1

LP sample Model formulation, Duality, Sensitivity Analysis

Product Mix
1.

2. A toy manufacturer makes three versions of a toy robot. The first version requires 10 minutes
each for fabrication and packaging and 2 pounds of plastic, the second version requires 12 min of
 2

fabrication and packaging and 3 pounds of plastic and the third version requires 15 min for
fabrication and packaging and 4 pounds of plastic. There are 8 hours for fabrication and
packaging time available and 200 pounds of plastic available for the next production cycle. The
unit profits are $1 for each version 1, $3 for each version 2, and $6 for each version 3. A
minimum of 10 units of each must be made to fill back orders. Formulate an LP model that will
determine optimal production quantities for profit maximization.

3. An electronic company produces three types of parts for automatic machines. It purchases
casting of the parts from the local foundry and then finishes parts on drilling, shaping and
polishing machines.
The selling prices of parts A, B, and C respectively are Birr8, 10, 14. All parts made can be sold.
Casting for parts A, B and C respectively costs Birr 5, 6 and 10. The shop possesses only one of
each type of machine. Costs per hour to run each of the three machines are Birr 20 for drilling,
30 for shaping, and 30 for polishing. The capacities (parts per hour) for each part on each
machine are shown in the following table:

Machine Capacity per hour

Part A Part B Part C

Drilling 25 40 25
Shaping 25 20 20
Polishing 40 30 40

The management of the shop wants to know how many parts of each type it should produce per
hour in order to maximize profit for an hour’s run. Formulate this problem as an LP model so as
to maximize total profit to the company.
Mix of Ingredients
4. A soup company wants to determine the optimal ingredients for its vegetable soup. The main
ingredients are:
Vegetables:
Potatoes
Carrot
Onions
Meat
 3

Water
Flavorings
The soup must meet these requirements:
a. No more than half of the can be vegetables
b. The ratio of water to meat should be 8: 1
c. The amount of meat should be between 5 and 6 percent of the soup.
d. The flavorings should weigh no more than ½ ounce.
The per ounce of the ingredient is $0.02 for the vegetables each, $0.05 for the meat, 0.001 for the
water, and $ 0.05 for the flavorings.
Formulate an LP model that will determine the optimum amounts of the various ingredients to
achieve 15-ounce cans of soup at minimum cost.
Chemical mixture
5. A chemical corporation produces a chemical mixture for the customer in 1000- pound batches.
The mixture contains three ingredients- Zinc, mercury and potassium. The mixture must conform
to formula specifications (i.e., a recipe) supplied by a customer. The company wants to know the
amount of each ingredient to put in the mixture that will meet all the requirements of the mix and
minimize total cost.
The customer has supplied the following formula specifications for each batch of mixture.
1. The mixture must contain at least 200 lb of mercury
2. The mixture must contain at least 300 lb of zinc
3. The mixture must contain at least 100 lb of potassium
The cost per pound of mixture is of Mercury Birr4, of zinc Birr 8 and of potassium Birr 9.
Required: Formulate LPM for the problem
Investment Application
6. An individual investor has Birr 70,000 to divide among several investments. The alternative
investments are real estate with an 8.5% return, shares of a certain cement company with a 10%
return, Treasury bill with a 6.5% return, and share on Agro-processing business with a 13%
return. The amount of time until maturity is the same for each alternative. However, each
investment alternative has a different perceived risk to the investor; thus it is advisable to
diversify. The investor wants to know how much to invest in each alternative in order to
 4

maximize the return. The following guidelines have been established for diversifying the
investment and lessening the risk perceived by the investor.

1. No more than 20% of the total investment should be in share on Agro-processing

business.
2. the amount invested in shares of a certain cement should not exceed the amount invested
in other three alternatives.
3. At least 30% of the investment should be in treasury bills and shares of a certain cement
company.
4. The ratio of the amount invested in real estate to the amount invested in treasury bills
should not exceed one to three.
The investor wants to invest the entire Birr 70,000.
Required: Formulate a LP model for the problem and standardize the model.
7. Innis consulting group Investments manages funds for a number of companies and wealthy
clients. The investment strategy is tailored to each client’s needs. For a new client, Innis has been
authorized to invest up to $1.2 million in two investment funds: a stock fund and a money market
fund. Each unit of the stock fund costs $50 and provides an annual rate of return of $5 per dollar
invested ; each unit of the money market fund costs $100 and provides an annual rate of return of
$4 for each dollar invested . The client wants to minimize risk subject to the requirement that the
annual income from the investment be at least $60,000. According to Innis’s risk measurement
system, each unit invested in the stock fund has a risk index of 8, and each unit invested in the
money market fund has a risk index of 3; the higher risk index associated with the stock fund
simply indicates that it is the riskier investment. Innis’s client also specified that at least $3000
be invested in the money market fund.
a. Determine how many units of each fund Innis should purchase for the client to minimize the
total risk index for the portfolio.
b. How much annual income will this investment strategy generate?
c. Suppose the client desires to maximize annual return. How should the funds be invested?
d. What is the optimal solution, and what is the minimum total risk?
e. Specify the objective coefficient ranges.
f. How much annual income will be earned by the portfolio?
g. What is the rate of return for the portfolio?
h. What is the dual value for the funds available constraint?
i. What is the marginal rate of return on extra funds added to the portfolio?
 5

j. Suppose the risk index for the stock fund (the value of CS) increases from its current value of 8
to 12. How does the optimal solution change, if at all?
k. Suppose the risk index for the money market fund (the value of CM) increases from its
current value of 3 to 3.5. How does the optimal solution change, if at all?
l. Suppose CS increases to 12 and CM increases to 3.5. How does the optimal solution change, if
at all?

8. A client approached a stockbroker in an economy where stocks are sold in a stock market. The
client has the following request to the broker: Invest $ 100,000 for maximum annual income
under the following conditions:
a. Spread the investment over no more than three different stocks.
b. put no more than 40% of the investment in to any stock.
c. put a minimum of $10,000 in to oil stock.

Stock Price per share Estimated annual return per

share
Oil $120 $11
Auto 52 4
Health 18 2
Formulate an LP model of the problem.

Marketing Application
9. Supermarket store chain has hired an advertising firm to determine the types and amount of
advertising it should have for its stores. The three types of advertising available are radio and
television commercials, and news papers advertisements. The retail chain desires to know the
number of each type of advertisement it should purchase in order to maximize exposure. It is
estimated that each ad or commercial will reach the following potential audience and cost the
following amount.
Exposure
Type of Advertisement (people /ad or commercial) Cost
Television commercial 20,000 Birr 15,000
Radio commercial 12,000 6,000
News paper advertisement 9,000 4,000

The company must consider the following resource constraints.

1. The budget limit for advertising is Birr 100,000
2. The television station has time available for 4 commercials.
3. The radio station has time available for 10 commercials.
4. The news paper has space available for 7 ads.
5. The advertising agency has time and staff available for producing no more than a total of
15 commercials and/or ads.
 6

Marketing problem
10. The manager of a department store in Adama is attempting to decide on the types and
amounts of advertising the store should use. He has invited representatives from the local radio
station, television station, and newspaper to make presentations in which they describe their
audiences.

a. The television station representative indicates that a TV commercial, which costs Birr 15,000,
would reach 25,000 potential customers. The break down of the audience is as follows.

Male Female

Old 5,000 5,000

Young 5,000 10,000

b. The news paper representative claims to be able to provide an audience of 10,000 potential
customers at a cost of Birr 4000 per ad. The break down of the audience is as follows.

Male Female

Old 4,000 3,000

Young 2,000 1,000

c. The radio station representative says that the audience for one of the station’s commercials,
which costs Birr 6000, is 15,000 customers. The break down of the audience is as follows.

Male Female

Old 1,500 1,500

Young 4,500 7,500

The store has the following advertising policy:

 7

a. Use at least twice as many radio commercials as news paper ads.

b. Reach at least 100,000 customers
c. Reach at least twice as many young people as old people
d. Make sure that at least 30% of the audience is women.

Available space limits the number newspaper ads to 7. The store wants to know the optimal
number of each type of advertising to purchase to minimize total cost.
Required:
Formulate appropriate linear programming model.

Agriculture
11. A farm consists of land, of which 500 acres of land will be planted with corn, soya bean and
wheat according to the following requirements:
a. At least 100 of the planted acreage should be in corn.
b. No more than 200 acres of land should be on soya bean.
c. The ratio of corn to wheat planted should be 2:1.
It costs $20 an acre to plant corn, $ 15 an acre to plant soya bean, and $12 an acre to plant wheat.
i) Formulate this problem as an LP model that will minimize planting cost while
achieving the stating conditions.
ii) How would the model change if the acreage to be planted was at least 500?
12. Regional Planning
In Southern Region there are a group of three Zones (communal farming communities). Overall
planning for this group is done in its Coordinating Technical Office. This office currently is
planning agricultural production for the coming year. The agricultural output of each zone is
limited by both the amount of available irrigable land and the quantity of water allocated for
irrigation by the Water Commissioner (a national government official). These data are given in
the following table.
TABLE 1 Resource data for the Southern Confederation of the Three Zones
Zone Usable Land (Acres) Water Allocation (Acre Feet)
1 400 600
2 600 800
3 300 375

The crops suited for this region include sugar beets, cotton, and sorghum, and these are the three
being considered for the upcoming season. These crops differ primarily in their expected net
 8

return per acre and their consumption of water. In addition, the Ministry of Agriculture has set a
maximum quota for the total acreage that can be devoted to each of these crops by the Southern
Region of Three Zones, as shown in Table 2 below.

TABLE 2. Crop data for the Southern region of Three Zones

Crop Maximum Quota Water Consumption Net Return
(Acres) (Acre Feet/Acre) ($/Acre)
Sugar beets 600 3 1,000
Cotton 500 2 750
Sorghum 325 1 250

Because of the limited water available for irrigation, the Southern region of three zones will not
be able to use all its irrigable land for planting crops in the upcoming season. To ensure equity
between the three zones, it has been agreed that every zone will plant the same proportion of its
available irrigable land. For example, if zone 1 plants 200 of its available 400 acres, then zone 2
must plant 300 of its 600 acres, while zone 3 plants 150 acres of its 300 acres. However, any
combination of the crops may be grown at any of the zones. The job facing the Coordinating
Technical Office is to plan how many acres to devote to each crop at the respective zone while
satisfying the given restrictions. The objective is to maximize the total net return to the Southern
region of three zones as a whole.