Topic 1: Linear Programming

Q1) Solve the following LPP

Maximize Z = 2 x1 +5x2, subject to the conditions x1+ 4x2 ≤ 24

3x1+x2 ≤ 21

x1+x2 ≤ 9and x1, x2 ≥ 0

Solution:

First we have to find the feasible region using the given conditions.

Since both the decision variables x1 and x2 are non-negative ,the solution lies in the first
quadrant.

Write all the inequalities of the constraints in the form of equations.Therefore we have the
lines x1+ 4x2=24 ; 3x1 + x2 = 21; x1 + x2= 9 x1+ 4x2= 24 is a line passing through the
points (0 , 6) and (24 , 0). [(0,6) is obtained by taking x1=0 in x1 + 4x2 = 24 , (24 , 0) is
obtained by taking x2 = 0 in x1+ 4x2 = 24].
Any point lying on or below the line x1 + 4x2 = 24 satisfies the constraint x1 + 4x2≤ 24 .

3x1 +x2= 21 is a line passing through the points (0, 21) and (7, 0). Any point lying on or
below the line 3 x1 + x2 = 21 satisfies the constraint 3 x1 + x2 ≤ 21.

x1+ x2 = 9 is a line passing through the points (0 , 9) and ( 9 , 0) .Any point lying on or below
the line x1 + x2 = 9 satisfies the constraint x1+ x2 ≤ 9.

Now we draw the graph.

The feasible region satisfying all the conditions is OABCD.The co-ordinates of the points
are O(0,0) A(7,0);B(6,3) [ the point B is the intersection of two lines x1+ x2= 9 and 3 x1+
x2= 21];C(4,5) [ the point C is the intersection of two lines

x1+ x2 = 9 and x1+ 4x2 = 24] and D(0,6).

Maximum value of Z occurs at C. Therefore the solution is x1 =4, x2 = 5, Z max = 33

Q2) Solve the following LPP.

Maximize Z= 2 x1 +3x2

subject to constraints

x1 + x2 ≤ 30 ; x2 ≤ 12; x1 ≤ 20 and x1, x2≥ 0

Solution:

We find the feasible region using the given conditions.

Since both the decision variables x1 and x2 are non-negative, the solution lies in the first
quadrant of the plane.

Write all the inequalities of the constraints in the form of equations.

Therefore we have the lines

x1+x2=30; x2 =12; x1= 20

x1+x2 =30 is a line passing through the points (0,30) and (30,0)

x2 = 12 is a line parallel to x1–axis

x1 = 20 is a line parallel to x2–axis.

The feasible region satisfying all the conditions x1+ x2≤ 30; x2≤ 12 ; x1≤ 20 and x1, x2 ≥ 0
is shown in the following graph.
The feasible region satisfying all the conditions is OABCD.

The co-ordinates of the points are O(0,0) ; A(20,0); B(20,10) ; C(18,12) and D(0,12).
Maximum value of Z occurs at C. Therefore the solution is x1 = 18 , x2= 12, Z max = 72

Q3) Universal Corporation manufactures two products- P1 and P2. The profit per unit of
the two products is Rs. 50 and Rs. 60 respectively. Both the products require processing in
three machines. The following table indicates the available machine hours per week and
the time required on each machine for one unit of P1 and P2. Formulate this product mix
problem in the linear programming form.

Machine Product Available Time

(in machine hours per week)
P1 P2

1 2 1 300

2 3 4 509

3 4 7 812

Profit Rs. 50 Rs. 60

Solution

Let x1 and x2 be the amounts manufactured of products P1 and P2 respectively. The

objective here is to maximize the profit, which is given by the linear function

Maximize z = 50x1 + 60x2

Since one unit of product P1 requires two hours of processing in machine 1, while the
corresponding requirement of P2 is one hour, the first constraint can be expressed as

2x1 + x2 ≤ 300
Similarly, constraints corresponding to machine 2 and machine 3 are

3x1 + 4x2 ≤ 509

4x1 + 7x2 ≤ 812

In addition, there cannot be any negative production that may be stated algebraically as

x1 ≥ 0, x2 ≥ 0

The problem can now be stated in the standard linear programming form as

Maximize z = 50x1 + 60x2

subject to

2x1 + x2 ≤ 300

3x1 + 4x2 ≤ 509

4x1 + 7x2 ≤ 812

x1 ≥ 0, x2 ≥ 0

Q4) The Best Stuffing Company manufactures two types of packing tins- round & flat.
Major production facilities involved are cutting and joining. The cutting department can
process 200 round tins or 400 flat tins per hour. The joining department can process 400
round tins or 200 flat tins per hour. If the contribution towards profit for a round tin is the
same as that of a flat tin, what is the optimal production level? Formulate a linear
programming model for this problem (LPP).

Solution

Let

x1 = number of round tins per hour

x2 = number of flat tins per hour

Since the contribution towards profit is identical for both the products, the objective
function can be expressed as x1 + x2. Hence, the problem can be formulated as
Maximize Z = x1 + x2

subject to

(1/200)x1 + (1/400)x2 ≤ 1

(1/400)x1 + (1/200)x2 ≤ 1

x1 ≥ 0, x2 ≥ 0

i.e., 2x1 + x2 ≤ 400

x1 + 2x2 ≤ 400

x1 ≥ 0, x2 ≥ 0

Topic 2: Expected Value

Q1) You are a financial analyst in a development company. Your manager just asked you to
assess the viability of future development projects and select the most promising one.
According to estimates, Project A, upon completion, shows a probability of 0.4 to achieve
a value of $2 million and a probability of 0.6 to achieve a value of $500,000. Project B
shows a probability of 0.3 to be valued at $3 million and a probability of 0.7 to be valued at
$200,000 upon completion.

Solution:

In order to select the right project, you need to calculate the expected value of each
project and compare the values with each other. The EV can be calculated in the following
way:

EV (Project A) = [0.4 × $2,000,000] + [0.6 × $500,000] = $1,100,000

EV (Project B) = [0.3 × $3,000,000] + [0.7 × $200,000] = $1,040,000

The EV of Project A is greater than the EV of Project B. Therefore, your company should
select Project A.

Q2) Your team has identified three risks with probabilities of 10%, 50%, and 35% during
risk management planning. If the first two risks occur, they will cost you 5,000 USD and
8,000 USD; however, the third risk will give you 10,000 USD if it occurs.

Determine the expected monetary value of these risk events.

Solution:
The expected monetary value of three events = EMV of the first event + EMV of the
second event + EMV of the third event
EMV of the first event = 0.10 * (–5,000)
= –500
EMV of the second event = 0.50 * (–8,000)
= –4,000
EMV of the third event = 0.35 * 10,000
= 3,500
EMV of all three events = EMV of the first event + EMV of the second event + EMV of the
third event
= – 500 – 4,000 + 3,500
= –1,000
The expected monetary value (EMV) of all three events is –1,000 USD.

Q3) A group of students raise money each year by selling souvenirs outside the stadium of
a cricket match between teams A and B. They can buy any of three different types of
souvenirs from a supplier. Their sales are mostly dependent on which team wins the match.
A conditional payoff (in Rs.) table is as under:

Type of Souvenir I II III

Team A wins 1200 800 300

Team B Wins 250 700 1100

(i) Construct the opportunity loss table.

(ii) Which type of souvenir should the students buy if the probability of team A's winning is
0.6?
(iii) Compute the cost of uncertainty.

Solution:

(i) The Opportunity Loss Table

(ii) EOL of buying type I Souvenir = 0 * 0.6 + 850 * 0.4 = 340

EOL of buying type II Souvenir = 400 *0.6 + 400 * 0.4 = 400.

EOL of buying type III Souvenir = 900 *0.6 + 0* 0.4 = 540.

Since the EOL of buying Type I Souvenir is minimum, the optimal decision is to buy Type I
Souvenir.

(iii) Cost of uncertainty = EOL of optimal action = Rs. 340

Q4) The following is the information concerning a product X :

(i) Per unit profit is Rs 3.

(ii) Salvage loss per unit is Rs 2.

(iii) Demand recorded over 300 days is as under:

Units demanded : 5 6 7 8 9

No. of days : 30 60 90 75 45

Find : (i) EMV of optimal order.

(ii) Expected profit presuming certainty of demand.

Solution:

(i) The given data can be rewritten in terms of relative frequencies, as shown below:

Units demanded: 5 6 7 8 9

No of days : 0.1 0.2 0.3 0.25 0.15

From the above probability distribution, it is obvious that the optimum order would lie
between and including 5 to 9.

Let A denote the number of units ordered and D denote the number of units demanded per
day.

If D ≥A, profit per day = 3A, and if D < A, profit per day = 3D – 2(A – D) = 5D – 2A.

Thus, the profit matrix can be written as

From the above table, we note that the maximum EMV = 19.00, which corresponds to the
order of 7 or 8 units. Since the order of the 8th unit adds nothing to the EMV, i.e., marginal
EMV is zero, therefore, order of 8 units per day is optimal.

(ii) Expected profit under certainty

= (5* 0.10+ 6*0.20+ 7 * 0.30+8* 0.25+ 9 * 0.15)* 3 = Rs 21.45

Topic 3: Distribution and Network

Q1) A concrete company transports concrete from three plants to three construction
sites. The supply capacities of the three plants, the demand requirements at the three
sites, and the transportation costs per ton are as follows:
Determine the linear programming model formulation for this problem.

Solution

The Linear Programming Model Formulation