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Session 4
Case Discussion:
Merton Truck Company
Graph all Vertices
Solving by Exhausting
y
Feasible Region: ABCDEF Contributions:
A (0, 0) 0
B (2500, 0) $7.5 million
C (2500, 500) $10 million
D (2000,
D (2000, 1000)
1000) $$ 11
11 million
million
max z = 3000x + 5000y E (1000, 1500) $ 10.5 million
3000
s.t. F (0, 1500) $ 7.5 million
x + 2y 4000
2x + 2y 6000 2000
2x 5000 102A E
3y 4500 F EA
x, y 0 D
1000 Feasible MS
Region C
101A
0
A B
1000 2000 3000 4000 x
Solving Graphically
Graphical Solution
y
Iso-contribution lines:
3000x + 5000y = c Lines with slope −3/ 5
y = (−3000/5000)x + c
y
Iso-contribution lines:
Lines with slope −3/ 5
y = (−3000/5000)x + c
y
Iso-contribution lines:
Lines with slope −3/ 5
y = (−3000/5000)x + c
y
Iso-contribution lines:
Lines with slope −3/ 5
y = (−3000/5000)x + c
y
Iso-contribution lines:
Lines with slope −3/ 5
y = (−3000/5000)x + c
y
Iso-contribution lines:
Lines with slope −3/ 5
y = (−3000/5000)x + c
y
Iso-contribution lines:
Lines with slope −3/ 5
y = (−3000/5000)x + c
y
Iso-contribution lines:
Lines with slope −3/ 5
y = (−3000/5000)x + c
y
Iso-contribution lines:
Lines with slope −3/ 5
y = (−3000/5000)x + c
y Optimal Solution:
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
y Shadow Price of EA
= Increase in contribution per EA hour
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
y Shadow Price of EA
= Increase in contribution per EA hour
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
y Shadow Price of EA
= Increase in contribution per EA hour
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
y Shadow Price of EA
= Increase in contribution per EA hour
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
y Shadow Price of EA
= Increase in contribution per EA hour
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
y Shadow Price of EA
= Increase in contribution per EA hour
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
y Shadow Price of EA
= Increase in contribution per EA hour
=
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
y Shadow Price of EA
= Increase in contribution per EA hour
= 11002000 – 11000000
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
y Shadow Price of EA
= Increase in contribution per EA hour
= 11002000 – 11000000
= $2000/ hour
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
y Alternatively,
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
y Alternatively,
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
y Alternatively,
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
0
1000 2000 3000 4000 x
• So, it makes sense to outsource engine
assembly for at most $2000 per hour.
• How many additional hours will you buy?
Sensitivity Analysis of EA
Allowable Increase?
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
Allowable Increase?
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
Allowable Increase?
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
Allowable Increase?
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
Allowable Increase?
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
Allowable Increase?
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
Allowable Increase?
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
Allowable Increase?
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
Allowable Increase?
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
Allowable Increase?
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
Allowable Increase?
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
Allowable Increase?
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
Allowable Increase?
Alternatively,
max z = 3000x + 5000y 3000
s.t.
x + 2y 4000
2x + 2y 6000 2000
2x 5000
E
3y 4500
x, y 0
1000
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
Allowable Increase?
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
Allowable Increase?
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
Allowable Increase?
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
Allowable Increase?
0
1000 2000 3000 4000 x
Questions?
Excel Solver
Q. 2
• Should Merton buy engine assembly hours?
Allowable Decrease?
C
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
Allowable Decrease?
Allowable Decrease?
C
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
Allowable Decrease?
C is (2500, 500).
max z = 3000x + 5000y 3000
s.t.
x + 2y 4000
2x + 2y 6000 2000
2x 5000
3y 4500
x, y 0
1000
C
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
Allowable Decrease?
C is (2500, 500).
max z = 3000x + 5000y Per hour decrease in EA capacity,
3000
s.t. x goes up by 1 and y goes down by 1
x + 2y 4000
2x + 2y 6000 2000
2x 5000
3y 4500
x, y 0
1000
C
0
1000 2000 3000 4000 x
Sensitivity Analysis of EA
Allowable Decrease?
C is (2500, 500).
max z = 3000x + 5000y Per hour decrease in EA capacity,
3000
s.t. x goes up by 1 and y goes down by 1.
x + 2y 4000
2x + 2y 6000 2000 Therefore, allowable decrease
2x 5000 = 500 hours.
3y 4500
x, y 0
1000
C
0
1000 2000 3000 4000 x
Questions?
Other Departments
Sensitivity Analysis of MS Capacity
0
1000 2000 3000 4000 x
y
Shadow price of MS constraint is
obtained by solving
x + 2y = 4000
2x + 2y = 6001
max z = 3000x + 5000y 3000
s.t.
x + 2y 4000
2x + 2y 6000 2000
2x 5000
3y 4500
x, y 0 D
1000
0
1000 2000 3000 4000 x
y
Shadow price of MS constraint is
obtained by solving
x + 2y = 4000
2x + 2y = 6001
max z = 3000x + 5000y 3000
s.t. New D is (2001, 999.5).
x + 2y 4000
2x + 2y 6000 2000
2x 5000
3y 4500
x, y 0 D
1000
0
1000 2000 3000 4000 x
y
Shadow price of MS constraint is
obtained by solving
x + 2y = 4000
2x + 2y = 6001
max z = 3000x + 5000y 3000
s.t. New D is (2001, 999.5).
x + 2y 4000
2x + 2y 6000 2000 New contribution = $11000500
2x 5000
3y 4500
x, y 0 D
1000
0
1000 2000 3000 4000 x
y
Shadow price of MS constraint
= $500 per MS hour
0
1000 2000 3000 4000 x
y
Allowable Increase?
0
1000 2000 3000 4000 x
y
Allowable Increase?
0
1000 2000 3000 4000 x
y
Allowable Increase?
0
1000 2000 3000 4000 x
y
Allowable Increase = 500 MS hours
0
1000 2000 3000 4000 x
y
Allowable Decrease?
0
1000 2000 3000 4000 x
y
Allowable Decrease?
0
1000 2000 3000 4000 x
y
Allowable Decrease?
0
1000 2000 3000 4000 x
y
Allowable Decrease?
0
1000 2000 3000 4000 x
y
Allowable Decrease = 1000
0
1000 2000 3000 4000 x
• Shadow prices?
Complementarity
• If slack is non-zero, shadow price is zero.
• If slackness is zero?
• If shadow-price is zero?
101A and 102A?
• Shadow prices?
• Allowable increase?
• Allowable decrease?
Sensitivity Analysis of 101A and 102A
0
1000 2000 3000 4000 x
Excel Solver
Questions?
Q.3: Model 103
• Reduced cost
Computation of Reduced Cost
• For one unit of M103, lost contribution
because of diverting resources from M101 and M102
= $(0.82000 +
1.5*500)
= $2350
(sum of resource use for each constraint times the
respective shadow price)
• Therefore…?
Q.5: More M101 trucks
• ?
• Additional constraint
• Hence, …?
y
0
1000 2000 3000 4000 x
y
0
1000 2000 3000 4000 x
Q.6.
• Should we re-solve?
Sensitivity Analysis of
Objective Function Coefficients
Sensitivity Analysis
0
1000 2000 3000 4000 x
0
1000 2000 3000 4000 x
0
1000 2000 3000 4000 x
0
1000 2000 3000 4000 x
0
1000 2000 3000 4000 x
0
1000 2000 3000 4000 x
0
1000 2000 3000 4000 x
0
1000 2000 3000 4000 x
C
0
1000 2000 3000 4000 x
• Excel Solver
Q.7.