FAR EASTERN UNIVERSITY

Manila

BUSINESS CAPACITY PLANNING

by 
Linear Programming
 

Linear Programming
Pr ogramming
 The management of any organization regularly
must make decisions about how to allocate its
resources to various activities to best meet
organizational objectives. Linear programming is
a powerful problem-solving tool that aids
management in making such decision.
 The word linear  in
 in the name refers to the form of
the mathematical expressions in this model.
Programming is
Programming  is essentially a synonym for
planning. Thus, linear programming means
 planning of activities represented by a linear  
mathematical model.
 

Application of linear programming

 There are
are numerous
numerous examples of
of linear programming
programming
applications to such problems, including:
1. Establishing locations for emergency equipment
and personnel to minimize response time.
2. Determin
Determining
ing optimal schedules for airlines for

planes, pilots, and ground personnel.

3. Developing nancial plans.
4. Determin
Determining
ing optimal blends of animal feed
f eed mixes.
5. Determin
Determining
ing optimal diet plans.
6.
Identifying the best set of worker-job assignments.
7. Developing optimal production schedules.
8. Developing shipping plans that will minimize
shipping costs.
9. Identifying the optimal mix of products in a factory.
 

Four components provide the

structure of a linear programming
model:
1. Objective
2. Decision variable

3. Constraints
4. Parameters
 

 The objective function is a

mathematical expression that
can be used to determine the
total prot or cost for a given
solution.
 The decision variables represent
variables represent
choices available to the decision
maker in terms of the amounts of
either inputs or output.
 

Constraints are limitations that

Constraints are
restrict the alternatives available
to decision makers.
 The LP model
model consis
consists
ts of
mathematical statement of the
objective and the mathematical
statement of each constraint.
constraint.
 These statements
statements consist
consist of
symbols that represent the
decision variables and numerical
 
valu
values
es cal
alle
led
d arameters
arameters..

GR
GRAPHICAL
APHICAL METHOD
 

 The Supreme Manufacturing Company

(Maximization Problem Graphical
Method)
  The Supreme Manufacturing Company produces two types of
toy model cars: The Cruiser and Model Tyrex. Three machines are
required to produce each type of toy car model. These machines
are classied as M1, M2 and M3. Each Cruiser model requires 7
minutes process time on M1, 4 minutes on M2, and 10 minutes
on M3. A Model Tyrex requires 4 minutes on M1, 15 minutes on
M2 and 16 minutes on M3. Each day there are 420 minutes of
available time on M1, 600 minutes on M2, and 840 minutes on
M3. The variable cost is P150 per unit of the Cruiser model and
P180 per unit for Model Tyrex.
Tyrex. Cruiser model sells at a price of
P580, whereas Model Tyrex sells for P750. The company’s xed
cost is P7,000 for the day’s production. Determine the daily
production rate of the two models which will maximize prot.
 

 The New Genera

Generation
tion Power
Power Corporation
Corporation
(Minimization Problem Graphical Method)
 The main generator of the New Generation
Generation Power
Power corporation
burns two types of fuel: Low sulfur and high sulfur, to produce
electricity
elect ricity.. For one hour, each gallon of low sulfur emits 30
units of sulfur dioxide, generates 40 kilowatts of electricity
and costs P600. Each gallon of high sulfur emits 50 units of
sulfur dioxide,
dioxide, generates 40 kilowatts of electricity, and costs
P500. The environ
e nvironmental
mental protection agency insists that the
maximum amount of sulfur dioxide that can be emitted
e mitted per
hour is 150 units. Suppose that at least 160 kilowatts of
electricity must be generated per hour, how many gallons of
low sulfur and how many gallons of high sulfur must be
utilized per hour in order to minimize the cost of fuel.
 

SIMPLEX METHOD
Maximization Model
 

Linear Programming
Simplex Method (Maximization)
Summary of Steps
1. Set-up the objective function and the problem constraints.
2. Convert the inequalities by adding slack or articial variables.
3. Enter equalities in the simplex table.
4.
Calculate the Cj and Zj values for this solution.
5. Determine the entering variable of the optimum column, i.e.
the column with the highest Cj – Zj value.
6. Determine the outgoing variable of the pivot row.
row.
7. Compute the elements of the entering variable.

8. Compute the values of the remaining rows using the formula:

(Elements in old row) – (Intersectional element of old
row)x(Corresponding
row)x(Corr esponding element in replacing row)
9. Calculate Cj – Zj values for the solution.
10. If there is no positive Cj – Zj value, the optimum solution is

obtained.
 

Methods for Treating Constraints

Original Action Required Resulting
Constraints Constraints

x≤c Add a slack variable x+s=c

x≥c Multiply both sides by -x + s = -c

 (-1) and add a slack
variable
x=c Add a slack variable x+s=c
 

Sample Problem:
Cavite West Oil Company (Simplex Method
Maximization)
 The Cavite
Cavite West
West Oil Company
Company produces
produces ttwo
wo
grades of gasoline: regular and premium. The
prot contributions are P3.00P3.00 per
 per liter for
regular gasoline and P6.00
P6.00 per per liter for
premium gasoline. Each liter of regular
gasoline contains 0.30.3 liter
 liter of grade A crude
oil and each liter of premium gasoline
contains 0.6
0.6 liter
 liter of grade A crude oil. For the
next production period, Cavite West has
18,000 liters
18,000  liters of Grade A crude oil available.
 The renery
renery u used
sed to prproduce
oduce ththe e gasoline
gasoline has
a production capacity of 50,000 liters for the
next production period. Cavite West’s
distributors have indicated that demand for
the premium gasoline for the next production
period will be at most 20,000
20,000 liters.
 liters.
  Determine the number of liters of regular
gasoline and the number of liters of premium
gasoline that should be produced in order to
maximize total prot contribution.
 

Linear Program:
Let x be the volume of regular gasoline and y be the
volume of premium gasoline

Objective function:
Maximize: P = 3x + 6y
Subject to:
0.3x + 0.6y ≤ 18,0000.3x + 0.6y
0.6y + S1 = 18,000
  x + y ≤ 50,0
50,000
00 x + y + S2 = 50,
50,00
000
0

  y ≤ 20,000 y + S3 = 20,000
  x, y ≥ 0
 

Initi
In itial
al Tabl
ablee

Pj 3 6 0 0 0

PM Q x y S1 S2 S3

0 S1 18,000 0. 3 0. 6 1 0 0 30000

0 S2 50,000 1 1 0 1 0 50000

0 S3 20,000 0 1 0 0 1 20000

  Zj 0 0 0 0 0 0

Pj - Zj 3 6 0 0 0
 

Second Table

Pj 3 6 0 0 0

  PM Q x y S1 S2 S3

0 S1 6,000 0.3 0 1 0 -0.6 20000

0 S2 30,000 1 0 0 1 -1 30000

6 y 20000 0 1 0 0 1 imaginary

  Zj
Zj 120000 0 6 0 0 6

Pj - Zj 3 0 0 0 -6
 

 Third
 Third Table
Table

Pj 3 6 0 0 0

  PM Q x y S1 S2 S3
NA
3 x 20,000 1 0 3.33 0 -2
NA
0 S2 10,000 0 0 -3.33 1 1
NA
6 y 20,000 0 1 0 0 1

  Zj   180000 3 6 3.33 0 0

Pj - Zj 0 0 -9.99 0 0
 

Production Mix Decision:

For the next
production period,
the Cavite West Oil
Company should
produce 20,000
liters of regular
gasoline and 20,000
liters of premium
gasoline in order to
attain the possible
maximum prot of
P180,000
 

Using Excel Solver:

  Regular, x Premium, y Proft

Objecve:
Max P 20000 20000 180000

Constraints:

Grade A 0. 3 0. 6 18,000 18000

Total output 1 1 50,000 40000

Premium 0 1 20,000 20000

 

 Problem Exercises

  The Sun Hwa Manufacturing Company produces two

models of microwave ovens: H and W series. Both models
require
require fabrication and assembly
assembly work; each
each H uses
uses 4 hours
of fabrication and 2 hours of assembly, and each W uses 2
hours of fabrication and 6 hours of assembly. There are 600
fabrication hours available for the week and 480 hours of
assembly. Each H contributes P800 to prots, and each W
contributes P600 to prots. What quantities of H and W
series will maximize prots?
 

 The FamilyF
FamilyFed
ed Trust
Trust Company is planning
planning to invest up to
P6,000,000: bonds and corporate stocks. Bonds carries
an average increase in investment of 25% while dividend
for corporate stocks, 30%. Suppose the fund rules state
that no more than P4,000,000 may be invested in
corporate stocks, while at least P1,500,000 must be
invested in bonds, how much should be invested in each
type of security to maximize the fund’s return?
 

A farmer has 40 hectares on

which to plant rice and corn.
 The rice needs 4 units of
insecticide and 2 units of
fertilizer per hectare while
corn requires 3 units of
insecticide and 6 units of
fertilizer. He has at most 90
units of insecticide and at
most 120 units of fertilizer
available. His average prot
per hectare on rice is
P30,000 and P20,000 on
corn. How many hectares of
each crop should he plant to
maximize his average prot?
 

 The Pure Love Candy Shop is preparing for the holiday season,
 The owner
owner mus
mustt decide ho
how
w many
many bags of
of deluxe
deluxe mix and
and standard
standard
mix of Peanut-Raisin Delite to put up. The deluxe mix has 2/3 kilo
raisins and 1/3 kilo peanut, and the standard mix has ½ kilo raisins
and ½ kilo peanuts per bag. The shop has 90 kilos of raisins and 60
kilos of peanuts to work with.
Peanuts cost P60 per kilo and raisins cost P150 per kilo. The deluxe
mix will sell for P580 per kilo and the standard mix will sell P510 per
kilo. The owner estimates that no more than 110 bags of either type
can be sold.
If the goal is to maximize prots, how many bags of each type
should be prepared? What is the expected prot?
 

 The Global Advertising Network Inc.

handles radio and television promotional
 jobs and placement for a wide range of
clients. The agency’s objective is to
maximize the total audience exposure for
its clients’
clients’ products.
products. Resear
Research
ch indicates
indicates
that each radio spot results in 1,000
exposures, while each television spot
contributes an independent 3,000
exposures. A radio spot costs P40,000 and
a television spot costs P200,000.
P 200,000. Clients
provide the company with a maximum
monthly budget of P10,000,000
P 10,000,000.. Contracts
with radio network require a minimum of
100 spots per month. The agency employs
account executives
experience indicatestothat
place theradio
each spots. Past
spot
takes 20 hours of executive eort and
each television spot uses 50 hours. The
agency’s account executives are available
for 4,000 hours per month. Determine how
many radio and television spots are
needed to maximize exposure of the
products.
 

SIMPLEX METHOD
Minimization Model
 

Linear Programming

Simplex Method (Minimization)

1. Set-up the objective function.
2. Convert the inequalities to equalities by
adding slack variables or subtracting
slack variables as necessary.
3. Enter the resulting equalities in the
simplex table.
4. Calculate Cj and Zj values for this
solution.
5. Determine the entering variable by
choosing the one with the largest
negative Cj – Zj value.
 

6. Determine the row to be replaced by

dividing the quantity column values by
their corresponding optimum column values
and choosing the smallest positive quotient.
7. Compute the values for the replacing row.
8. Calculate the values for the remaining row.
row.
9. Calculate the Cj and Zj for this solution

10. If there is a negative Cj – Zj value

remaining, proceed as indicated in Step 5.
11. If there is no negative Cj – Zj value, the
optimum solution is obtained.
 

Linear Programming

Simplex Method (Minimization)

Method of Treating Constraints
Original Action Required Resulting
Constraints Constraints

x≤c Add a slack x+s=c

variable
x≥c Subtract a slack x–s+A=c
variable (surplus)
and add an
articial variable
x=c Add an articial x+A=c
variable
 

Sample Problem
A manufacturer of commercial
chemicals has an order for a certain
mixture consisting of two ingredients,
low concentration and high
concentration,
concentration, which cost P40.00 and
P50.00 per kilo, respectively. The
following are the specications: the
weight of the mixture must exactly
100 kilos; it cannot contain more
than 30 kilos of low concentrat
concentration
ion
ingredient; and it must contain at
least 20 kilos of high concentration
ingredient. Find the mixture of the
two ingredients which satises the
customers’ requirements and still
yield a minimum total cost of raw
materials.
 

Linear Program
Minimize: C = 40x + 50y
Subject to: x + y = 100;
x ≤ 30;

y ≥ 20;
x, y ≥ 0
Modied linear progra
program:
m:

Minimize: C = 40x + 50y

Subjectt to: x + y + A1
Subjec A1 = 100
x + S1 = 30
y – S2 + A2 = 20
 

Initial Table
Cj 40 50 0 0 100 100

PM Q x y S1 S2 A1 A2

100 A1 100 1 1 0 0 1 0 100

0 S1 30 1 0 1 0 0 0 UND

100 A
A2
2 20 0 1 0 -1 0 1 20

Zj 12,0 100 200 0 -100 100 100

00
Cj-Zj -60 -150 0 100 0 0
 

Second Table
Cj 40 50 0 0 100 100

PM Q x y S1 S2 A1 A2

100 A
A1
1 80 1 0 0 1 1 -1 80

0 S1 30 1 0 1 0 0 0 30

50 y 20 0 1 0 -1 0 1 UND

Zj 900 100 50 0 50 100 -50

0
Cj-Zj -60 0 0 -50 0 150
 

 Third table
Cj 40 50 0 0 100 100

PM Q x y S1 S2 A1 A2

100 A
A11 50 0 0 -1 1 1 -1 50

40 x 30 1 0 1 0 0 0 UND

50 y 20 0 1 0 -1 0 1 -20

Zj 720 40 50 -60 50 100 -50

0

Cj-Zj 0 0 60 -50 0 150

 

Fourth Table
Cj 40 50 0 0 100 100

PM Q x y S1 S2 A1 A2

0 S2 50 0 0 -1 1 1 -1

40 x 30 1 0 1 0 0 0

50 y 70 0 1 -1 0 1 0

Zj 470 40 50 -10 0 50 0
0

Cj-Zj 0 0 10 0 50 100
 

Decision:
 The company
should use 30
kilos of low
concentration
ingredient and 70
kilos of high
concentration
ingredient. The
cost of P4,700 is
at minimum.
 

Pr
Problem
oblem Exer
Exercises
cises

 The Orient Pearl Airlines operates two types of

domestic aircraft:
aircraft: PH77 and PH78. The
The rst type can
carry a maximum of 40 passengers and 30 tons of

cargo. It costs
can carry P50,00060
a maximum per journey. The
passengers andsecond type
15 tons of
cargo. It costs P60,000 per journey
journey.. The aircraft rm
is contracted to carry at least 480 passengers and 180
tons of cargo
cargo each day.
day. What choice of aircraft will
minimize overall cost?
 

A swine farmer must supplement the vitamins in the

feeds he contains
of which buys. Hethe
is considering two but
feeds required supplements,
in dierenteach
amounts. He must meet or exceed the minimum
vitamin requirements.
requirements. The vitamin content per gram of
the
Vitsupplements
amin Suppleismgiven
ent in the following table.
Supplement
A B
A 5 units 25 units
B Complex 25 units 10 units
C 10 units 10 units
E 36 units 20 units

Supplement A costs P5 per gram and Supplement B

costs P6 per gram. The feeds must contain at least 50
units of vitamin A, 100 units of vitamin B Comple
Complex,x,
60 units of vitamin C, and 180 units of Vitamin E.
Determine the combination that has the minimum
cost.
 

 The Pampanga Betis Furniture has an order of 100 of

its narra chairs. The chairs can be produc
produceded in two ways.
One way is for the company to produce the chair parts in
its own shop at a cost of P250 and use 20 minutes of
level 2 labor to assemble each chair. Level 3 labor is paid
P180 per hour. The alternative method is to purchase the
parts of the chair from a competitor at a cost of P300 per
set and to use 15 minutes of level 3 labor to assemble
each chair.
chair. Level 3 labor is paid P200 per hour.
hour. The order
must be lled during the next 20 days. If Betis will order
the parts from the competitor, it must order at least 50
sets of parts. A total of 20 hours of each of the two
levels of labor could be available at the time of assembly.
Determine
Determ ine the best combination of the chair to ll up the
order at minimum cost.
 

As part of quality improvement initiative , the Ideal World

Electronics employees complete a three-day  training program on
three-day training
team-building and two-day  training program on problem solving. The
two-day training
manager of quality improvement has requested that at least 8
training programs on team-building
team-building   and at least 10 training
programs on problem solving be
solving be oered during the next operation
year. The senior manager has specied that at least 25  training
25 training
programs must be oered during the period. During the next operation
year, the training consultant has 84 days of training time available.
84 days
Each training on team-building costs P100,000
P100,000 and and each training on
problem solving costs P80,000
P80,000..
Determine the number of the two training programs that should be
conducted in order to minimize the total training cost for the company.
 
 

PharmaPlus operates a chain of 30 pharmacies. The

pharmacies are staed by licensed pharmacists and pharmacy
technicians. The company currently employs 85 pharmacists and
175 technicians. At the end of scal year the management
reviews current stang levels and make hiring plans for the year
yea r.
A recent forecast of the prescription load for the next year shows
that at least 250 full-time equivalent employees (pharmacists
and technicians) will be required to sta the pharmacies. The
personnel department expects 10 pharmacies and 30 technicians
to leave over the next year. To accommodate the expected
attrition and prepare for future growth, the management stated
that at least 15 new pharmacist must be hired. In addition,
PharmaPlus’s new service quality guidelines specify no more

than
salarytwo
fortechnicians per licensed
licensed pharmacist pharmacist.
is P200 per hourThe
andaverage
the average
salary for technician is P50 per hour
hour..
a. Determine a minimum-cost stang plan for the company.
company.
b. Given the current stang levels and expected attrition, how
many new hires (if any) must be made to reach the level
recommended in (a)? What will be the impact on the payroll?