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QUANTITATIVE METHODS II
Final Examination
Sunday, December 7, 2014

Time : 3.0 Hours

Total No. of Pages :12 Name ________________________

Total No. of Questions: 4 Roll No. ________________________

Total marks: 90 Section: _______________________

Instructions

1. This is a Closed Book Exam. You are not allowed to carry anything other than stationary and
calculator.
2. Answer all questions only in the space provided following the question.
3. Define all the decision variables precisely and label all the constraints clearly.
4. Show all work and give adequate explanations to get full credit.
5. You may use the backside of the last page for rough work only if needed. Do NOT attach any
rough work/sheets.
6. Encircle or underline your final answer for each part.
7. Any answers in pencil cannot be considered for re-grading.
8. No clarifications will be made during the exam.
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Question 1 (25 points)

The Sidon company produces four types of alloys which we label 1, 2, 3 and 4. Each type of
alloy (per gram) requires 3 different types of metals as shown below:

Metal 1 (in Metal 2 (in Metal 3 (in Selling Price

grams) grams) grams) (INR)
Alloy 1 0.2 0.4 0.4 200.8
Alloy 2 0.2 0.6 0.2 125.4
Alloy 3 0.3 0.3 0.4 300.3
Alloy 4 0.5 0.5 0 215.5

During the coming month, Sidon can acquire up to 2000 grams of Metal 1, 3000 grams of Metal
2 and 500 grams of Metal 3. The unit costs are INR 5 per gram for Metal 1, INR 5 per gram for
Metal 2 and INR 7 per gram for Metal 3. The demand for alloys 1, 2, 3 and 4 are 1000, 2000,
500 and 1000 respectively. The company wants to maximise its monthly profit.

Let x1, x2, x3 and x4 denote Alloy (in grams) 1, 2, 3 and 4 manufactured, respectively. The
corresponding formulation is given by:

Maximize 186x1 + 111x2 + 281x3 + 188x4

Subject to constraints:
0.2x1 + 0.2x2 + 0.3x3 + 0.5x4 <= 2000 (Metal 1 constraint)
0.4x1 + 0.6x2 + 0.3x3 + 0.5x4 <= 3000 (Metal 2 constraint)
0.4x1 + 0.2x2 + 0.4x3 <= 500 (Metal 3 constraint)
x1 <= 1000 (Alloy 1 demand)
x2 <= 2000 (Alloy 2 demand)
x3 <= 500 (Alloy 3 demand)
x4 <= 1000 (Alloy 4 demand)
x1, x2, x3 and x4 >= 0

The Excel Solver output is provided below:

Microsoft Excel 14.0 Sensitivity Report

Variable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$A$2 x1 0 186 1E+30
$B$2 x2 0 111 29.5 18
$C$2 x3 0 281 1E+30 59
$D$2 x4 0 188 1E+30 188
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Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$A$5 Metal 1 950 2000 1E+30 1050
$A$6 Metal 2 1550 3000 1E+30 1450
$A$7 Metal 3 500 500 100 300
$A$8 Alloy 1 0 1000 1E+30 1000
$A$9 Alloy 2 1500 2000 1E+30 500
$A$10 Alloy 3 500 500 750 250
$A$11 Alloy 4 1000 1000 2100 1000

Question 1.1 (3 points)

Write the optimal production plan (in terms of number of grams of Alloy 1, 2, 3 and 4
manufactured). What is the optimal monthly profit?

The optimal production plan is:

x1 = 0; x2 = 1500; x3 = 500 and x4 = 1000 (from the final values of the constraints 4-7. The
amount of metal 1, 2 and 3 used are 950, 1550 and 500 respectively.

The optimal monthly profit is 186 x 0 + 111 x 1500 + 281 x 500 + 188 x 1000 = 495000

Marking scheme: 2 marks for writing the production plan and one mark for calculating the
objective function value

Question 1.2 (6 points)

Up to 200 additional grams of metal 3 can be imported and it would cost Sidon INR 20000.
Should Sidon import this additional metal 3? If so, up to how much (assume that the cost
incurred will change proportionately)? What will be the guaranteed increase in monthly profit?
Show your work.

The students have to find the shadow price using complementary slackness theorem (CST).

The dual of the problem is given by:

0.2y1 + 0.4y2 + 0.4y3 + y4 >= 186

0.2y1 + 0.6y2 + 0.2y3 + y5 >= 111

0.3y1 + 0.3y2 + 0.4y3 + y6 >= 281

0.5y1 + 0.5y2 + y7 >= 188

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Using complementary slackness theorem, we can say that y1 = y2 = y4 = y5 = 0 since the primal
constraints are non-binding. The constraints 2, 3 and 4 in the dual are binding since the primal
variables are > 0. Thus, we have

0.4y3 >= 186

0.2y3 = 111  y3 = 555

0.4y3 + y6 = 281  y6 = 59

y7 = 188

For metal 3, the shadow price is 555 and the allowable increase is 100. Upto 100 grams, the
increase in the profit will be 55,500 at the cost of 10,000.

So, Sidon should buy 100 grams that will generate an additional profit of 55,500 at the cost of
10000. We do not know what will be shadow price if Sidon buys more than 100 grams of metal
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Marking: Writing the dual and solving for all the shadow prices: 4 points. Using the allowable
increase to comments that Sidon should buy only 100 grams of metal 3: 2 points

Question 1.3 (3 points)

One of the customers of Sidon has placed order for alloy type 1. To maintain a long term
relationship Sidon would like to accept this order. What should the minimum price be for Alloy
1 so that Sidon can accept the order?

The students have to first calculate the reduced cost which can be calculated from the first dual
constraint 0.4y3 >= 186. Substituting y3 = 555, we get the surplus as 36 which is the reduced
cost.

The profit should be at least 186 + 36 = 222 for Sidon to accept the offer.

Marking scheme: 2 points for calculating the reduced cost using CST. Calculating the new profit
(222): 1 point.

Question 1.4 (3 points)

Suppose that the market price for the four alloys shoots up dramatically. Therefore, Sidon’s
profit margins earned from different alloys increases to 372, 222, 562 and 376 respectively.
Assume that the increase in the market price has no impact on its demand. State whether these
changes in the profit margin will change the current optimal production plan. Why or Why not?
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(a) The revised objective function coefficients are twice the current objective function
values. Thus there will be no change in slope of the objective function and thus no
change in the optimal solution, that is the production plan will remain the same.

(b) Many students are likely to use the 100% rule. The sum of the ratios will be more than
100% and students will comments that one cannot say whether the optimal solution will
change or not.

Marking scheme: For solution (a): 3 points; For solution (b): 1 point

Question 1.5 (3 points)

Government imposes a restriction that Sidon can sell only 1000 grams of Alloy 2. What will be
the impact of this restriction on the optimal solution and the optimal profit?

1000 is outside the range. The current range of rhs is [1500, ]. Therefore the correct
answer is The optimal solution will most likely change and that the optimal profit cannot
be predicted.

Marking Scheme: Using allowable decrease to state that the solution will change: 2 points

Calculating revised profit: 1 point

Question 1.6 (3 points)

A company has approached Sidon to sell their resources (metals 1, 2 and 3) at prices 100, 100
and 300 respectively (per gram). Should Sidon accept the offer? Provide reasons.

Solution 1

100*2000 + 100*3000 + 300*500 = 650,000. Since it is greater than 495000, the offer should
be accepted.

Solution 2:

Make alloys and make a profit of 495000 and sell leftover metal 1 and 2 (1050 and 1450
respectively). This option will generate a profit of 745000.

Give full credit to both options

Question 1.7 (4 points)

An alloy 5 can be manufactured using 0.5 units of metal 1, 0.4 units of metal 2 and 0.1 unit of
metal 3 per gram of alloy 5. The profit earned by alloy 5 is 220 per gram and the demand is
1500 grams per month. Should Sidon manufacture this new alloy? Why or Why not?
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The revised formulation is:

Maximize 186x1 + 111x2 + 281x3 + 188x4 + 200x5
Subject to constraints:
0.2x1 + 0.2x2 + 0.3x3 + 0.5x4 + 0.5x5 <= 2000 (Metal 1 constraint)
0.4x1 + 0.6x2 + 0.3x3 + 0.5x4 + 0.4x5 <= 3000 (Metal 2 constraint)
0.4x1 + 0.2x2 + 0.4x3 + 0.1x5 <= 500 (Metal 3 constraint)
x1 <= 1000 (Alloy 1 demand)
x2 <= 2000 (Alloy 2 demand)
x3 <= 500 (Alloy 3 demand)
x4 <= 1000 (Alloy 4 demand)
x5 <= 1500 (Alloy 5 demand)
x1, x2, x3 and x4 >= 0

The new dual is:

0.2y1 + 0.4y2 + 0.4y3 + y4 >= 186

0.2y1 + 0.6y2 + 0.2y3 + y5 >= 111

0.3y1 + 0.3y2 + 0.4y3 + y6 >= 281

0.5y1 + 0.5y2 + y7 >= 188

0.5y1 + 0.4y2 + 0.1y3 + y8 >= 200

If the current solution is optimal, then x5 = 0. Using CST, the primal constraint 8 is non-
binding. We know that y1 = y2 = 0. 0.1y3 = 55.5 making the new constraint infeasible. Thus,
Sidon should manufacture the new alloy. The other way to state it is that benefit of 200
outweighs the cost of (0*0.5 + 0*0.4 + 0.1*555). Therefore it is beneficial to manufacture the
new alloy.

Writing the new primal 1.5

Writing new dual 1.5

Checking for feasibility 1

Question 2 (15 points)

Consider the following general integer programming formulation:

Max Z = 4x1 + 3x2

S.t
7x1 – 2x2 >= 14
2x1 + x2 <= 8
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x1 and x2 are positive integers.

Solve the formulation in question 2 using the branch and bound method (use graphical method to
solve problems at the individual nodes if necessary). While branching out, branch on the node
that has the maximum Z value for the relaxed problem.

Solution: Let’s solve the LP graphically. Here, 2 notches on an axis = 1 unit.

7x1 – 2x2 >= 14

F D

A E B Z = 4x1 + 3x2

2x1 + x2 <= 8

The triangle ABC denotes the feasible region for the relaxed problem.

Let’s determine the intersection of the two constraint lines: with x2 = 8 – 2 x1, substitute
in 7 x1 – 2 x2 = 14.
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LHS = 7 x1 – 16 + 4 x1 = 11 x1 – 16 = 14 = RHS. Hence x1 = 30/11 = 2.72, and x2 = 8

– 60/11 = 28/11 = 2.54

The optimal Z is evaluated as 4 x1 + 3 x2 = 120/11 + 84/11 = 204/11 = 18.54. This is for

the relaxed LP.

We could branch on x1 or on x2.

Option 1: Branching on x1, the problem splits into two:

LP2: Max Z = 4x1 + 3x2 subject to

7x1 – 2x2 >= 14
2x1 + x2 <= 8
x1 <= 2
x1 and x2 are positive integers.

Observing that the leftmost point in the triangle ABC representing the feasible
region is the vertex A = (2, 0), the only solution is (2, 0), which is an integer
solution. The objective Z = 8. (Fathomed)

LP3: Max Z = 4x1 + 3x2 subject to

7x1 – 2x2 >= 14
2x1 + x2 <= 8
x1 >= 3
x1 and x2 are positive integers.

The feasible region for this problem is the triangle EBD in the graph. Graphically,
it is clear that the maximum Z is attained at the vertex D, i.e. when x1 = 3, and
2x1 + x2 = 8. Substituting, get x2 = 8 – 2x1 = 2. The objective Z = 18. Because
this solution has integral components, the node is fathomed.

Comparing the optima, conclude that the solution to the integer programming problem is
given by Z* = 18, achieved with (x1 = 3, x2 = 2).

Grading policy:

Most students would have constructed a graph. However, it is not needed for arriving at
the answer, because a student can simply figure out a grid of points in the feasible
region with integer values.

If the graph is constructed clearly, award 5 marks, and proceed to evaluate the rest of
the solution for 10 marks.

Identifying the correct optimum solution for each LP node, plus evaluating the Z-value is
worth 5 marks.
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Option 2: Branching on x2, the problem splits into two:

LP2: Max Z = 4x1 + 3x2 subject to

7x1 – 2x2 >= 14
2x1 + x2 <= 8
x2 <= 2
x1 and x2 are positive integers.

The feasible region to this problem is the trapezium AFDB in the graph.
Graphically, it is clear that the maximum Z is attained at the vertex D, i.e. when
x2 = 2, and 2x1 + x2 = 8. Substituting, get x1 = (8 – x2)/2 = 3. The objective Z =
18. Because this solution has integral components, the node is fathomed.

Some students may not have shown the objective function line on their graph. In
this case, there are four vertices to the trapezium, where the base A = (2, 0) and
B = (4, 0), have Z values of 8 and 16 respectively. They will figure out the
coordinates of D as (3, 2) and conclude Z = 18.

The coordinates of the vertex F are derived from 7x1 – 2x2 = 14. Substituting x2
= 2, obtain x1 = 18/7 = 2.57, yielding a Z value of 16.28.

LP3: Max Z = 4x1 + 3x2 subject to

7x1 – 2x2 >= 14
2x1 + x2 <= 8
x2 >= 3
x1 and x2 are positive integers.

This is simply infeasible, because the highest value for x2 is attained when x2 =
2.54 at vertex C.

Again, conclude that the optimal value to the integer programming problem is given by
Z* = 18, achieved with (x1 = 3, x2 = 2).

Question 3 (25 Points)

An oil tanker owned by ABS Company has five compartments that can hold up to 2,700, 2,800,
1,100, 1,800, and 3,400 litres of petrol, respectively. The company must deliver three types of
fuel (super, regular, and unleaded) to a distribution outlet. In case the distribution outlet’s
demand is not met ABS Company has to pay a penalty for the shortage. The demands, penalty
per litre short, and the maximum allowed shortages for the three types of petrol are given in
Table 1 below. Each compartment of the tanker can carry only one type of petrol. However,
more than one compartment can be used to carry the same kind of petrol. ABS would like to use
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an appropriate linear integer programming model that can help plan delivery such that shortage
costs are minimized. It would like to keep the model generic enough so that it works for different
combinations of demands, shortages allowed and applicable penalties.

TABLE 1
Penalty per Maximum allowed
Type of Petrol Demand (litres) Litre Short (Rs.) Shortage (litres)
Super 2,900 10 500
Regular 4,000 8 500
Unleaded 4,900 6 500

a) Define the variables needed for the linear integer programming model that can help ABS
in its decision. (4 points)

Formulation 1 Variables:

a) The Variables are-

1 If ith compartment is selected for jth fuel

Xij
0 Otherwise, i = 1 to 5 and j = 1 to 3.
Yi is the shortage variable.

Formulation 2 Variables:
In addition to the variables used in formulation 1,
Let Qij be the quantity of fuel type j sent in compartment i, i= 1 to 5 and j= 1 to 3

b) List the constraints and label them clearly. (12 points)

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The Formulation 1 Constraints are-

2700 X11 + 2800 X21 + 1100 X31 + 1800 X41 + 3400 X51 + Y1 ≥ 2900

2700 X12 + 2800 X22 + 1100 X32 + 1800 X42 + 3400 X52 + Y2 ≥ 4000

2700 X13 + 2800 X23 + 1100 X33 + 1800 X43 + 3400 X53 + Y3 ≥ 4900

X11 + X12 + X13 = 1

X21 + X22 + X23 = 1

X31 + X32 + X33 = 1

X41 + X42 + X43 = 1

X51 + X52 + X53 = 1

Y1 ≤ 500

Y2 ≤ 500

Y3 ≤ 500

Xij binary and Yi ≥ 0.

The Formulation 2 Constraints are-

Q11 ≤ 2700 X11
Q12 ≤ 2700 X12
Q13 ≤ 2700 X13
Q21 ≤ 2800 X21
Q22 ≤ 2800 X22
Q23 ≤ 2800 X23
Q31 ≤ 1100 X31
Q32 ≤ 1100 X32
Q33 ≤ 1100 X33
Q41 ≤ 1800 X41
Q42 ≤ 1800 X42
Q43 ≤ 1800 X43
Q51 ≤ 3400 X51
Q52 ≤ 3400 X52
Q53 ≤ 3400 X53
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Y1 + ∑5𝑖=1 𝑄𝑖1 ≥ 2900

Y2 + ∑5𝑖=1 𝑄𝑖2 ≥ 4000
Y3 + ∑5𝑖=1 𝑄𝑖3 ≥ 4900

X11 + X12 + X13 = 1

X21 + X22 + X23 = 1
X31 + X32 + X33 = 1
X41 + X42 + X43 = 1
X51 + X52 + X53 = 1

Y1 ≤ 500
Y2 ≤ 500
Y3 ≤ 500
Xij binary and Yi ≥ 0 and Qij ≥ 0.

c) State the objective. (3 points)

Min 10Y1 + 8Y2 + 6Y3

d) Suppose the outlet increases the penalty for shortages above 250 litres of unleaded petrol
by 10%. State the modifications required in the formulation (parts a-c) above to
incorporate the new penalty structure. (6 points)

Y3 ≤ 250
251 ≤ Y4 ≤ 500.

Objective function Min 10Y1 + 8Y2 + 6Y3 + 6.6Y4.

Question 4: (25 points)

Die Another Day (DAD) hospital is a multi-speciality hospital and has a capacity of 250 beds,
patients are admitted based on the available beds on any given day. The revenue per day earned
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from the patients decreases as their length of stay increases. The patients are classified into 2
categories based on the treatments, the revenue earned from each category (in 1000s of rupees)
and length of stay are shown in Table 1.

Table 1. Revenue earned from different categories on day 1

Patient Category Day of Treatment Average Revenue (in Discharge rate (in
1000s) percentages)
1 20 0%
1 2 15 10%
3 10 60%
4 4 20%
5 3 10%
1 25 0%
2 2 10 0%
3 5 80%
4 2 20%

To explain the table above, if 100 patients in category 1 are admitted on any day, none of them
will be discharged on day 1, 10 will be discharged on day 2, 60 will be discharged on day 3 and
so on. Patients belonging to category 1 will provide a revenue of 20,000 on day 1, 15,000 on day
2, 10,000 on day 3 and so on. Demand for treatments 1 and 2 are unlimited. The hospital has set
the following goals:

1. Average revenue over the planning horizon earned per day should be at least 2 million.

2. The number of patients staying for more than 3 days should be restricted to 50 over a five
day period.

3. At least 400 patients should be from category 2 over the entire planning horizon.

On December 1 2014, all 250 beds are free for admitting new patients. DAD would like to plan
for admitting the number of Category 1 and Category 2 patients over the next five days.
Construct a goal programming model for a five day planning horizon (December 1 to December
5 2014) to meet the aforementioned goals. All the goals belong to the same priority, but their
weightages differ, which are provided below.

Goal Revenue Length of stay Category 2 patient

Penalty for one unit 0.01 1 0.5
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deviation

a) Define clearly all the decision variables and/or deviation variables needed to formulate
the above as a goal program. (5 points)

Decision Variables:

Xij: Number of Category i patients admitted in day j, where i=1, 2 and j = 1,…,5

di+: Positive deviation variable associated with Goal i=1, 2, 3.

di-: Negative deviation variable associated with Goal i=1, 2, 3.

b) List all the system (‘hard’) constraints as well as the goal (‘soft’) constraints for this
problem using the decision and/or deviation variables defined in part (a). Describe the
purpose of each constraint clearly but succinctly. (12 points)

Hard constraints:

The following constraints enforce the capacity restriction of 250 for each day i=1, 2,…, 5.
That is, the number patients admitted on that day, plus the number of patients continuing
to receive treatment from previous days cannot exceed 250. The assumption here is that
patients are discharged at the end of each day.

X11+X21<=250 {Day 1 Capacity}

X12+X11+X22+X21<=250 {Day 2 Capacity}
X13+X23+0.9X11+X12+X21+X22<=250 {Day 3 Capacity}
X14+X24+0.3X11+0.9X12+X13+0.2X21+X22+X23<=250 {Day 4 Capacity}
X15+0.1X11+0.3X12+0.9X13+X14+X25+X24+X23+0.2X22<=250 {Day 5 Capacity}

Goal Constraints:

To construct the 1st goal constraint, the following calculation needs to be made. The
average revenue (in ‘000) per day revenue associated with,

X11 is (20+15+0.9*10+0.3*4+0.1*3)/5 = 45.5/5 = 9.1

X12 is (20+15+0.9*10+0.3*4)/5 = 45.2/5 = 9.04

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X13 is (20+15+0.9*10)/5 = 44/5 = 8.8

X14 is (20+15)/5 = 35/5 = 7

X15 is (20)/5 = 20/5 = 4

X21 is (25+10+5+0.2*2+0)/5 = 8.08

X22 is (25+10+5+0.2*2)/5 = 8.08

X23 is (25+10+5)/5 = 8.0

X24 is (25+10)/5 = 7.0

X25 is (25)/5 = 5.0

Therefore the first goal constraint is

9.1X11 + 9.04X12 + 8.8X13 + 7X14 + 4X15 + 8.2X21 + 8.2X22 + 8.0X23 + 7.0X24 + 5.0X25 + d1- -
d1+ = 2000.

The total number of patients staying more than 3 days over a 5 day period is

0.3X11 + 0.2X21 + 0.1X11 + 0.3X12 + 0.2X22.

Therefore the second goal constraint is

0.3X11 + 0.2X21 + 0.1X11 + 0.3X12 + 0.2X22 + d2- - d2+ = 50.

The total number of Category 2 patients over a 5 day period is

X21+X22+X23+X24.

Therefore the third goal constraint is

X21+X22+X23+X24 + d3- - d3+ = 400

c) State the objective function needed for this goal program. (3 points)

MIN Z = 0.01 d1- + 1 d2+ + 0.5 d3-

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ROUGH SHEET