LINEAR PROGRAMMING I: FORMULATION AND GRAPHIC SOLUTION

We live in a world of shortages since the supply of our resources is limited. This is all the more true
at the micro level. Thus, there is always a problem as to how to allocate the given resources in the
best possible manner. Linear programming is a technique which provides the answer in a wide
variety of cases.

Some situations where a manager can use linear programming include the following:
♦ How to allocate the advertising budget among various alternate advertising media which have
different degrees of effectiveness in reaching audiences and involve different costs?

♦ In case of a multi-product firm, what product-mix will yield the maximum profit, when different
products are known to have different profitability coefficients and different resource
requirements?

♦ How should the given funds be allocated between diferent investment opportunities that yield
variing returns and involve different degrees of risk?

♦ How should the land on an agricultural farm be allocated between different crops which involve
different costs on account of labour, manure, seeds, etc. and have different yields, resulting in
unequal profitability of the agricultural products produced?

♦ How should the HR manager of a hospital decide about the employment of nurses that involves
lowest cost and yet meets the requirements at different times of 24-hour day?

INTRODUCTION
A large number of decision problems faced by a business manager involve allocation of resources
to various activities, with objective of increasing profits or decreasing costs, or both. When
resources are in abundance, no difficulty is experienced. But such cases are very rare. Practically in
all situations, the managements are confronted with the problem of scarce resources. Normally,
there are several activities to perform but limitations of either of the resources or their use prevent
each activity from being performed to the best level. Thus, the manager has to take a decision as
to how to best allocate the resources among the various activities.

The decision problem becomes complicated when a number of resources are required to be
allocated and there are several activities to perform. Rule of thumb, even an experienced
manager, in all likelihood, may not provide the right answer in such cases. The decision problems
can be formulated and solved, as mathematical programming problems.

Mathematical programming involves optimisation of a certain function, called the objective

function, subject to certain constraints. For example, a manager may be faced with the problem of
deciding the appropriate product mix of four products. With the profitability of the products along
with their requirements of raw materials, labour, so on known, his problem taking the objective
function as the maximisation of profits obtainable from the mix, keeping in view the various
constraints - the availability of raw materials, labour supply, market and so on. The methods of
mathematical programming can be divided into three groups: linear, integer and non-linear
programming.
Linear programming (LP) method is a technique for choosing the best from a set of feasible
alternatives. Being a method of mathematical programming, it uses a mathematical model to
describe the problem in consideration for solution. However, it can be applied only in those
situations in which the objective function and constraints can be expresed as a linear mathematical
functions. In order to apply linear programming, certain requirements have to be met. These are
discussed here:

(a) There shoud be an objective which is clearly identifiable and measurable in quantitative terms.
It could be, for example, maximisation of sales or profit, minimisation of cost and so on.

(b) The activities to be included should be distinctly identifiable and measurable in quantitative
terms, for instance, the products included in a production planning problem.

(c) The resources of the system, which are to be allocated for the attainment of the goal, should
also be identifiable and measurable quantitatively. They must be in limited supply. The technique
would involve allocation of these resources in a manner that would trade off the returns of the
investment of the resources for the attainment of the objective.

(d) The relationships representing the objective function and the constraint equations or
inequalities, respectively, must be linear in nature.

(e) There should be a series of feasible alternative courses of action available to the decision-maker
which are determined by the resource constraints.

When these stated conditions are satisfied in a given situation, the problem can be expressed in
algebraic form, called the Linear Programming Problem (LLP), and then solved for optimal decision.

FORMULATION OF LINEAR PROGRAMMING PROBLEMS

The formulation of LLP involves developing a mathematical model of the problem at hand. An LP
model involves specification of the goal of the problem and the constraints in algebraic terms. For
this, we first identify the activities regarding which a decision is to be made. These are represented
by what are known as decision variables. Using the decision variables and other relevant
informationl we develop what is known as the objective function (which specifies the goal) and the
set of constraints under which to take decision. The objective function may be of the
"maximisation" or "minimisation" type.
Marketing

Sales / Marketing /
Operations / Finance

Finance

Agricultural sector

Human Resource
1. The Maximisation Case

A firm is engaged in producing two products, A and B.

Each unit of product A requires 2 kg. of raw material and 4 labour hours for processing, whereas
each unit of product B requires 3 kg. of raw material and 3 hours of labour of the same type.
Every week, the firm has an availability of 60 kg. of raw material and 96 labour hours. One unit of
product A sold yields Rs. 40 and one unit of product B sold gives Rs. 35 as profit.
Formulate the problem as a linear programming problem to determine as to how many units of
each of this products should be produced per week so tht the firm can earn maximum profit.
Assume that there is no marketing constraints so that all that is produced can be sold.

Solution:

The objective function:

In this problem the number of units of products A & B to be produced defines the level of actiities
while the goal is maximisation of profit, which would be obtained by producing (and selling) these
products. If we let x1 and x2 represent the umber of units produced per week of the products A
and B, respectively, the total profit Z, would be equal to 40x1 + 35x2, because the unit profit on the
two products is, respectively, Rs. 40 and Rs. 35. Accordingly Z = 40x1 + 35x2 should be the objective
funciton relating the profit and the output level of each of the two items. Notice that the function
is a linear one. Further, since the problem calls for a decision about the optimal values of x 1 and x2,
these are known as the decision variables.

The constraints:

Another requirement of linear programming is that the resources must be in limited supply. The
mathematical relationship which is used to explain this limitation is inequality. The limitation itself
is known as a constraint.

Each unit of product A requires 2 kg. of raw material while each unit of product B needs 3 kg. The
total consumption would be 2x 1 + 3x2, which cannot exceed the total availability of 60 kgs.every
week. We can express this constraint as 2x1 + 3x2 < 60. Similarly, it is given that a unit of A required
4 labour hours for its production and one unit of B requires 3 labour hours. With an availability of
96 hours a week, we have 4x1 + 3x2 < 96 as the labour hour constraint.
It is important to note that each constraints, inequality rather than equation has been used. This is
because the profit maximising output might not use all the resources to the full, leaving some
unused. Hence, the < sign. However, the inequalities used are not strict ones. A strict inequality is
expressed as, for examle, a < b (or a > b). Here, the inequalities are loose thus permitting a to be
smaller (or greater) than, or equal to, b. It may be noticed that all the constraints, like objective
function, are also linear in nature.

Non-negativity condition:
Quite obviously, x1 and x2, being the number of units produced, cannot have negative values.
Thus, both of them can assume values only greater-than-orequal-to-zero. This is non-negativity
condition, expressed symbolically as x 1 > 0 and x2 > 0.

Now, we can write the problem in complete form as follows:

Maximise
Z = 40x1 + 35x2 Profit

Subject to
2x1 + 3x2 < 60 Raw material constraint
4x1 + 3x2 < 96 Labour hour constraint
x1, x2 > 0 Non-negative restriction
Product R.M. (kg./unit) Labour (Hrs. Profit (per unit) Product quantity
per unit)
A 2 4 40 x1

B 3 3 35 x2

Weekly < 60 < 96 40x1+35x2 >0

R.M. constraint Labour hours Objective function Non-negativity

constraint condition
Minimize profit Z =
1. The Maximisation Case - Solver

A firm is engaged in producing two products, A and B.

Each unit of product A requires 2 kg. of raw material and 4 labour hours for processing, whereas
each unit of product B requires 3 kg. of raw material and 3 hours of labour of the same type.
Every week, the firm has an availability of 60 kg. of raw material and 96 labour hours. One unit of
product A sold yields Rs. 40 and one unit of product B sold gives Rs. 35 as profit.
Formulate the problem as a linear programming problem to determine as to how many units of
each of this products should be produced per week so that the firm can earn maximum profit.
Assume that there is no marketing constraints so that all that is produced can be sold.

Solution:

We can write the problem in complete form as follows:

Maximise
Z = 40x1 + 35x2 Profit

Subject to
2x1 + 3x2 < 60 Raw material constraint
4x1 + 3x2 < 96 Labour hour constraint
x1, x2 > 0 Non-negative restriction
 Product R.M. (kg./unit) Labour (Hrs. Profit (per unit) Product quantity
per unit)
A 2 4 40 x1

B 3 3 35 x2

Weekly < 60 < 96 40x1+35x2 >0

R.M. constraint Labour hours Objective function Non-negativity

constraint condition
Minimize profit Z =

Products
A B
Profit per unit 40 35

Per unit requirement Utilised Max. available

R.M. 2 3 0 < 60
Labour hrs. 4 3 0 < 96

Total requirement
R.M. 0 0
Labour hrs. 0 0

A B
Output 0 0
x1 x2

Total Profit =60 Total profit

0 =96 1000
Z