MGT1107 MANAGEMENT SCIENCE

Chapter 2: Linear Programming:

TOPICS Basic Concepts
DATE • TIME
• Explain what Linear Programming is
• Identify the three key questions to be addressed in formulating any spreadsheet
model
• Name and identify the purpose of the four kinds of cells used in linear programming
spreadsheet models
• Formulate a basic linear programming model in a spreadsheet from a description of
the problem
• Present the algebraic form of a linear programming model from its formulation on a
spreadsheet
Housekeeping Rules

Rec ●
This online session is Always keep your Use the “raise hand” You can use the chat box Use appropriate tone Test your microphone and
recorded. microphone muted. feature if you have feature if you have other when speaking. headset to avoid technical
questions and wait to be questions to be addressed issues.
recognized. by the speaker.
What is Linear Programming?
• It is a powerful problem-solving tool that aids management in making decisions on
how to allocate its resources to various activities to best meet organizational
objectives.
• The word linear in the name refers to the form of mathematical expressions in this
model. The word programming does not refer to computer programming; rather it is
synonymous to planning.
• This then means that it is the planning of activities represented by a linear
mathematical model.
• It is a mathematical modeling technique in which a linear function is maximized or
minimized when subjected to various constraints. This technique has been useful for
guiding quantitative decisions in business planning, in industrial engineering, and—to
a lesser extent—in the social and physical sciences.
• linear programming was used extensively to deal with transportation, scheduling, and
allocation of resources subject to certain restrictions such as costs and availability.
Three Key Questions to be Addressed in Formulating any
Spreadsheet Model
1. What are the decisions to be made?
2. What are the constraints on these decisions?
3. What is the overall measure of performance for these decisions?
Decision variables are the variables which will be used as a function of the objective
function. These variables decide your output. The decision maker can control the value
of an objective function using the decision variable. When you solve any linear
programming problem, you first need to identify the decision variables.
Constraints are a set of restrictions or situational conditions. Constraints can be in
equalities or inequalities form. Constraints restrict the value of decision variables.
The objective function is a profit or cost function that maximizes or minimize. It is the
main target of making decisions.
The optimal solution is one of the feasible solutions where the objective function is
either maximum or minimum, for example, maximum profit or minimum cost. It is the
best value of the objective function.
Four Kinds Of Cells Used In Linear Programming Spreadsheet Models
Developing A Spreadsheet Model

• Step #1: Data Cells

• Enter all of the data for the problem on the spreadsheet.
• Make consistent use of rows and columns.
• It is a good idea to color code these “data cells” (e.g., light blue).

A B C D E F G
1 Wyndor Glass Co. Product-Mix Problem
2
3 Doors Windows
4 Unit Profit $300 $500
5 Hours
6 Hours Used Per Unit Produced Available
7 Plant 1 1 0 4
8 Plant 2 0 2 12
9 Plant 3 3 2 18
Four Kinds Of Cells Used In Linear Programming Spreadsheet Models
Developing A Spreadsheet Model

• Step #2: Changing Cells

• Add a cell in the spreadsheet for every decision that needs to be made.
• If you don’t have any particular initial values, just enter 0 in each.
• It is a good idea to color code these “changing cells” (e.g., yellow with
border).
A B C D E F G
1 Wyndor Glass Co. Product-Mix Problem
2
3 Doors Windows
4 Unit Profit $300 $500
5 Hours
6 Hours Used Per Unit Produced Available
7 Plant 1 1 0 4
8 Plant 2 0 2 12
9 Plant 3 3 2 18
10
11 Doors Windows
12 Units Produced 0 0
Four Kinds Of Cells Used In Linear Programming Spreadsheet Models
Developing A Spreadsheet Model

• Step #3: Objective Cell

• Develop an equation that defines the objective of the model.
• Typically this equation involves the data cells and the changing cells in
order to determine a quantity of interest (e.g., total profit or total cost).
• It is a good idea to color code this cell (e.g., orange with heavy border).
B C D E F G
3 Doors Windows
4 Unit Profit $300 $500
5 Hours
6 Hours Used Per Unit Produced Available
7 Plant 1 1 0 1
8 Plant 2 0 2 12
9 Plant 3 3 2 18
10
11 Doors Windows Total Profit
12 Units Produced 1 1 $800

G
11 Total Profit
12 =SUMPRODUCT(UnitProfit,UnitsProduced)
Four Kinds Of Cells Used In Linear Programming Spreadsheet Models
Developing A Spreadsheet Model
• Step #4: Constraints
• For any resource that is restricted, calculate the amount of that resource
used in a cell on the spreadsheet (an output cell).
• Define the constraint in three consecutive cells. For example, if Quantity A
<= Quantity B, put these three items (Quantity A, <=, Quantity B) in
consecutive cells.

A B C D E F G
1 Wyndor Glass Co. Product-Mix Problem
2
3 Doors Windows
4 Unit Profit $300 $500
5 Hours Hours
6 Hours Used Per Unit Produced Used Available
7 Plant 1 1 0 0 <= 4
8 Plant 2 0 2 0 <= 12
9 Plant 3 3 2 0 <= 18
10
11 Doors Windows Total Profit
12 Units Produced 0 0 $0
 Mathematical Formulation
A furniture dealer deals in only two items–tables and chairs. He has
₱50,000 to invest and has storage space of at most 60 pieces. A table
costs ₱2500 and a chair ₱500. He estimates that from the sale of one
table, he can make a profit of ₱250 and from the sale of one chair a
profit of ₱75. He wants to know how many tables and chairs he should buy
from the available money to maximize his total profit, assuming that he
can sell all the items which he buys.
Observation:
• The dealer can invest his money in buying tables or chairs or a
combination of both. Further, he would earn different profits by
following different investment strategies.
• His investment is limited to a maximum of ₱50,000, and so is his
storage space, which is for a maximum of 60 pieces.
 Mathematical Formulation
Let’s suppose he decides to purchase tables only and no chairs. So,
he can buy 50000/2500 = 20 tables. In this case, he will earn a
profit of 250 x 20 = ₱5000. Or he decides to purchase chairs only
and no tables. So, he can buy 50000/500 = 100 chairs.
In this case, he will earn a profit of 75 x 60 = ₱4500.
There could be many combinations of tables and chairs he could
buy.
 Mathematical Formulation
Let X = tables; Y = chairs
• The dealer has a maximum amount of ₱50000 to purchase tables and
chairs hence: 2500X + 500Y <= 50000 (Investment constraints) or 5X +
Y <= 100 ~~~ equation 1
• The maximum number of units he can store is 60. X + Y <= 60 ~~~
equation 2

The dealer wants to purchase in such quantities so he can maximize his

profit Z, hence the equation would be –
Max Z : 250 X + 75 Y

Objective function: Max Z: 250X + 75Y

Subjected to constraints:
5X + Y <= 100,
X + Y <= 60 and
X,Y >= 0
PROBLEM
PROBLEM
 SOLUTION A:
As in the Wyndor Glass Co. problem, we want to find the optimal levels of two
activities that compete for limited resources.
Let x1 be the fraction purchased of the partnership in the first friends venture.
Let x2 be the fraction purchased of the partnership in the second friends venture.
The following table gives the data for the problem:
Resource Usage
per Unit of Activity Amount of
Resource 1 2 Resource Available
Fraction of partnership in first friends venture 1 0 1
Fraction of partnership in second friends venture 0 1 1

Money $10,000 $8,000 $12,000

Summer Work Hours 400 500 600
Unit Profit $9,000 $9,000
 SOLUTION B:
The decisions to be made are how much, if any, to participate in
each venture. The constraints on the decisions are that you can’t
become more than a full partner in either venture, that your money
is limited to $12,000, and time is limited to 600 hours. In addition,
negative involvement is not possible. The overall measure of
performance for the decisions is the profit to be made.
 SOLUTION C:
First venture: (fraction of 1st) ≤ 1
Second venture: (fraction of 2nd) ≤ 1
Money: 10,000 (fraction of 1st) + 8,000 (fraction of 2nd) ≤ 12,000
Hours: 400 (fraction of 1st) + 500 (fraction of 2nd) ≤ 600
Nonnegativity: (fraction of 1st) ≥ 0, (fraction of 2nd) ≥ 0

Profit = $9,000 (fraction of 1st) + $9,000 (fraction of 2nd)

 SOLUTION D:

Data cells: B2:C2, B5:C6, F5:F6, and B11:C11

Changing cells: B9:C9
Objective cell: F9
Output cells: D5:D6
 SOLUTION E:
This is a linear programming model because the decisions are
represented by changing cells that can have any value that satisfy the
constraints. Each constraint has an output cell on the left, a
mathematical sign in the middle, and a data cell on the right. The
overall level of performance is represented by the objective cell and
the objective is to maximize that cell. Also, the Excel equation for
each output cell is expressed as a SUMPRODUCT function where
each term in the sum is the product of a data cell and a changing
cell.
 SOLUTION F:
Let x1 = share taken in first friend’s venture
x2 = share taken in second friend’s venture
Maximize P = $9,000x1 + $9,000x2,
subject to x1 ≤ 1
x2 ≤ 1
$10,000x1 + $8,000x2 ≤ $12,000
400x1 + 500x2 ≤ 600 hours
and x1 ≥ 0, x2 ≥ 0.
 SOLUTION G:
Algebraic Version
decision variables: x1, x2
functional constraints: x1 ≤ 1
x2 ≤ 1
$10,000x1 + $8,000x2 ≤ $12,000
400x1 + 500x2 ≤ 600 hours
objective function: Maximize P = $9,000x1 + $9,000x2,
parameters: all of the numbers in the above algebraic model
nonnegativity constraints: x1 ≥ 0, x2 ≥ 0
Spreadsheet Version
decision variables: B9:C9
functional constraints: D4:F7
objective function: F9
parameters: B2:C2, B5:C6, F5:F6, and B11:C11
nonnegativity constraints: “Make Unconstrained Variables Nonnegative”
in Solver
SOLUTION H:
Optimal solution = (x1, x2) = (0.667, 0.667). P = $12,000.
 REMINDER
WORK ON YOUR ACTIVITIES
LATE SUBMISSION WILL NOT BE ACCEPTED
NEXT WEEK ALL GROUPS BE READY TO PRESENT CASE 1