Chapter Three Maths

Mathematics for management 2020
CHAPTER THREE
3. LINEAR PROGRAMMING: Application and Model Formulation
INTRODUCTION
In 1947, George Danzig developed the use of algebra for determining solutions to problems that
involved the optimal allocation of scarce resources. In spite of numerous potential applications in
business, response to this new technique was low due to substantial computational burden, which
is now removed with subsequent advances in computer technology and related software during
the last three decades.
The term linear implies that all the mathematical relations used in the problem are linear or
straight-line relations, while the term programming refers to the method of determining a
particular program or plan of action, i.e., the use of algorithms that is a well-defined sequence of
steps that will lead to an optimal solution. Taken as a whole, the term linear programming refers
to a family of mathematical techniques for determining the optimum allocation of resources and
obtaining a particular objective when there are alternative uses of the limited or constrained
resources.
The technique of linear programming is applicable to problems in which the total effectiveness
can be expressed as linear function of individual allocations and the limitations on resources give
rise to linear equation or inequalities of the individual allocations.
The usefulness of this technique is enhanced by the availability of several user-friendly soft
wares such as STORM, TORA, QSB+, LINDO, etc. However, there is no general package for
building an LP model. Model building is an art of practice.
3.1. LINEAR PROGRAMMING MODELS

Linear programming models are mathematical representations of LP problems. Linear
programming models have certain characteristics in common. Knowledge of these characteristics
enables us to recognize problems that are amenable to a solution using LP models, and to be able
to correctly formulate an LP model. These characteristics can be grouped as components and
assumptions. The components relate to the structure of a model, where as the assumptions reveal
the conditions under which the model is valid.
1 Samara University Department of Management Prepared by: Abdu. K

3.1.1. COMPONENTS OF LP MODELS

There are four major components of LP models including: Objective function, decision variables,
constraints and parameters.
A) Objective and Objective Function

The objective in problem solving is the criterion by which all decisions are evaluated. It provides
the focus for problem solving. In linear programming models, a single, quantifiable objective
must be specified by the decision maker. Because we are dealing with optimization, the objective
will be either maximization or minimization. Hence, every LP problem will be either
maximization or a minimization problem. Once the objective is specified, it becomes the
measure of effectiveness against which alternate solutions are judged. An LP model consists of a
mathematical statement of the objective called the objective function.
B) Decision variables
They represent unknown quantities to be solved for. The decision maker can control the value of
the objective, which is achieved through choices in the levels of decision variables. For example,
how much of each product should be produced in order to obtain the greatest profit?
C) Constraints
However, the ability of a decision maker to select values of the decision variables in an LP
problem is subject to certain restrictions or limits coming from a variety of sources. The
restrictions may reflect availabilities of resources (e.g., raw materials, labor time, etc.), legal or
contractual requirements (e.g., product standards, work standards, etc.), technological
requirements (e.g., necessary compressive strength or tensile strength) or they may reflect other
limits based on forecasts, customer orders, company policies, and so on. In LP model, the
restrictions are referred to as constraints. Only solutions that satisfy all constraints in a model are
acceptable and are referred to as feasible solutions. The optimal solution will be the one that
provides the best value for the objective function.
A constraint has four elements:
A right hand side (RHS) quantity that specifies the limit for that constraint. It must be
a constant, not a variable.

An algebraic sign that indicates whether the limit is an upper bound that cannot be
exceeded, a lower bound that is the lowest acceptable amount, or an equality that
must be met exactly.
The decision variables to which the constraint applies.
The impact that one unit of each decision variable will have on the right-hand side
quantity of the constraint.
Constraints can be arranged into three groups:
System constraints – involve more than one decision variable,
Individual constraints – involve only one variable, and
Non-negativity constraints – specify that no variable will be allowed to take on a
negative value. The non-negativity constraints typically apply in an LP model,
whether they are explicitly stated or not.
D) Parameters
The objective function and the constraints consist of symbols that represent the decision
variables (e.g., X1, X2, etc.) and numerical values called parameters. The parameters are fixed
values that specify the impact that one unit of each decision variable will have on the objective
and on any constraint it pertains to as well as the numerical value of each constraint.
The following simple example illustrates the components of LP models:

3.1.2. ASSUMPTIONS OF LP MODELS

Linearity (proportionality)
The linearity requirement is that each decision variable has a linear impact on the objective
function and in each constraint in which it appears. In terms of a mathematical model, a function
or equation is linear when the variables included are all to the power 1 (not squared, cubed,
square root, etc.) and no products (e.g., x 1x2) appear. On the other hand, the amount of each
resource used (supplied) and its contribution to the profit (or cost) in the objective function must
be proportional to the value of each decision variable. For example, if production of one unit
requires 5 hours of a particular resource, then making 3 units of that product requires 15 hours
(3x5) of that resource.
Divisibility (Continuity)
The divisibility requirement pertains to potential values of decision variables. It is assumed that
non-integer values are acceptable. However, if the problem concerns, for example, the optimal
number of houses to construct, 3.5 do not appear to be acceptable. Instead, that type of problem
would seem to require strictly integer solutions. In such cases, integer-programming methods
should be used. It should be noted, however, that some obvious integer type situations could be
handled under the assumption of divisibility. For instance, suppose 3.5 to be the optimal number
of television sets to produce per hour, which is unacceptable, but it would result in 7 sets per two
hours, which would then be acceptable.
Certainty
This requirement involves two aspects of LP models. One aspect relates to the model parameters,
i.e., the numerical values. It is assumed that these values are known and constant. In practice,
production times and other parameters may not be truly constant. Therefore, the model builder
must make an assessment as to the degree to which the certainty requirement is met. Large
departures almost surely will have a significant effect on the model. The other aspect is the
assumption that all relevant constraints have been identified and represented in the model.
Additivity
The value of the objective function and the total amount of each resource used (or supplied),
must be equal to the sum of the respective individual contributions (profit or cost) by decision
variables. For example, the total profit earned from the sale of two products A and B must be
equal to the sum of the profits earned separately from A and B. Similarly, the amount of a
resource consumed for producing A and B must be equal to the sum of resources used for A and
B respectively.
Non-negativity
It assumes that negative values of variables are unrealistic and, therefore, will not be considered
in any potential solutions. Only positive values and zero will be allowed and the non-negativity
assumption is inherent in LP models.
3.1.3. Advantages of Linear Programming

Following are certain advantages of linear programming.
 Linear programming helps in attaining the optimum use of scarce productive resources. It
also indicates how a decision maker can employ productive resources effectively by
selecting and allocating these resources.
 LP techniques improve quality of decisions. The decision making approach of the user of
this technique becomes more objective and less subjective.
 Highlighting of bottlenecks in the production process is one of the most advantages of
this technique. For example, when a bottleneck occurs, some machines can not meet
demand while others remain idle for some of the time.
 LP also helps in re-evaluation of a basic plan for changing conditions. If conditions
change when the plan is carried out, they can be determined so as to adjust the remainder
of the plan for best results.
3.1.4. Limitations of Linear Programming

In spite of having many advantages and wide area of applications, there are some limitations
associated with this technique. These are:
 LP treats all relation ships among decision variables as linear. However, generally neither
the objective functions nor the constraints in real-life situations concerning business and
industrial problems are linearly related to variables.
 While solving an LP model, there is no guarantee that we will get integer valued
solutions. For example, in finding out how many men and machines would be required to
perform a particular job, a non integer valued solution will be meaningless. Rounding off
the solution to the nearest integer will not yield an optimal solution.
 An LP model does not take in to consideration the effect of time and uncertainty. Thus,
the LP model should be defined in such a way that any change due to internal as well as
external factors can be incorporated.
 It deals with only with a single objective, whereas in real-life situations we may come
across conflicting multi-objective problems.
 Parameters appearing in the model are assumed to be constant but, in real life situation
they are frequently neither known nor constant.
3.1.5. FORMULATING LP MODELS

Just as it is to define a problem, careful formulation of the model that will be used to solve the
problem is important. Linear programming algorithms (solution techniques) are widely used and
understood and computer packages are readily available for solving LP problems. Consequently,
obtaining solutions is not the real issue, what is very important to note is failure to check that all
constraints have been accounted for and have been correctly formulated results in ill-structuring
of the model that can easily lead to poor decisions.
Steps in formulating LP models:
Identify the decision variables.
Determine the objective function.
Identify the constraints.
Determine appropriate values for parameters and determine whether an upper limit,
lower limit or equality is called for.
Use this information to build a model.
Validate the model.
In many cases, the decision variables are obvious; in others it might require brief discussion with
the appropriate manager. However, identifying the constraints and determining appropriate
values for the parameters can require considerable time and effort. Potential sources of
information include historical records, interviews with managers and staff, and data collection.
Validating the model will involve a critical review of the output, perhaps under a variety of
inputs, in order to decide if the results are reasonable.
3.2. LINEAR PROGRAMMING APPLICATIONS

There is a wide range of problems that lend themselves to solution by linear programming
techniques. Some of these include production management (product mix, blending problems,
production planning, Assembly line balancing…), Marketing management (media selection,
traveling sales man problem, physical distribution), Financial management (portfolio selection,
profit planning), agricultural application, military applications, personnel management (staffing
problem, Determination of equitable salary and etc.
Product Mix
Organizations often produce similar services that use the same resources. For example, labor,
material cost, etc. because of limited resources available during any time period a decision must
be made concerning how much of each product to produce or make available. Linear
programming answers what mix of output (or service) will maximize profit given the availability
of scarce resources.
Diet problem
It usually involves the mixing of raw materials or other ingredients to obtain an end product that
has certain characteristics. For example, what mix of inputs will achieve the desired results in the
output for the least cost? Other applications that fall into this category include mixing feed for
livestock, mixing pet foods, mixing building materials (concrete, mortar, paint), and so on.
Blending problems
They are very similar to diet problems. Strictly speaking, however, blending problems have
additional requirement, i.e. to achieve a mix that have specific consistency. For example, how
many quarts of the different juices each with different sugar content proportion must be mixed
together to achieve one gallon that has a sugar content of 17 percent?
Portfolio selection
These problems generally involve allocating a fixed dollar amount among a variety of
investments, such as bonds, sockets, real states, etc. The goal usually is to maximize income or

total return. The problems take on an added dimension when certain other requirements are
specified (for example, no more than 40 percent of the portfolio can be invested in bonds).
Product Mix
1. ABC private limited company is engaged in the production of power and traction
transformers. Both of these categories of transformers pass through three basic processes:
core preparation, core to coil assembly, and vapor phase drying. A power transformer
yields a contribution of Birr 50,000 and traction transformer contributes Birr 10,000. The
time required in the production of these two products in terms of hours for each of the
processes is as follows.
Power transformer Traction Transformer
Core preparation 75 15
Core to Coil Assembly 160 30
Vapor Phase Drying 45 10
If the capacities available are 1000, 1500, and 750 machine hours in each processes respectively,
formulate the problem as LP?
Investment Application
2. An individual investor has Birr 70,000 to divide among several investments. The
alternative investments are municipal bonds with an 8.5% return, certificates of deposits
with a 10% return, Treasury bill with a 6.5% return, and income bonds 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
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 an income bonds.

2. No more than 30% of the total investment should be in treasury bills and certificates of
deposits.
3. The investor wants to invest no more than of Birr 70,000.
Required: Formulate a LP model for the problem.
3.3. Solving LP Models

Following the formulation of a mathematical model, the next stage in the application of LP to
decision making problem is to find the solution of the model. An optimal, as well as feasible
solution to an LP problem is obtained by choosing from several values of decision variables
x1,x2…xn , the one set of values that satisfy the given set of constraints simultaneously and also
provide the optimal ( maximum or minimum) values of the given objective function. The most
common solution approaches are to solve graphically and algebraically the set of mathematical
relationships that form the model, thus determining the values of decision variables.
3.3.1. GRAPHICAL LINEAR PROGRAMMING METHOD

Graphical linear programming is a relatively straightforward for determining the optimal solution
to certain linear programming problems involving only two decision variables. Although graphic
method is limited as a solution approach, it is very useful in the presentation of LP, in that it
gives a “picture” of how a solution is derived thus a better understanding of the solution. More
over, graphical methods provide a visual portrayal of many important concepts.
In this method, the two decision variables are considered as ordered pairs (X 1, X2), which
represent a point in a plane, i.e, X1 is represented on X-axis and X2 on Y-axis.
Graphical method has the following advantages:
 It is simple
 It is easy to understand, and
 It saves time.
Important Definitions
Solution: the set of values of decision variables xj (j = 1,2,…, n) which satisfy the constraints of
an LP problem is said to constitute solution to that LP problem.
Feasible solution: the set of values of decision variables xj (j = 1,2,…, n) which satisfy all the
constraints and non- negativity conditions of an LP problems simultaneously is said to constitute
the Feasible solution to that LP problem.
Infeasible solution: the set of values of decision variables xj (j = 1,2,…, n) which do not satisfy
all the constraints and non- negativity conditions of an LP problems simultaneously is said to
constitute the infeasible solution to that LP problem.
Basic solution: for a set of m simultaneous equations in n variables ( n>m), a solution obtained
by setting ( n-m) variables equal to zero and solving for remaining m equations in m variables is
called a basic solution.
The (n-m) variables whose value did not appear in this solution are called non-basic variables
and the remaining m variables are called basic variables.
Basic feasible solution: a feasible solution to LP problem which is also the basic solution is
called the basic feasible solution. That is, all basic variables assume non-negative values. Basic
feasible solutions are of two types:
 Degenerate A basic feasible solution is called degenerate if value of at least one basic
variable is zero.
 Non-degenerate A basic feasible solution is called non-degenerate if value of all m
basic variables are non- zero and positive.
Optimal Basic feasible solution:a basic feasible solution which optimizes the objective function
value of the given LP problem is called an optimal basic feasible solution.
Unbounded solution:a solution which can increase or decrease the value of the LP problem
indefinitely is called an unbounded solution.
The Extreme Point/Corner Point Approach
It is an approach in graphical method which states that for problems that have optimal solutions,
a solution will occur at the corner point in the case of unique solution, while in the case of
multiple solutions; at least one will occur at a corner point as these multiple solutions will be
combinations of those points between two corner points. The necessary steps for this approach is
after graphing the problem, we determine the values of the decision variables at each corner
point of the feasible region either by inspection or using simultaneous equations. We then
substitute the values at each corner point into the objective function to obtain its value at each
corner point and select the one with the highest value of the objective function (for a
maximization problemwith ≤ constraint) or lowest value (for a minimization problemwith ≥
constraint )as the optimal solution.

Note: for maximization problems the solution space lies below the slant line and is bounded by
the line segments. The origin and other points below the slant lines are in the solution space (i.e.,
feasible region). For minimization problem the solution space lies above the slant lines and it is
not enclosed. It extends indefinitely above the lines in the first quadrant. This means simply that
cost increases without limit as more and more units are produced. The minimum cost will occur
at a point along the inner boundary of the solution space. The origin and other points below the
lines are not in the solution space.
Steps in Graphical method

Graphical solution method involves the following steps.
1. Plot each of the constraints
2. Identify the feasible region
3. Locate the optimal combination (Compute the values of each constraint at each corner
point of the feasible region)
4. Select the corner point with the maximum profit for maximization problem, and
minimum cost for minimization problem. ( the optimal solution )
Example-1
A firm is about to start production of two new microcomputers, X 1 and X2. Each requires limited
resources of assembly time, inspection time, and storage space. The manager wants to determine
how much of each computer to produce in order to maximize the profit generated by selling
them. Other relevant information is given below:
Type 1 Type 2
Profit per unit $60 $50
Assembly time per unit 4 hrs 10 hrs
Inspection time per unit 2 hrs 1 hrs
Storage space per unit 3 cubic feet 3 cubic feet
Availability of company resources:

Resources Amount available
Assembly time 100 hrs
Inspection time 22 hrs
Storage space 39 cubic feet
Required: Determine the optimal point using graphical method.
Example-2

Z min = 0.1X1+0.07X2
Subject to:
6X1+2X2> 18
8X1+10X2> 40
X2> 1
X1,X2> 0
Required: Find the values of X1and X2 which make the objective function minimum?
Special Cases in Graphical Method: Linear Programming

A. No feasible solution:-this is the case where there is no feasible region for the LP model
and it happens when there is mix of constraints.
Minimize z = 200x1 + 300x2

Subject to
2x1 + 3x2 ≥ 1200
x1 + x2 ≤ 400
2x1 + 1.5x2 ≥ 900
x1, x2 ≥ 0
B. Unbounded solution:-the case where it is possible to increase profit/reduce cost without

limit. It happens due to incorrectly maximizing the LP model when the objective is
minimization or vice versa; it can also happen when greater than constraints are used
instead of less than or vice versa.
Minimize z = 40x1 + 60x2

Subject to

2x1 + x2 ≥ 70
x1 + x2 ≥ 40
x1 + 3x2 ≥ 90
x1, x2 ≥ 0
C. Redundant Constraints: -a constraint does not form a unique boundary of the feasible
solution space.A constraint is redundant if its removal would not alter the feasible
solution space.
D. Multiple Optimal Solutions: - the condition or situation where more than combination of
activities yield the same optimal solution.
Example: Z Max =20X1+80X2
Subject to
X1+4X2≤20
4X1+X2≤35
X1, X2≥0

SIMPLEX METHOD
INTRODUCTION
The graphical method to solving LPPs provides fundamental concepts for fully understanding the LP
process. However, the graphical method can handle problems involving only two decision variables (say
X1and X2).
In 19940’s George B.Dantzig developed an algebraic approach called the Simplex Method which is an
efficient approach to solve applied problems containing numerous constraints and involving many
variables that cannot be solved by the graphical method.
The simplex method is an ITERATIVE or “step by step” method or repetitive algebraic approach that
moves automatically from one basic feasible solution to another basic feasible solution improving the
situation each time until the optimal solution is reached at.
Note:
The simplex method starts with a corner that is in the solution space or feasible region and moves to
another corner I the solution space improving the value of the objective function each time until optimal
solution is reached at the optimal corner.
Scope of solution of LPP by simplex method
Following types of problems are solved by simplex method:
 Maximize Z with inequalities of constraints in “< “form.
 Minimize Z with inequalities of constraints in “>“form.
 Maximize Z with inequalities of constraints in “>“form.
 Maximize Z or Minimize Z with inequalities of constraints in “< “, “>“or “=”form.
MAXIMIZATION PROBLEMS
 Maximize Z with inequalities of constraints in “< “form

Example:
Solve the problem using the simplex approach
Max.Z=300x1 +250x2
Subject to:
2x1 + x2 <40 (Labor )
x1+3x2 < 45 (Machine)
x1< 12 (Marketing)
x1, x2> 0
Solution
Step 1
Formulate LPP Model
Step 2
Standardize the problem
i.e Convert constraint inequality into equality form by introducing a variable called Slack variable.
Slack Variables:
A slack variable(s) is added to the left hand side of a < constraint to covert the constraint inequality in to
equality. The value of the slack variable shows unused resource.
A slake variable emerges when the LPP is a maximization problem.
Slack variables represent unused resource or idle capacity. Thus, they don’t produce any product and their
contribution to profit is zero.
Slack variables are added to the objective function with zero coefficients.
Let that s1, s2, and s3 are unused labor, machine and marketing hrs respectively.

Max.Z=300x1 +250x2 + 0 s1 +0 s2+ 0 s3
St: 2x1+x2+ s1 +0 s2+ 0 s3= 40 Standard form
x1+3x2+0s1 + s2+ 0 s3= 45
x1+ 0s1 + 0s2+ s3=12
x1,x2 , s 1 , s 2, s 3 > 0
Step 3: Obtain the initial simplex tableau
To represent the data, the simplex method uses a table called the simplex table or the simplex matrix.
==> In constructing the initial simplex tableau, the search for of the optimal solution begins at the origin.
Indicating that nothing can be produced;
Thus, first assumption, No production implies that x1 =0 and x2=0
==>2x1+x2+ s1 +0 s2+ 0 s3= 40 ==>x1+3x2+0 s1 + s2+ 0 s3= 45
2(0) +0+ s1 +0 s2+ 0 s3= 40 0 +3(0)+0s1 + s2+ 0 s3= 45
s1= 40 – Unused labor hrs. s2= 45 – Unused machine hrs.
==>x1+0s1 +0s2+ s3= 12
0 +0s1 +0 s2+ s3= 12
s3= 12 – Unused Marketing hrs.
Therefore, Max.Z=300x1 +250x2 + 0 s1 +0 s2+ 0 s3
=300(0) +250(0) + 0(40) +0(45) + 0(12) =0
Note:
In general, whenever there are n variables and m constraints (excluding the non-negativity), where m is
less than n (m<n), n-m variables must be set equal to zero before the solution can be solved algebraically.
a. Basic variables are variables with non-zero solution values.

Or: basic variables are variables that are in the basic solution. Basic variables have 0 values in the
Cj-Zjrow.

b. Non-basic variables are variables with zero solution values.

Or: non-basic variables are variables that are out of the solution.
==>n=5 variables (x1 ,x2, s1, s2, and s3) and m=3 constraints (Labor, machine and marketing constraints),
excluding non-negativity.
Therefore, n-m=5-3=2 variables(x1 and x2) are set equal to zero in the 1st simplex tableau. These are non-
basic variables. 3 Variables (s1, s2, and s3) are basic variables (in the 1st simplex tableau) because they
have non-zero solution values.
Step 4
Construct the initial simplex tableau
Initial simplex tableau

variables column
Real or decision
variables
variable column
Basic or Solution
columns
Solution quantity
Slack
column
Profit per unit
column
Profit per unit

row
Cj 300 250 0 0 0
SV X1 X2 S1 S2 S3 Q
Constraint
equation rows
0 S1 2 1 1 0 0 40
R1
0 S2 1 3 0 1 0 45 Gross Profit row R2
Net Profit row R3

0 S3 1 0 0 0 1 12
/Indicator row/
Zj 0 0 0 0 0 0
C j - Zj 300 250 0 0 0

F Zj row indicates the amount by which the value of objective function would be decreased
or increased if one unit of the given variable is added to the new solution.
F Cj –Zj row indicates the amount of increase or decrease in the objective function when a
certain variable is added to the solution. For example, from the above table, if when X 1
and X2 are added to the solution the profit will increase by 300 and 250 say dollar
respectively.
Step 5:
Choose the “incoming” or “entering” variables
Note:
The entering variable is the variable that has the most positive value in the Cj - Zjrow also called as
indicator row. Or the entering variable is the variable that has the highest contribution to profit per unit.
a. X1in our case is the entering variable

b. The column associated with the entering variable is called key or pivot column ( X1columnin our
case )
Step 6
Choose the “leaving “or “outgoing” variable
==> In this step, we determine the variable that will leave the solution for X1 (or entering variable)
Note:
 The row with the minimum or lowest positive (non-negative) replacement ratio shows the variable to
leave the solution. Replacement Ratio (RR) = Solution Quantity (Q)
Corresponding values in pivot column

Note: RR>0
 The variable leaving the solution is called leaving variable or outgoing variable.
 The row associated with the leaving variable is called key or pivot row (s3 columnin our case)
 The element that lies at the intersection of the pivot column and pivot row is called pivot element( No 1
in our case)
Step 7
Repeat step 3-5 till optimum basic feasible solution is obtained.
Or: repeat step 3-5 till no positive value occurs in the Cj - Zj row.
Note:

 Divide each element of the pivot row by the pivot element to find new values in the key or pivot row.
 Perform row operations to make all other entries for the pivot column equal to zero.
2nd simplex tableau
Cj 300 250 0 0 0
SV X1 X2 S1 S2 S3 Q
0 S1 0 1 1 0 -2 16 R’1=R1-2R3
0 S2 0 3 0 1 -1 33
R’2=R2-R3
300 X1 1 0 0 0 1 12
R’3=R3
Zj 300 0 0 0 300 3600 1
Cj - Zj 0 250 0 0 -300
3rd simplex tableau
Cj 300 250 0 0 0
SV X1 X2 S1 S2 S3 Q
0 S1 0 0 1 -1/3 -5/3 5
250 X2 0 1 0 1/3 -1/3 11 R’’1=R’1-R’2
300 X1 1 0 0 0 1 12
R’’2=R2/3
Zj 300 250 0 250/3 650/3 6350

R’’3=R’3
Cj - Zj 0 0 0 -250/3 - 650/3
Since all the Cj - Zj< 0 optimal solution is reached at.
Therefore, X1=12, X2=11, S1=5 and Max Z=6350

Exercise:
A Juice Company has available two kinds of food Juices: Orange Juice and Grape Juice. The company
produces two types of punches: Punch A and Punch B. One bottle of punch A requires 20 liters of
Orange Juice and 5 liters of Grape Juice.1 Bottle of punch B requires 10 liters of Orange Juice and 15
liters of Grape Juice.
From each of bottle of Punch A a profit of $4 is made and from each bottle of Punch B a profit of $3 is
made .Suppose that the company has 230 liters of Orange Juice and 120 liters of Grape Juice available
Required:
a. Formulate this problem as a LPP
b. How many bottles of Punch A and Punch B the company should produce in order to maximize profit?
(Using the simplex method)
c. What is this maximum profit?
Solution:
Juice needed for one bottle of
Juice Punch APunch B Juice Available
_____________________________________________________________________
Orange Juice (lt) 20 10 230
Grape Juice (lt) 5 15 120
Profit per tent $4$3
___________________________________________________________________________________
Let X1= the No of bottles of punch A produced.
X2= the No of bottles of punch B produced.

 LPP Model
Max Z=4X1+3X2
St:
20X1+10X2 < 230 Orange Constraint
5X1+15X2 < 120 Grape Constraint
X1,X2 > 0 Non-negativity constraint
 Standard form
Max.Z=4x1 +3x2 + 0 s1 +0 s2+ 0 s3
St:20x1+3x2+ s1 +0 s2 = 230
Standard form
5x1+15x2+0s1 + s2+ = 120
x1,x2 , s 1 , s 2, > 0
Where,s1=Unused orange juice
s2 =Unused grape juice
Initial simplex tableau
Cj 4 3 0 0
SV X1 X2 S1 S2 Q
0 S1 20 10 1 0 230
0 S2 5 15 0 1 120
Zj 0 0 0 0 0
Cj - Zj 4 3 0 0

2nd simplex tableau
Cj 4 3 0 0
SV X1 X2 S1 S2 Q
4 X1 1 1/2 1/20 0 11.5
0 S2 0 25/2 -1/4 1 62.5
Zj 4 2 1/5 0 46
Cj - Zj 0 1 -1/5 0
Optimal simplex tableau
Cj 4 3 0 0
SV X1 X2 S1 S2 Q
4 X1 1 0 3/50 -1/25 9
0 X2 0 1 -1/50 2/25 5
Zj 4 3 0.12 0.08 51
Cj - Zj 0 0 - 0.12 -0.08
X1= 9 bottles of punch A
X2= 5 bottles of punch B
s1=0
s2 =0
Max.Z=$51

Solving linear programming problem by simplex method (Minimization case)
Inlinear programming problem, if some of the constraints are of ( ≤ ¿ or(¿) type, they will not contain any
basic feasible variables. Just to have a basic variable in each of them new variable called artificial
variable will be introduced in each of such constraints with a positive unit coefficient. If the objective
function is a minimization type, then the coefficient of the artificial variable in the objective function
should be +M; otherwise, it should be –M, where is a very large value. If the objective function is to be
minimized, then a very large positive price called penalty is assigned to each artificial variable. This
method of solving LP problem with minimization case by simplex method is called The Big M – method.
The purpose of introducing artificial variables into the problem to get the starting basic feasible solution
so that simplex method be applied as usual way to get optimal solution. The Big M –method consists of
the following basic steps:
Step 1: Express the linear programming problem in standard form by introducing slack variables. These
variables are added to the left hand sides of the constraints of ( ≤ ¿ type and substracted from the
constraints of ( ≥ ) type.
Step2: Add nonnegative artificial variables to the left hand sides of all the constraints with ¿) or (¿ ¿ type
to obtain an initial basic feasible solution.since these variables are opposed to other real decision variables
in the problem, we must get rid of these variables and must not allow them to appear in the final solution.
To get rid of artificial variables from the final solution, we assign a very large per unit penalty in the
objective function. This penalty is designated by –M for maximization problem and +M for minimization
problem, where M ¿ 0.
Step 3: solve the modified LP problem by simplex method
Determine the incoming variable
Select the variable with most or large negative value from the Cj-Zj row as entering variable and breaking
a tie is similar to maximization problem.
Select the leaving variable
Select the basic variable with non negative minimum replacement ratio as leaving variable. The procedure
to calculate the replacement ratio and break a tie is similar to the procedure in the maximization case.

Optimality condition
For minimization problem, if all Cj –Zj are greater than or equal to zero, optimality is reached; otherwise
select the entering variable with the most or larger negative value and select leaving variable with
minimum replacement ratio and iterate till the optimal solution is reached.
While making iterations, using simplex method, one of the following cases may arise:
 Case1: If no artificial variable remains in the basic and the optimality condition is
satisfied, then the solution is an optimal feasible solution of the given problem and none
of the constraints are redundant.
 Case 2:If at least one artificial variables appears in the basis at zero level or with zero
value in the quantity column and the optimality is satisfied, then the solution is optimal
feasible(though degenerate) to the given problem. The constraints are consistent though
redundant may exist in them. By redundancy is meant that the problem has more than the
required number of constraints.
 Case3: If at least one artificial variable appears in the basis with positive value in the
quantity column, and the optimality is reached, either because the constraints are
inconsistent or because there are solutions but none is feasible. In economic terms, the
solution is infeasible means that the resources of the system are not sufficient to meet the
expected demand.
Remarks: variables, other than the artificial variables once driven out in iteration, may re-
enter in a subsequent iteration. But, an artificial variable, once driven out, can never re-
enter, because of the large penalty coefficient M associated with it in the objective
function.
Example1: Consider the following LP model and solve it by using Big M – Method;
Minimize Z = 2X1 + 3X2,
Subject to X1 +X2≥ 6
7X1 +X2≥14
X1 and X2≥0

Exercise
Solve the following linear programming problem by simplex method
Minimize Z =10X1+15X2+20X3,
Subject to 2X1+4X2+6X3≥ 24
3X1+9X2+6X3≥30
X1, X2 and X3≥ 0
Example1: Consider the following LP model and solve it by using Big M – Method;
Minimize Z = 2X1 + 3X2,
Subject to X1 +X2≥ 6
7X1 +X2≥14
X1 and X2≥0
Solution
Step 1: Write the problem in standard form as follow
Minimize Z = 2X1 +3X2 +0S1+0S2,
X1 +X2 –S1 =6
7X1 +X2 –S2 =14
X1, X2, S1 and S2≥ 0
Note: Slack variables S+ and S+ are subtracted from the first and second constraints
respectively because the constraints are expressed in greater than or equal to (≥).
Step2: Add non negative artificial variables to the left hand sides of all the constraints
with¿) type to obtain an initial basic feasible solution and also include them in the
objective function with coefficients of +M as follow;
Minimize Z = 2X1 +3X2 +0S1 +0S2 +MA1 +MA2,

Subject to X1 +X2 –S1 +A1 =6
7X1 +X2 –S2 +A2 =14
X1, X2, S1, S2, A1 and A2≥0

N.B. Find the initial basic feasible solution for the problem by setting x1,x2,s1 and s2 to
zero level, then the solution becomes A1= 6 and A2 = 14 which make the basis for initial
feasible solution and shown in the following initial basic feasible solution table.
Cj 2 3 0 0 M M
CBV BV X1 X2 S1 S2 A1 A2 Solution
M A1 1 1 -1 0 1 0 6
M A2 7 1 0 -1 0 1 14
Zj 8M 2M -M -M M M 20M
Cj- Zj 2-8M 3-2M M M 0 0
From the above table, all the values for Cj- Zj are less than or equal to zero. Therefore, this shows that the
solution is not optimal and needs further improvement. Since, Cj –Zj row has the maximum negative
value for the variable x1,which is 2 -8M,x1 enters the basis as an entering variable and the
corresponding column containing x1 is a key column.
Note: If Cj-Zj is a function of M, then ignore the constant numeric terms in it while making comparison
with another Cj –Zj. feasibility condition or determination of leaving variable is the same as in the
maximization case. For example, the minimum non negative ratio is found in the second row under
quantity column which represented by 14/7=2.thus, A2 is a leaving variable and the row containing R2 is a
key row and the key element is 7.Now make the key element unit or one by dividing all elements of key
row by 7, and then make other intersectional element zero by suitable row operation as follow.
1 7 1 0 −1 0 1 14 1 −1 1
R4 = , , , , , , ; in short R4 = 1, ,0, , 0, , 2
7 7 7 7 7 7 7 7 7 7 7
R3-R4 R3 = 1 1 -1 0 1 0 6
1 −1 1
(-) R4 = 1 0 0 2
7 7 7

6 1 1
R3 = 0 -1 1 4
7 7 7
Step 3: Construct the second simplex table for the modified table
Cj 2 3 0 0 M M
CBV BV X1 X2 S1 S2 A1 A2 Solution
M A1 0 6/7 -1 1/7 1 -1/7 4
2 X1 1 1/7 0 -1/7 0 1/7 2
Zj 2 6/7M+2/7 -M M/7-2/7 M -M/7+2/7 4M+4
Cj-Zj 0 -6M/7 +19/7 M -M/7+2/7 0 8M/7 -2/7
Looking at the above second simplex tableau, the most or larger negative value in the Cj –Zj row is (-
6M/7) which is found in the column containing variable X 2.therefore, column containing X2 is becomes a
key column. To determine the leaving variable, divide the quantity column value by corresponding
elements of key column as follow:
4
A1 =14/3
6/ 7
2
X1 = 14
1/7
Since A1 is a basic variable with minimum non negative ratio compared to X 1, it should be the leaving
variable and replaced by X2 in the next table .now, apply the row operation to make the key element a unit
and other intersectional elements zero as follow:
7 −7 1 7 −1 14
R3 0 1 new row R3
6 6 66 6 3
1 1 −1 1
R4 - R3 1 0 0 2
7 7 7 7
1 1 1 1 1 2
0 − −
7 6 42 6 42 3

1 1 114
R4= 1 0 - - new row R4
6 6 663
Step 4: Construct the third simplex table as follow
Cj 2 3 0 0 M M
CBV BV X1 X2 S1 S2 A1 A2 Solution Ratio
3 X2 0 1 -7/6 1/6 7/6 -1/6 14/3 28
2 X1 1 0 1/6 -1/6 -1/6 1/6 4/3 -8
Zj 2 3 -19/6 1/6 19/6 -1/6 50/3
Cj-Zj 0 0 19/6 -1/6 M-19/6 M+1/6
Since the most negative value in the Cj –Zj row is found in the column containing S 2, it is a key column
and S2 is an entering variable. Since X1 is negative in the quantity column, we have to discard the
negative value and consider X2 as a leaving variable. The leaving variable is determined in the above
table as follow:
14/3 4/3
X2 = = 28 and X1 = = -8
1/6 −1/6
Now, apply the row operations to make the element unit or 1 and other intersectional element zero as
follow:
6R3= 0 6 -7 1 7 -1 28, new row 3
R4 – (-1/6R3) = 1 1 -1 0 1 0 6, new row 4
Step 5: construct the fourth simplex table as follow
Cj 2 3 0 0 M M
BV X1 X2 S1 S2 A1 A2 Solution
0 S2 0 6 -7 1 7 -1 28
2 X1 1 1 -1 0 1 0 6
Zj 2 2 -2 0 2 0 12
Cj -Zj 0 1 2 0 M-2 M

Note: since all elements in the Cj-Zj row are either greater than or zero, the solution. Therefore, the
solutions are X1 = 6, X2 =0, and the minimum total cost is 12.S2 =28 which shows unused resource.

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Mathematics for management 2020

3.1. LINEAR PROGRAMMING MODELS

1 Samara University Department of Management Prepared by: Abdu. K

3.1.1. COMPONENTS OF LP MODELS

A) Objective and Objective Function

2 Samara University Department of Management Prepared by: Abdu. K

3 Samara University Department of Management Prepared by: Abdu. K

3.1.2. ASSUMPTIONS OF LP MODELS

3.1.3. Advantages of Linear Programming

3.1.4. Limitations of Linear Programming

3.1.5. FORMULATING LP MODELS

3.2. LINEAR PROGRAMMING APPLICATIONS

7 Samara University Department of Management Prepared by: Abdu. K

Power transformer Traction Transformer

Core to Coil Assembly 160 30

Vapor Phase Drying 45 10

1. No more than 20% of the total investment should be in an income bonds.

8 Samara University Department of Management Prepared by: Abdu. K

3.3. Solving LP Models

3.3.1. GRAPHICAL LINEAR PROGRAMMING METHOD

 It is easy to understand, and

10 Samara University Department of Management Prepared by: Abdu. K

Steps in Graphical method

Availability of company resources:

Required: Determine the optimal point using graphical method.

11 Samara University Department of Management Prepared by: Abdu. K

Special Cases in Graphical Method: Linear Programming

Minimize z = 200x1 + 300x2

B. Unbounded solution:-the case where it is possible to increase profit/reduce cost without

Minimize z = 40x1 + 60x2

12 Samara University Department of Management Prepared by: Abdu. K

Example: Z Max =20X1+80X2

13 Samara University Department of Management Prepared by: Abdu. K

Scope of solution of LPP by simplex method

Following types of problems are solved by simplex method:

 Maximize Z with inequalities of constraints in “< “form.

 Minimize Z with inequalities of constraints in “>“form.

 Maximize Z with inequalities of constraints in “>“form.

 Maximize Z or Minimize Z with inequalities of constraints in “< “, “>“or “=”form.

14 Samara University Department of Management Prepared by: Abdu. K

Solve the problem using the simplex approach

2x1 + x2 <40 (Labor )

x1+3x2 < 45 (Machine)

Formulate LPP Model

Standardize the problem

A slake variable emerges when the LPP is a maximization problem.

15 Samara University Department of Management Prepared by: Abdu. K

Max.Z=300x1 +250x2 + 0 s1 +0 s2+ 0 s3

St: 2x1+x2+ s1 +0 s2+ 0 s3= 40 Standard form

x1+3x2+0s1 + s2+ 0 s3= 45

x1+ 0s1 + 0s2+ s3=12

Step 3: Obtain the initial simplex tableau

Thus, first assumption, No production implies that x1 =0 and x2=0

==>2x1+x2+ s1 +0 s2+ 0 s3= 40 ==>x1+3x2+0 s1 + s2+ 0 s3= 45

2(0) +0+ s1 +0 s2+ 0 s3= 40 0 +3(0)+0s1 + s2+ 0 s3= 45

s1= 40 – Unused labor hrs. s2= 45 – Unused machine hrs.

==>x1+0s1 +0s2+ s3= 12

0 +0s1 +0 s2+ s3= 12

s3= 12 – Unused Marketing hrs.

Therefore, Max.Z=300x1 +250x2 + 0 s1 +0 s2+ 0 s3

=300(0) +250(0) + 0(40) +0(45) + 0(12) =0

a. Basic variables are variables with non-zero solution values.

16 Samara University Department of Management Prepared by: Abdu. K

b. Non-basic variables are variables with zero solution values.