelets.

m 60 grams to

AVAILABLE
500
600

PROFIT
₱ 100,000.00

140 grams. Lastly, Profit will decrease by P16,666.67.

 Allowable Allowable
Increase Decrease
15000 5000
10000 10000

Allowable Allowable
Increase Decrease
400 80
53.3333333333 266.6667

AVAILABLE
500
600

PROFIT
₱ 166,666.67

of bracelets.
ted was applied
ribution on necklace