Or For PG Classes PDF

Prepared by Dr.
Brehanu Borji (Associate Professor)
Quantitative Analysis for Business Decisions

(QABD)
Part I
Chapter One
1. Operations Research – An overview
1.1 The origin and Development of operations research
The term Operations Research, was first coined in

1940 by McClosky and Trefthen in a small town, Bowdsey,
of the United Kingdom. This new science came into
existence in military context. Its concept was derived from
the fact that “Unity is strength”. Why unity is strength?
Because, when there is calamity to the nation, citizens of all
shades join their opinions together to do their might to
solve the problem. How this came to be proved? It was
proved during World War II.
Two blocks took part in the Second World War,
namely, Axes Forces and Allied Forces. Axes forces
included Nazi German, Italy and Japan in one block.
Contrarily, the allied forces included America, Great
Britain and Russia. During World War II, there was a
natural calamity to Great Britain from Nazi German Forces.
Superior weapons and strategy of Germans became a real
threat to Allied Forces. Consequently, Allied Forces were
threatened on land, sea and air by Axes forces, using
superior weapons such as submarines, U-boats and air
crafts. Being challenged by this serious situation, the
Hawassa University 1
Prepared by Dr. Brehanu Borji (Associate Professor)
Government of Great Britain appealed to the people and

requested talents from all walks of life to join together and
find a solution to the problem in order to overcome the
threatening situation. Based on an appeal made by
Government of Great Britain, military management called
on scientists from various disciplines and organized them
into teams to assist in solving strategic and tactical
problems, i.e., to discuss, evolve and suggest ways and
means to improve the execution of various military
projects. Accordingly, scientists reported to the military
management and they were grouped into various teams and
each team is given strategic problem to come up with the
possible solution. These combined efforts produced
fantastic results. By their joint efforts, experience and
deliberations, they suggested certain approaches that
showed remarkable progress. Based on suggestions
provided by teams of scientists, Allied forces defeated
Axes forces. This signaled to the birth of Operations
Research as a separate discipline. This new approach to
systematic and scientific study of operations of the systems
was called the Operations Research or Operational
Research (abbreviated as O.R.)
Following the end of World War II, the success of
military teams attracted the attention of industrial managers
who were seeking solutions to their complex executive-
type problems.
During the year 1950, O.R. achieved recognition as a
subject worthy of academic study in the Universities. Since
then, the subject has been gaining more and more
importance for the students of Economics, Management,
Public Administration, Behavioral Sciences, Social
Work, Mathematics, Commerce and Engineering. With

a view to increasing the impact of O.R. and establishing
rapport between all its serious students and users, the
Operations Research society of America was formed in
1950. Other countries followed suit, and in 1957 the
International Federation of O.R. Societies was established.
O.R. is, therefore, a systematic method consisting of
stating the problem in clear terms, collecting facts and data,
analyzing them, and reaching certain conclusions in the
form of solutions to the problem. The ultimate aim of it is
to find out an optimum solution which is most appropriate
under the given circumstances.
1.2 DEFINITIONS:
The term operations research consists of two terms,
namely, operations and research. Literally, the operations
may be defined as some action that we apply to some
problems or hypotheses and the word research is an
organized process of seeking out facts about the same.
Dictionary meaning of research is “a careful investigation
or inquiry especially through search for new facts”. It
also means “systematized effort to gain new knowledge”.
Thus, Operations Research could be thought of as a
“systematized efforts to solve a given problem through
careful investigation”. OR is the application of scientific
methods, techniques and tools to problems involving the
operations of a system. It is a scientific approach to
problem solving for executive management.
As far as the definition of O.R. is concerned, there is
no single universally accepted definition. It is so because it
has been defined by many authors in different ways.
However, the following definition is proposed for this

study to be used in common.
Operations Research is a systematic analysis of a
problem through scientific methods, carried out by
appropriate specialists, working together as a team,
constituted at the instance of management for the
purpose of finding an optimum and the most
appropriate solution, to meet the given objective under
a given set of constraints.
According to the definition given by operational
research society, UK, Operations Research is the
application of the methods of science to complex problems
in the direction and management of large systems of men,
machines, materials and money in industry, business,
government and defense. The distinctive approach is to
develop a scientific model of the system incorporating
measurements of factors such as chance and risk, with
which to predict and compare the outcomes of alternative
decisions, strategies or controls. The purpose is to help
management in determining its policy and actions
scientifically.
According to the definition given by operational
research society, America, operations research is concerned
with scientifically deciding how to best design and operate
man-machine system usually requiring allocation of scarce
resources.
According to Daellenbach and George 1978,
“Operations Research is the systematic application of
quantitative methods, techniques and tools to the analysis
of problems involving the operation of systems.”
According to S L Cook 1977, Operations Research has

been described as a method, an approach, a set of
techniques, a team activity, a combination of many
disciplines, an extension of particular disciplines
(mathematics, engineering, economics, etc.) a new
discipline, a vocation, even a religion. It is perhaps some of
all these things.
There are many more definitions as various authors
have defined the term differently. As it has been written by
many authors, discussing all the definitions exhaustively is
very impossible. The student, therefore, can consult more
definitions from such books as J.K. Sharma, 1997, S.D
Sharma and others.
Meaning of O.R. is evident from the concept given in
the definitions here above. However, some more aspects of
O.R. are given here under to get better insight into it.
1. O.R is the application of scientific methods,
techniques and tools to the problem to find out an
answer.
2. O.R. is a management tool, in the hands of a
manager, to take a decision.
3. O.R. is a scientific approach to the decision-making
process.
4. O.R. is an “Applied Research” which aims at
finding a solution for immediate problem facing a
society, industry or a business enterprise. It is not
fundamental research.
5. O.R. is a decision-oriented research, which provides
quantitative basis to managers of the organization
for taking decisions.
6. O.R. is applied decision theory. It uses scientific,

mathematical and logical means to take decisions.
N.B. - O.R. is a team effort. Team efforts are as old

as mankind. What is then new in O.R. approach?
O.R. is a systematic approach using only scientific
methods to find a solution. This distinguishes O.R.
from team efforts-past or present.
Activity 1.1: Define the meaning of Operations

Research and discuss the origin and development of
it. What can we learn from the discussion of O.R.?
Minimum requirement is not less than 2 pages. 10
marks
1.3 NATURE AND CHARACTERISTIC OF

OPERATIONS RESEARCH:
Some significant features of O.R. are given here under

as follows:
i) Decision-making. Primarily O.R. is addressed to
managerial decision-making or problem-solving. A
major premise of O.R. is decision-making.
ii) Scientific approach. O.R. employs scientific
methods for the purpose of solving problems. It is a
formalized process of reasoning.
iii) Objective. O.R. attempts to locate the best or
optimal solution to the problem under
consideration. For this purpose, it is necessary that a

measure of effectiveness is defined based on the
goals of organization. This measure is then used as
the basis to compare the alternative courses of
action.
iv) Inter-disciplinary team approach. O.R. is inter-
disciplinary in nature and requires a team approach
to arriving at a solution of the problem. Managerial
problems have economic, physical, psychological,
biological, sociological and engineering aspects.
This requires a blend of people with expertise in the
areas of mathematics, statistics, engineering,
economics, management, computer science and so
on.
v) Digital computer. Use of a digital computer has
become an integral part of the O.R. approach to
decision-making. The computer may be required
due to the complexity of the model, volume of data
required and the computations to be made.
vi) Methodological Approach. O.R. is the application
of scientific methods, techniques and tools to
problems involving the operations of systems so as
to provide optimum solutions to the problems. The
scientific method consists of observing and finding
the problem; formulating and testing the hypothesis;
and analyzing the results of the test. The data so
obtained is then used to decide whether the
hypothesis should be accepted or not. If the
hypothesis is accepted, the results should be
implemented. Otherwise, an alternative hypothesis
has to be accepted.
vii) Wholistic Approach. While arriving at a decision,

an operations research team examines the relative
importance of all conflicting and multiple objectives
and the validity of claims of various departments of
the organization from the perspective of the whole
organization.
It is not so easy to exhaustively list down the features

of O.R. as the matter of fact that it constitutes very broad
area. However, the following features can also be
mentioned in addition to those already listed here above.
 Existence of a problem.
 Intention to solve the problem.
 Application of system concept and system analysis to
problem.
 Scientific approach to solving the existing problem.
 Formation of a group consisting of different
specialists.
 Multi-disciplinary team with common aim.
 Team is constituted by management.
 O.R. assists the management to take decision.
 O.R. role is that of recommendatory nature.
 Existence of a number of solutions to the problem.
 Solution must be optimum.
 Solution must be most appropriate.
 Solution must meet the objectives within the
constraints.
 Solution must be given in quantifiable terms.
 Solution must be practical, application specific and
result-oriented.
1.4 APPLICATIONS OF OPERATIONS RESEARCH
Operation Research is mainly concerned with the

techniques of applying scientific knowledge, besides the
development of science. It provides an understanding
which gives the expert/manager new insights and
capabilities to determine better solutions in his decision-
making problems, with great speed, competence and
confidence. In recent years, O.R. has successfully entered
many different areas of research in Defence, Government,
Service Organizations and Industry.
Some applications of O.R. in the functional areas of

management are briefly presented here under:
Finance, Budgeting, and Investment
i) Cash flow analysis, long range capital requirements,
dividend policies, investment portfolios.
ii) Credit policies, credit risks and adequate account
procedures.
iii) Claim and complaint procedure.
Marketing
i) Product selection, timing, comparative actions.
ii) Advertising media with respect to cost and time.
iii) Number of salesmen, frequency of calling of
account, etc.
iv) Effectiveness of market research.
Physical Distribution
i) Location and size of warehouses, distribution centers,
retail outlets, etc.
ii) Distribution policy.
Purchasing, Procurement and Exploration

i) Rules of buying.
ii) Determine the quality and timing of purchase.
iii)Bidding policies and vendor analysis.
iv) Equipment replacement policies.
Personnel
i) Forecasting the manpower requirement, recruitment
policies and job assignments.
ii) Selection of suitable personnel with due consideration
for age and skills, etc.
iii)Determination of optimum number of persons for each
service center.
Production
i) Scheduling and sequencing the production run by
proper allocation of machines.
ii) Calculating the optimum product mix.
iii) Selection, location and design of sites for the
production plant.
Research and Development

i) Reliability and evaluation of alternative designs.
ii) Control of developed projects.
iii)Co-ordination of multiple research projects.
iv) Determination of time and cost requirements.
Besides the above mentioned applications of O.R. in the
context of modern management, its use has now extended
to a wide range of problems, such as the problems of
communication and information, socio-economic fields
and national planning.
1.5 OPPORTUNITIES AND SHORTCOMINGS OF

OPEERATIOS RESEARCH
The use of O.R. to improve decision-making has

become almost universal today. However, this remarkable
achievement of O.R. is not totally free from shortcomings.
Certain shortcomings result from lack of awareness on the
part of managers about their roles, while others result due
to avoidance of the behavioral and organizational issues
which are a part of every successful application.
Opportunities of O.R.
1. Using O.R. approach, the decision-maker can determine
a solution to his routine or repetitive problem. For
obtaining solution of such type of problems, it is
necessary to build a model so that future solution can be
obtained using the model thus freeing managers to
concentrate on more pressing matters.
2. O.R. requires business managers to be quite explicit
about their objective, their assumptions and the way of
visualizing the constraints.
3. While using O.R. approach, a manager has to consider
very carefully all those variables which influence his
decisions and the way these variables in a problem
interact with each other. He then selects a decision which
is best for the organization as whole.
4. O.R. approach allows a decision-maker to solve a
complex problem involving multiple variables much
more quickly than if he had to compute them using
traditional methods. Some times it may not be possible to
solve such complex problems without using O.R.

methods.
5. Using O.R. approach, a decision-maker can examine a
situation from various angles by simulating the model
which he has constructed for the real problem. He can
change various conditions under which decisions are
being made, and examine the effect of these changes
through appropriate experiments on the model, to
determine the best or optimal solution for the problem
under consideration. All these experiments can be carried
out without causing any series damage to the existing
system or incurring excessive cost.
Shortcomings of O.R.
1) There are certain problems which a decision-maker may

have to solve only once. Constructing a complex O.R.
model for solving such problems is often too expensive
when compared with the cost of other less sophisticated
approaches available to solve them.
2) Some times O.R. specialists become too much enamored
with the model they have built and forget the fact that
their model does not represent the “real world problem”
in which decisions have to be made.
3) Some times the basic data are subject to frequent
changes. In such cases, modification of O.R. models is a
costly affair.
4) Many O.R. models are so complex that they can not be
solved without the use of computer. Also, the solutions
obtained from these models are difficult to explain to
managers and hence fail to gain their support and

confidence.
5) Magnitude of computation involved, lack of
consideration for non-quantifiable factors and
psychological issues involved in implementation are
some of the other shortcomings of O.R.
Chapter II
LINEAR PROGRAMMING PROBLEM (LPP)
2. a) Introduction:
The first step in quantitative analysis is to develop a
clear and concise statement of the problem. The set
problem should be clearly defined. Once the problem is
defined, the next step is to build a suitable mathematical
model.
What is a model?
In decision-making environment, model formulation/
building/ is important because it represents the essence of
business decision problem.
 A model is a representation of an actual object or
situation.
 A model is a theoretical abstraction of a real-life
problem.
 A model is a simplified representation of a real-world
situation.
Models may be represented in variety of ways. They can be
classified as physical models and symbolic models.
a) Physical models: Physical model is

schematic/graphic/ representation of the
real thing. There are two types of physical
models, namely, iconic and analogue
models.
i) Iconic models: They are basically scaled up/

down versions of the particular thing they
represent. They represent the images of
certain thing they actually stand for. A model
aeroplane in a wind tunnel, a model of
proposed building provided by an architect,
models of sun and its planets housed in a
planetarium, a model of a particular molecular
structure of a chemical are examples of iconic
models, because they look like what they
represent (except size). Maps, photographs,
pictures, or drawings may also be categorized
as iconic models since they represent the
images of certain things. The chief merit of
an iconic model is that it is concrete and
specific. It resembles visually the thing it
represents and, therefore, there are likely to be
fewer problems in translating any ‘findings’
from the model into the real life situation.
However, its disadvantage is that they often
do not lend themselves to manipulation for
experimental purposes.
ii) Analogue models: the analogue models use one
set of properties to represent another set. For
example, an electrical network model may be
used as an analogue model to study the flows
in a transportation system. The contour lines
on a map are analogues of elevation. A
barometer indicates changes in atmosphere
pressure through movements of a needle. In
general, analogue models are less specific and
concrete but they are easier to manipulate as

compared to the iconic models.
b) Symbolic models: Most of the time, many real-life
problems can be described using symbolic models or
mathematical models. These are the most general and
abstract types of models. They employ letters, numbers,
and other types of symbols to represent the variables
and their inter-relationships. As such, they are capable
of experimental manipulation most easily.
The symbolic models can be either verbal or
mathematical. Verbal models describe a situation in a
spoken language or written words. Mathematical
models, on the other hand, employ mathematical
notation to represent the variables of the real situations.
The mathematical models take the form of
mathematical relationships that portray the structure of
what they are intended to represent. The use of a verbal
versus mathematical model could be shown by the
formula for finding the perimeter of a rectangle. A
verbal model would express the problem as follows: the
perimeter (p) of a rectangle is equal to the sum total of
two times the length (L) and two times the width (W) of
the rectangle. In contrast, the mathematical model can
be demonstrated as follows: P = 2L + 2W. If applicable
to the same problem, both models would yield identical
results. However, a mathematical model is more precise
and thus preferable.
There are various mathematical models in use. They are a
deterministic models and probabilistic models.
a) A deterministic model: a deterministic model is the
one in which all parameters in the mathematical
formulation are fixed at predetermined values so that

no uncertainty exists.
b) A probabilistic model: In probabilistic model, on
the other hand, some or all the basic characteristics
may be random variables (capable of assuming
different values with given probabilities). In such
models, uncertainty and errors are required to be
given explicit consideration. Probabilistic models
are also termed as stochastic or chance models.
The mathematical models comprise three basic

components: decision variables, result variables and
uncontrollable variables.
i) Decision variables: The decision variables
represent those factors where a choice could be
made and they are independent variables. These
variables can be manipulated and, therefore, are
controllable by the decision-maker. To illustrate
in the area of marketing, the decision variables
may be the advertising budget, the number of
regional salesmen employed, and the number of
products and so on.
ii) Result variable: The result variables indicate
the level of effectiveness of a system. They
represent output of the system and are also
termed as dependent variables but are beyond
the control of the decision-maker. The result
variables may be the market share for the
company, level of customer satisfaction and
others.
iii) Uncontrollable variables: These variables are

beyond the control of the company.
Uncontrollable variables may be the
competitor’s strategies, consumer’s income and
so on.
Activity 1.2: Review Questions

1. Model building is the essence of the operations research
approach? Discuss.
2. What is meant by a mathematical model of a real
situation? Discuss the importance of models in the
solution of O.R. problems.
3. What is the purpose of a mathematical model? How does a
model achieve this purpose? Consider in your answer the
concept that a model is an abstraction of reality.
4. Explain how and why operations research methods have
been valuable in aiding executive decisions?
12 marks: 3 for each.
The different components of mathematical models are tied

together with the relationships in the form of equations,
inequalities and so on. Such a model consists of an
objective function and describes how a dependent variable/
result variable/ is related to independent variable /decision
variable/.
For example, the profit function of the firm making two
products can be stated as follows: P = p1x1+ p2x2, in which
P indicates the total profit of the firm, x1 and x2 are the
number of units (independent variables) of the two products
produced and sold, and p1 and p2 are the profit per unit on
the two products, respectively (uncontrollable variables).
The term formulation is used to mean the process of

converting the verbal description and numerical data into
mathematical expressions which represent the relevant
relationship among decision variables, objectives and
restrictions on the use of resources.
Linear programming (LP) is a mathematical modeling
technique useful for economic allocation of scarce or
limited resources, such as labour, material, machine, time,
warehouse space, capital, energy, etc., to several competing
activities, such as products, services, jobs, new equipment,
projects, etc., on the basis of a given criterion of optimality.
Scarce resources mean resources that are not infinite in
availability during the planning period. The criterion of
optimality generally is either performance, return on
investment, profit, cost, utility, time, distance, etc.
Many business and economic situations are concerned
with a problem of planning activity. In each case, there are
limited resources at your disposal and your problem is to
make efficient and effective use of such resources so as to
yield the maximum production or to minimize the cost of
production, or to give the maximum profit, etc. Such
problems are referred to as the problems of constrained
optimization.
Linear programming is a technique for determining an
optimum schedule of interdependent activities in view of
the available resources.
Programming is just another word for planning and
refers to the process of determining a particular plan of
action from amongst several alternatives. The word linear
stands for indicating that all relationships involved in a
particular problem are linear, which means the change
on one variable has a proportional influence or impact

on the other variable. Thus, a given change in one
variable will always cause a resulting proportional
change in another variable. For example, doubling
investment on a certain project will exactly double the rate
of return.
Moreover, programming refers to modeling and
solving a problem mathematically that involves the
economic allocation of limited resources by choosing a
particular course of action or strategy among various
alternative strategies to achieve the desired objective.
Linear programming problem was first developed by
George B. Dantzing to primarily for solving military
logistics problem. But now, it is being used extensively in
all functional areas of management, airlines, agriculture,
military operations, oil refining, education, energy
planning, pollution control, transportation planning and
scheduling, research and development, health care system,
etc.
What is linear programming? “Linear programming is

a versatile mathematical technique in O.R. and a plan of
action to solve a given problem involving linearly related
variables in order to achieve the laid down objective
function under a given set of constraints.
2.b) CHARACTERISTICS OF LINEAR PROGRAMMING

Any linear programming problems have the following key
characteristics:
1. Objectives. Objectives can be expressed in a standard

form viz, maximize/minimize Z = f (x), where Z is called
the objective function. The objective function of each
LPP is expressed in terms of decision variables to
optimize the criterion of optimality (also called measure-
of-performance) such as profit, cost, revenue, distance,
etc. In its general form, it is expressed as:
Optimize (maximize or minimize) Z= c1x1 + c2x2 +
…+ cnxn,
where Z is the measure-of-performance which is a function
of x1, x2,… xn to the measure-of-performance Z. The
optimal value of the given objective function is obtained by
the graphical method or simplex method.
2. Constraints. The resources are scarce. They are limited.
The scarcity of resources is expressed using inequalities.
Therefore, constraints are capable of being expressed in
the form of equality, or inequality viz, f (x) = or ≥ or ≤ k,
where k = constant and x ≥ 0.
3. Resources to be optimized are capable of being
quantified in numerical terms.
4. The variables are linearly related to each other.
5. More than one solution exists, the objective being to
select the optimum solution.
6. The LP technique is based on simultaneous solutions of
linear equations.
2. c) Definition of terms employed in LPP

a) Basic Solution. For 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. In the other words, there are
instances where number of unknowns (P) is more than the
number of linear equations (Q) available. In such cases, we
assign zero value to all surplus unknowns. There will be (p-
q) such unknowns. With these values we solve ‘q’
equations and get values of ‘q’ unknowns. Such solutions
are called basic solutions.
b) Basic Variables. The variable whose value is
obtained from the basic solution is called basic variables.
c) Non-basic Variables. The variables whose values are
assumed as zero in the basic solution are known as non-
basic variables.
d) Solution. A solution to an LPP is the set of values of
the variables which satisfies the set of constraints of the
problem.
e) Feasible Solution. A feasible solution to an LPP is
the set of values of the variables which satisfies the set of
constraints as well as the non-negative condition of the
problem.
f) Optimum (Optimal) Solution. A feasible solution of
an LPP is said to be an optimum (optimal) if it also
optimizes the objective function of the problem. In other
words, optimum solution is the set of values which satisfies
the set of constraints, the non-negative conditions and the
objective function of the problem.
g) Slack Variables. Linear equations are solved through
equality form of equations. Normally, constraints are given
in the “less than or equal” (≤) form. In such cases, we add
an appropriate variable to make it equality (=) equation.

The added variables to the constraints to make them an
equality equation in LPP are called slack variables and
often denoted by the letter ‘S’. See the following example
to understand how slack variable is added to the
constraints. Example1: 2x1 + 3x2 ≤ 500. In this equation, the
left-hand side of the equation is assumed to be less than the
right hand side of the equation. To convert it into equality,
slack variable is to be added to the left hand side of the
equation as follows:
2x1 + 3x2 + S1= 500, Where S1 = slack variable.
h) Surplus Variable. Some times, constraints are given

in the “more than or equal” (≥) form. In such cases, we
subtract an appropriate variable to make it into the
“equality” (=) form. Hence, variables subtracted from the
constraints to make it an “equality” equation in an LPP is
called surplus variables and often represented by the letters
‘S’. In this case, the left-hand side of the equation is greater
than the right hand side of the equation and to equalize it
with the right hand side of the equation, surplus variable is
subtracted from the left-hand side.
Example: 3x1 + 4x2 ≥100 is converted as
3x1 + 4x2 – S1 = 100, where S1 is a surplus
variable.
2. d) Advantages of Linear Programming.
Following are certain advantages of linear programming:

1. Linear programming helps in attaining the optimum use
of productive resources. It also indicates how a decision-
maker can employ his productive factors effectively by

selecting and distributing (allocating) these resources.
2. Linear programming techniques improve the quality of
decisions. The decision-making approach of the user of
this technique becomes more objective and less
subjective.
3. Linear programming techniques provide possible and
practical solutions since there might be other constraints
operating outside the problem which must be taken into
account. Producing so many units does not mean that all
of them can be sold. Thus, the necessary modification of
its mathematical solution is required for the sake of
convenience to the decision-maker.
4. Highlighting of bottlenecks in the production process is
the most significant advantage of this technique. For
example, when bottleneck occurs, some machines can
not meet demand while other remains idle for some of
the time.
5. Linear programming also helps in re-evaluation of a
basic plan for changing conditions. If conditions change
when the plan partly carried out, they can be determined
so as to adjust the remainder of the plan for best results.
2. e) Limitations of Linear Programming.

In spite of having many advantages and wide areas of
application, there are some limitations associated with this
technique. These are given here below:
1. Linear programming treats all relationships 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 the variables.
2. 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. In such cases integer
programming is used to ensure integer value to the decision
variables.
3. Linear programming model does not take into 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.
4. Sometimes large-scale problems cannot be solved with
linear programming technique even when assistance of
computer is available. For it, the main problem can be
fragmented into several small problems and solving each one
separately.
5. Parameters appearing in the model are assumed to be
constant but in real-life situations, they are frequently neither
known nor constant.
6. It deals with only single objective, whereas in real-life
situations we may come across conflicting multi-objective
problems. In such cases, instead of the LP model, a goal
programming model is used to get satisfactory value of these
objectives.
2.1 FORMULATION OF MATHEMATICAL MODEL OF LP
The procedure for mathematical formulation of a linear

programming problem consists of the following major
steps:
Step 1. Study the given situation to find the key decisions
to be made.
Step 2. Identify the variables involved and designate them
by symbols xj (1, 2,…, n).
Step 3. State the feasible alternatives which generally are:
xj ≥ 0, for all j.
Step 4. Identify the constraints in the problem and express
them as linear inequalities or equations, LHS of
which are linear functions of the decision
variables.
Step 5. Identify the objective function and express it as a
linear function of the decision variables. The
objective function states about maximization of the
profit or minimization of the cost.
Simplex Tableau: This is a tableau prepared to show and

enter the values obtained for basic variables at each stage of
iteration. This is the derived value at each stage of
calculation.
EXAMPLES
Example 2.1: A company has three operational departments
(weaving, processing and packing) with capacity to produce
three different types of clothes, namely: suiting, shirting and
woolens yielding a profit of Birr 2, 4 and 3 respectively. One
meter of suiting requires 3 minutes in weaving, 2 minutes in

processing and 1 minute in packing. Similarly, one meter of
shirting requires 4 minutes in weaving, 1 minute in processing
and 3 minutes in packing. One meter of woolen requires 3
minutes in each department. In a week, total run time of each
department is 60, 40 and 80 hours for weaving, processing and
packing respectively. Formulate the linear programming
problem (LPP) to find the product mix to maximize the profit.
The data can be summarized as follows before formulating an LPP model.
Products in meters Availability

Departments Suiting Shirting Woolens (in
minutes)
Weaving 3 4 3 60 x60 =3600
Processing 2 1 3 40 x 60=2400
Packing 1 3 3 80 x 60=4800
Profit contr. 2 4 3
LPP model formulation

Let x1, x2 and x3 represent the rate of production in the three departments.
Maximize Z = 2x1 + 4x2 + 3x3 …… objective function
Subject to:
3x1 + 4x2 + 3x3 ≤ 3600 …….. Weaving time constraint
2x1 + x2 + 3x2 ≤ 2400 ……. Processing time constraint
x1 + 3x2 + 3x3 ≤ 4800 ……. Packing time constraint
x1 , x2 , x3 ≥ 0. ……. Non-negativity condition.
Example 2.2: A small scale manufacturer produces two types of

products A and B which give a profit margin of Birr 4 and Birr
3, respectively. There are two plants I and II, each having a
capability of 72 and 48 hours per day. Cycle times of A and B
are 2 hours and 1 hour in plant number I, respectively. Similar
figures for plant II are 1 and 2 hours. Formulate an LPP model
for maximizing the profit.
The summarized data of the above problem is as follows:

Products
Plant A B Availability
I 2 1 72
II 1 2 48
Profit 4 3
LPP model formulation:
Maximize Z = 4x + 3y
Subject to:
2x + y ≤ 72
x + 2y≤ 48
x , y ≥ 0.
Example 2.3: A firm can produce 3 types of clothes A, B and

C. Three kinds of wools are required with the colour of red,
green and blue to produce the clothes. One unit of A-type cloth
consumes 4 meters of red, and 6 meters of blue wool. One unit
of B-type cloth needs 6 meters of red, 4 meters of green and 4
meters of blue wool. Type C uses 10 meters of green and 8
meters of blue. Available stocks are 80, 100 and 150 meters of
red, green and blue wools. Profit margins per unit of A, B and C
are 15, 25 and 20 Birr, respectively. Formulate an LPP model to
maximize the profit.
Clothes
Wool Colour A B C Availability
Red 4 6 - 80
Green - 4 10 100
Blue 6 4 8 150
Profit 15 25 20
The LPP model formulation:
Maximize Z = 15x + 25y + 20z

Subject to:
4x + 6y + 0z ≤ 80
0x + 4y + 10z ≤ 100
6x + 4y + 8z ≤ 150
x, y, z ≥ 0.
Example 2.5 Rozina and Sons Company is engaged in the manufacture of three products X, Y
and Z. Available data is given below.
Product Minimum sales per month Costs per unit

X 20 10
Y 35 20
Z 30 22
Operations Time in hours Total time / month

I 1 2 2 200
II 2 1 1 220
III 3 1 2 180
Formulate product mix which will give maximum profit.

Products
Operations A B C Availability
I 1 2 2 200
II 2 1 1 220
III 3 1 2 180
Profit 10 15 8
The LPP Model formulation:
Maximize Z = 10x + 15y + 8z.

Subject to:
x + 2y + 2z ≤ 200
2x + y + z ≤ 220
3x + y + 2z ≤ 180
x , y , z ≥ 0.
Example 2.17 Evening shift resident doctors in a government

hospital work five consecutive days and have two days off.
Their five days’ work can start on any day of the week and the
schedule rotates indefinitely. The hospital requires the following
minimum number of doctors working:
Sun Mon Tues Wed Thu Fri Sat
35 55 60 50 60 50 45
No more than 40 doctors can start their five working days
on the same day. Formulate this problem as an LP model to
minimize the number of doctors employed by the hospital.
LP model formulation:
Let x1,x2,x3,x4,x5,x6,x7 = number of doctors who start their duty on day of the week.
The LP model
Minimize (total number of doctors) Z = x1+x2+x3+x4+x5+x6+x7
Subject to the constraints:
x1+x4+x5+x6+x7 ≥35
x2+x5+x6+x7+x1 ≥55
x3+x6+x7+x1+x2 ≥60
x4+x7+x1+x2+x3 ≥50
x5+x1+x2+x3+x4≥60
x6+x2+x3+x4+x5≥50
x7+x3+x4+x5+x6≥45
x1+x2+x3+x4+x5+x6+x7 ≤40
x1,x2,x3,x4,x5,x6,x7≥0
Example 2.18 Awassa Referral Hospital has the following minimal daily requirements for
nurses.
Period Check Time (24 hours day) Minimal number of nurses
1 6A.M.–10A.M. 2
2 10A.M.- 2P.M. 7
3 2P.M.– 6P.M. 15
4 6P.M.- 10P.M. 8
5 10P.M. -2A.M. 20
6 2A.M.- 6A.M. 6
Nurses report to the hospital at the beginning of each period and work for 8 consecutive hours.
The hospital wants to determine the minimum number of nurses to be employed so that there will
be sufficient number of nurses available for each period. Formulate this as a linear programming
problem by setting up appropriate constraints and objective function. Do not solve.
LP model formulation
Let x1, x2, x3, x4, x5, x6 be the number of nurses on duty at 6A.M, 10 A.M, 2 P.M., 6 P.M., 10
P.M. and 2 A.M., respectively. Then the required LP formulation will be as follows:
Minimize Z = x1+ x2 + x3 + x4 + x5 + x6
x1+x2 ≥7
x2 + x3 ≥15
x3 + x4 ≥8
x4 + x 5 ≥20
x5 + x6 ≥6
x6 + x 1 ≥ 2
x1, x2, x3, x4, x5, x6 ≥0
SELF TEST PROBLEMS
2.1 Yirgalem (Dale) Hospital, as it is a big one, has the following minimal daily requirement of
doctors:
Period Clock Time (24 hours) No. of doctors required
1 6 A.M – 10 A. M. 72
2 10 A.M. – 2 P.M. 77
3 2 P.M – 6 P.M. 85
4 6 P.M. – 10P.M. 68
5 10 P.M.- 2 A.M. 25
6 2 A.M – 6 A.M. 23
Doctors report to the hospital at the beginning of each period and work for 8 consecutive
hours. Formulate this problem as a linear programming problem to minimize the total
number of doctors to meet the needs of the hospital throughout the day.
2.2 A 24 hour supermarket has the following minimal requirements for cashers:
Period 1 2 3 4 5 6
Time of day 3-7 7-11 11-15 15-19 19-23 23-27
(24 hr clock)
Minimum 7 20 14 20 10 5
number
Period 1 follows immediately after period 6. A cashier works eight consecutive hours,
starting at the beginning of one of the six periods. Determine a daily employee worksheet
which satisfies the requirements with the least number of personnel. Formulate the problem
as a linear programming problem.
2.3 Evening shift doctors of Awassa Referral Hospital work five consecutive days and have two
consecutive days off. Their five days of work can start on any day of the week and the
schedule rotates indefinitely. The hospital requires the following number of doctors
working:
Sun Mon Tues Wed Thus Fri Sat
110 120 115 120 100 112 108
No more than 100 doctors can start their five working days duty on the same day.
Formulate the general linear Programming problem model to minimize the number of
doctors employed by the hospital.
2.4 A firm makes two types of furniture: chairs and tables. The contribution for each product as
calculated by the accounting department is Birr 20 per chair and Birr 30 per table. Both
products are processed on three machines M1, M2 and M3. The time required (in hours) by
each product and total time available per week on each machine are as follows:
Machine Chair Table Available hours/week
M1 3 3 36
M2 5 2 50
M3 2 6 60
How should the manufacturer schedule his production in order to maximize contribution?
Formulate the problem as a linear programming problem.
2.5 A manufacturer can produce two different products, A and B during a given time period. Each
of these products requires four different manufacturing operations: Grinding, Turning,
Assembling and Testing. The manufacturing requirements in hours per unit of product are
given below for A and B:
Operations A B
Grinding 1 2
Turning 3 1
Assembly 6 3
Testing 5 4
The available capacities of these operations in hours for the given time period are: Grinding
30, Turning 60, Assembly 200, and Testing 200. The contribution to profit is Birr 2 for
each unit of A and Birr 3 for each unit of B. The firm can sell all that it produces at the
prevailing market price. Formulate the problem as a linear programming model to
maximize profit.
2.3 LINEAR PROGRAMMING:

GRAPHICAL AND SIMPLEX SOLUTION METHODS:
2.3.1 THE GRAPHICAL METHOD:
The Graphical method can be used to solve simple LPPs having two decision variables
only. For LPPs with three or more variables, this method cannot be employed. To use the
graphical method for solving linear programming problems of two decision variables, the
following steps are required:
1. Identify the problem- the decision variables, the objective function and constraint
restrictions. And convert the linear inequalities (constraints) into linear equations and find
two points of coordinates of X and Y on each of the lines.
2. Draw a graph that includes all the constraints/ restrictions and identify the feasible region
(the solution space). In the other words, plot each equation on the graph, as each one will
geometrically represent a straight line.
3. Shade the feasible region. Every point on the line will satisfy the equation of the line. If
the inequality-constraint corresponding to that line is ‘≤’, then the region below the line
lying in the first quadrant (due to non-negativity of variables) is shaded. For the
inequality-constraint with ‘≥’ sign, the region above the line in the first quadrant is
shaded. After shading the feasible region, take the entire corner points of the feasible
region and evaluate each corner point/ extreme point/ in order to arrive at the point that
optimizes the objective function (the optimal solution).
4. Interpret the results.
2.3.1.1) Limitations of the graphical method.

In principle, a system in three variables can be represented graphically because linear
equations in three variables are planes. However, sketching planes that are 3-dimensional space
on a flat (two -dimensional) piece of paper or a board and trying to identify the solution space is
too complex to be a practical method of eliminating intersections that are not in the solution
space.
Of course, it is impossible even to graph systems in more than 3 variables. Therefore,
another systematic procedure that provides a solution to LLPs of any magnitude, that is, two,
three or more variables was developed and known as the simplex method. We shall take up the
simplex method (algebraic method) after illustrating the graphical approach in respect of
maximization and minimization problems.
Although the graphical method was clearly dealt in Mathematics for Management Course
earlier, to refresh it once again, some examples which are assumed to be very crucial to create
more understanding of the subject matter are given here below. Examples may be categorized
into two as maximization case and minimization case.
2.3.1.2) Examples on Maximization LP problem
Example 2.1 Use the graphical method to solve the following LP problem.
Maximize Z = 15x1+10x2
Subject to the constraints
4x1+6x2 ≤ 360
3x1+0x2 ≤ 180
0x1+5x2 ≤ 200
and x1, x2 ≥ 0.
Solution:
1. If the given problem is not in mathematical form, then convert the problem into
mathematical form. However, in the case of above example, the given problem is
already in mathematical form.
2. We shall treat x1 as the horizontal axis and x2 as the vertical axis. Each constraint will
be plotted on the graph by treating it as a linear equation and then appropriate
inequality conditions will be used to mark the area of feasible solutions.
Consider the first constraint 4x1+6x2 ≤ 360. Treat it as the equation, 4x1+6x2 = 360. The
easiest way to plot this line is to find any two points that satisfy the equation, then drawing a
straight line through them. The two points are generally the points at which the line intersects the
x1 and x2 axes. For example, when x1 = 0, we get 6x2 = 360 or x2 = 60, dividing both sides by 6.
Similarly, when x2 = 0, 4x1 = 360, then x1 = 90, applying the same rule as above.
These two points are then connected by a straight line as will be depicted in the Figure
2.1 here below. But the question is: where are the points satisfying 4x1+ 6x2 ≤ 360. In the case of
this constraint, any point above the constraint line violates the inequality condition. But any point
below the line does not violate the constraint. Thus, the inequality and non-negativity condition
can only be satisfied by the shaded area (feasible region) as may be shown in Figure 2.1 here
below. Similarly, the constraints 3x1 ≤ 180 and 5x2 ≤ 200 are also plotted on the graph and are
indicated by the shaded area as shown in Fig. 2.1.
X2
80
5x2 = 200
(0, 60)
60
4x1+6x2 = 360.
40A(0,40) B(30, 40) 3x1 = 180

:::::::::::::::::::::::
20 :::::::::::::::::::::::: C (60, 20)
:::::Feasible Region::
::::::::::::::::::::::::D (60, 0)
0 20 40 60 80 90 100 X1
Figure 2.1 Graphical Solution of LP Problem.
Since all constraints have been graphed, the area which is bounded by all the constraint
lines including all the boundary points is the feasible region (solution space). The feasible region
is shown in Figure 2.1 by the shaded area OABCD.
Since the optimal value of the objective function occurs at the one of the extreme points
of the feasible region, it is necessary to determine their coordinates. The coordinates of extreme
points of the feasible region are: O= (0, 0), A= (0, 40), B= (30, 40), C= (60, 20), D = (60, 0).
Evaluate objective function value at each extreme point of the feasible region as shown
here below, in order to arrive at decision making.
Extreme point Coordinates Objective function value

x1 x2 Z = 15x1 + 10x2
0 0 0 15(0) + 10(0) = 0
A 0 40 15(0) + 10(40)= 400
B 30 40 15(30)+10(40)= 850
C 60 20 15(60)+10(20)= 1100
D 60 0 15(60)+10(0) = 900
Since we desire Z to be maximum for maximization case, we conclude that maximum

value of Z = 1,100 is achieved at the point C (60, 20). Hence, the optimal solution to the given
LP problem is x1= 60, x2 = 20 and Max Z = 1,100.
Example 2.2 Ephrem is planning to buy some hens. Old hens can be bought at Birr 2 each and
young ones at Birr 5 each. The old hens lay 3 eggs per week and the young ones lay 5 eggs per
week. Each egg bears a worth of 30 cents. A hen (young or old) costs 1 Birr per week to feed. He
has only Birr 80 to spend for hens. How many of each kind should he buy to give a profit of
more than Birr 6 per week, assuming that he can not house more than 20 hens?
Solution: LP model formulation. Let x1 be the number of old hens and x2 the number of young
hens to be bought. Since old hens lay 3 eggs per week and the young ones lay 5 eggs per week,
the total number of eggs obtained per week will be = 3x1+5x2. Consequently, the cost of each
egg being 30 cents, the total gain will be = Birr 0.30(3x1 + 5x2). Total expenditure for feeding
(x1+ x2) at the rate of Birr 1 each will be = Birr 1 (x1+ x2). Thus, total profit Z earned per week
will be Z = total gain – total expenditure, or
Z = 0.30 (3x1+5x2) – (x1 + x2) or
Z = 0.50x2 – 0.10x1 (objective function)
Since old hens can be bought at Birr 2 each and young ones at Birr 5 each and there is
only Birr 80 available for purchasing hens, the constraint is: 2x1 + 5x2 ≤ 80.
Also, since it is not possible to house more than 20 hens at a time, x1 + x2 ≤ 20. Since the
profit is restricted to be more than Birr 6, this means that the profit function z is to be
maximized. Thus, there is no need to add one more constraint, i.e., 0.5x2 – 0.10x1≥ 6. Again, it is
not possible to purchase negative quantity of hens, therefore, x1, x2 ≥ 0. Thus, the formulated LP
model would be:
Maximize Z = 0.5x2 – 0.1x1
Subject to the constraint
2x1 + 5x2 ≤ 80
x1 + x2 ≤ 20
x1, x2 ≥ 0
Graphical solution
First convert inequalities into equalities and solve for x1 and x2 coordinates as discussed
in example 2.1 here above. Then, plot the straight lines for 2x1+5x2 = 80 and x1 + x2 = 20 on the
graph and shade the feasible region. Then, find the coordinate of the extreme points of the
feasible region. The coordinates of the extreme points of the feasible region are: 0 = (0, 0), A =
(0, 16), B = (20, 0) C = (20/3, 40/3). Thus, the value of Z can be evaluated as follows:
Coordinates Objective function value

Extreme point x1 x2 Z = 0.5x2 -0.10x1
0 0 0 0.5(0) - 0.10(0) = 0
A 0 16 0.5(16) - 0.10(0)= 8
B 20 0 0.5(0)-0.10(20)= -2
C 20/3 40/3 0.5(40/3)-0.10(20/3) = 6
Since the maximum value of z is Birr 8, which occurs at the point A = (0, 16), the
solution to the given problem is x1 = 0, and x2 = 16, max z = Birr 8.
Decision: He should buy only 16 young hens in order to get the maximum profit of Birr 8
(which is > 6).
Example 2.3 A firm makes two products X and Y, and has a total production capacity of 9 tones
per day, X and Y requiring the same production capacity. The firm has a permanent contract to
supply at least 2 tones of X and at least 3 tones of Y per day to another company. Each tone of X
requires 20 machine hours of production time and each tone of Y requires 50 machine hours of
production time. The daily maximum possible number of machine hours is 360. All the firm’s
output can be sold, and the profit made is Birr 80 per tone of X and Birr 120 per tone of Y. It is
required to determine the production schedule for maximum profit and to calculate this profit.
LP model formulation: Let x1 and x2 = number of units (in tones) of product X and Y to be
manufactured, respectively. Then, the LP model of the given problem can be written as:
Maximize (total profit) Z = 80x1 + 120x2

x1 + x2 ≤ 9
x1 ≥2 (Production capacity constraints).
x2 ≥ 3
20x1 + 50x2 ≤ 360 (machine hours constraint)
x1, x2 ≥ 0. (Non-negativity restriction)
Graphical Solution:
For solving this problem graphically, let us graph each constraint by first treating it as a
linear equation in the same way as discussed earlier. Then use the inequality condition of each
constraint to mark the feasible region as shown in Figure 2.2.
(1) x1+x2=9 (2) x1 = 2

X2 ( 3) x2 = 3 (4) 20x1 + 50x2 = 360
(2)
10
8
( 1) B(2, 6.4)
6 B C(3, 6)
++++
4 ++++++ D(6,3) (3)
A(2, 3)
2
( 4)
0
2 4 6 8 10 12 14 16 18 x1
Figure 2.2 Graphical Solution of LP problem
So computed coordinates of the extreme points of the feasible region are: A= (2, 3), B=
(6, 3), C= (3, 6), and D= (2, 6.4). The value of the objective function at each of these extreme
points is as follows:
Extreme point x1 x2 Z = 80x1+ 120x2
A 2 3 80(2)+120(3) = 520
B 2 6.4 80(2)+120(6.4) =928
C 3 6 80(3)+120(6) = 960
D 6 3 80(6)+120(3) = 840
Decision: The maximum value of the objective function Z = 960 occurs at the extreme point
C (3, 6). Hence the company should produce, x1 = 3 tones of product X and x2 = 6 tones of
product Y in order to yield a maximum profit of Birr 960.
2.2.1.3) Minimization Case and graphical method solution

Minimization case is used to minimize the cost the organization could incur otherwise.
Cost can be minimized by reducing wastages and increasing efficiency. The increase of
efficiency can lead the organization to productivity and profitability.
Minimization case is used when the constraint is “greater than or equal to” which may
symbolically be represented as (≥). When the minimization case is employed, the solution space
will be situated above the constraint lines. Thus, shading will take place above the constraints.
Example 2.4 Use the graphical method to solve the following LP Problem.
Minimize Z = 3x1 + 2x2
5x1 + x2 ≥ 10
x1 + x2 ≥ 6
x1 + 4x2≥12
x1 , x 2 ≥ 0
Solution: Plot on a graph each constraint by first treating them as a linear equation in the same
way as discussed earlier. Use the inequality condition of each constraint to mark the feasible
region as may be shown in Figure 2.3.
x2 1. 5x1 + x2 = 10
10 D (0, 10) 2. x1 + x2 = 6
1 3. x1+ 4x2 = 12
8
6
4 C (1, 5)
2 B (4, 2)
2 3 A (12, 0)
0 2 4 6 8 10 12 14 x1
Figure 2.3 Graphical solution of LP problem.
Accordingly, the coordinates of the extreme points of the feasible region (bounded from
below) are: A = 12, 0), B= (4, 2), C = (1, 5), and D = (0, 10). The value of the objective function
at each of these extreme points is as follows:

Extreme point X1 X2 Z = 3x1 + 2x2
A 12 0 3(12)+2(0) = 36
B 4 2 3(4) + 2(2) = 16
C 1 5 3(1) + 2(5) = 13
D 0 10 3(0) + 2(10) = 20
Decision: The minimum value of the objective function Z = 13 occurs at the extreme point
C (1, 5). Hence, the optimal solution to the given LP problem is: x1= 1, x2 = 5 and min z = 13.
2.2.1.4) SPECIAL CASES IN LINEAR PROGRAMMING
c) Alternative (or Multiple Optimal Solutions)

So far we have seen that the optimal solution of any linear programming problem occurs
at an extreme point of the feasible region and the solution is unique, i.e., no other solution yields
the same value of the objective function. However, in certain cases, a given LP problem may
have more than one solution yielding the same optimal objective function value. Each of such
optimal solutions is termed as alternative optimal solution.
There are two conditions that should be satisfied for an alternative optimal solution to
exist:
1. The given objective function is parallel to a constraint that forms the boundary (or
edge) of the feasible solution region. In other words, the slope of the objective
function is same as that of the constraint forming the boundary of the feasible
solution region, and
2. The constraint should form a boundary on the feasible region in the direction of
optimal movement of the objective function. In other words, the constraint should be
an active constraint.
Remark: The constraint is said to be active or binding or tight, if at optimality, the left-hand side
of a constraint equals the right-hand side. In other words, an equality constraint is always active.
An inequality constraint may or may not be active.
Geometrically, an active constraint is one that passes through one of the extreme points
of the feasible solution region.
Example 2.5 Use the graphical method to solve the following LP problem.
Maximize Z = 10x1 + 6x2
Subject to the constraint:
5x1 + 3x2 ≤ 30
x1 + 2x2 ≤ 18
x1,x2 ≥ 0
Solution: 1. Convert inequalities, in the constraints, into equalities, such as

5x1 + 3x2 = 30
x1 + 2x2 = 18
x1,x2 ≥ 0
2. Find x and y coordinates of each constraint computing it as follows:

1) 5x1 + 3x2 = 30
x1 = 0, x2 = 30/3 = 10.
x1= 30/5= 6 , x2=0
2) x1 + 2x2 = 18
x1=0, x2= 9
x1= 18, x2= 0
3. Plot the graph using the coordinates of X and Y.
X2
10
A(0,9)
8 B (6/7, 60/7)
6 =====
4 =======
== == === x1+2x2 = 18
2 ==========5x1 + 3x2 = 30
C (6, 0)
0 2 4 6 8 10 12 14 16 18 20 X1
Figure 2.4 Graphical Solution of LP problem.
Here we observe that the objective function is parallel to the line BC (or the first
constraint), which forms the boundary of the feasible region. This is because the slope of the
objective function and that of the first constraint (5x1 + 3x2 = 30) is -5/3. Therefore, this implies
that any point including extreme points B and C on the same line between B and C is an optimal
solution.
We may disregard all other solutions obtained on the line segment BC and consider only
those obtained at extreme points B and C to establish that the solution to an LP problem will
always lie at an extreme point of the feasible region.
The evaluation of four extreme points is presented here below:

Extreme point x1 x2 Z = 10x1 + 6x2
O 0 0 10(0) + 6(0) = 0
A 0 9 10(0) + 6(9) = 54
B 6/7 60/7 10(6/7) + 6(60/7)=60
C 6 0 10(6) + 6(0) =60
Since on two different extreme points B and C the value of objective function is same, i. e., max
Z = 60, two alternative solutions: x1 = 6/7, x2 = 60/7 and x1 = 6, x2 = 0 exist.
Remark: If a constraint to which the objective function is parallel does not form the boundary of
the feasible region, the multiple solutions will not exist and such a constraint is called redundant
constraint, i.e., a redundant constraint is one whose addition or removal does not change the
feasible region.
2.2.1.5 Unbounded Solution

Some times an LP problem will not have a final solution. This means when one or more
decision variable values and the value of the objective function (maximization case) are
permitted to increase infinitely without violating the feasibility condition, then the solution is
said to be unbounded. It is important to note that there is difference between a feasible region
being unbounded. It is possible for a feasible region to be unbounded but LP problem not to be
bounded, that is, an unbounded feasible region may yield some definite value of the objective
function. The general cause of an unbounded LP problem is a mistake in mathematical model
formulation.
Example 2.6 Use the graphical method to solve the following unbounded LP problem.

x1 – x2 = -1
-x1 + x2 ≤ 0
x1, x2 ≥ 0
Solution: First treat all the inequalities of the constraints into a linear equation in the same way
as discussed earlier. Find x and y coordinates and plot the graph as usual. Then, use the
inequality condition of each constraint to mark the feasible region as may be shown in Figure 2.5
here below.
X2 1 2 1. x1 – x2 = -1
2 2. x1 + x2 = 0
1
Unbounded
Feasible
Region
0 1 2 X1
Figure 2.5 unbounded solution to an LP problem
It may be noted from Figure 2.5 that there exist an infinite number of points in the convex
region for which the value of the objective function increases as we move from extreme point
(origin), to the right. That is, both the variables x1 and x2 can be made arbitrarily large and the
value of objective function Z is also increased. Thus, the problem has an unbounded solution.
2.2.1.6 Infeasible Solution

Infeasibility is a condition that arises when no value of the variables satisfy all of the
constraints simultaneously. This means there is no unique (single) feasible region. Such a
problem arises due to wrong model formulation with conflicting constraints.
Example 2.7 Use the graphical method to solve the following LP problem:
Maximize Z = 6x1 – 4x2

2x1 +4x2 ≤ 4
4x1 + 8x2 ≥ 16
x1, x2 ≥ 0
Solution: As usual, convert the inequality constraints into a linear equation and solve for x and y
coordinates. Then plot the graph and try to find the feasible region that satisfies all the
constraints, simultaneously. However, in this case, there is no unique feasible solution space to
the constraints. Hence, there is no feasible solution to this problem, because of conflicting
constraints. See Figure 2.6 here below.
x2
0 1 2 3 4 5 x1
Figure 2.6 An infeasible solution
2.2.1.7 Redundancy
Redundant constraint is one that does not affect the feasible solution region (or space)
and thus redundancy of any constraint does not cause any difficulty in solving an LP problem
graphically. As has already been explained earlier, the removal of the redundant constraint does
not affect the feasible region of the given problem. In other words, the redundant constraint does
not form the boundary of feasible region. It is away from the boundary of the solution space and
does not contribute for the formation or determination of the feasible solution region.
SELF PRACTICE PROBLEMS:

Solve the following problems using graphical method and submit them to your instructor.
1. A manufacturing firm produces two machine parts: p1 and p2 using milling and grinding
machines. The different machine times required for each part, the machining times available
on different machines and the profit on each machine part are given as below:
Manufacturing time required Maximum time
Machine P1 P2 available / week (min)
Lathe 10 5 2,500
Milling machine 4 10 2,000
Grinding machine 1 1.5 450
Profit per unit ($) 50 100
Determine the number of pieces of p1 and p2 to be manufactured per week to maximize
profit.
2. A furniture manufacturer makes two products: chairs and tables. Processing of these products
is done on two machines A and B. A chair requires 2 hours on machine A and 6 hours on
machine B. A table requires 5 hours on machine A and no time on machine B. There are 16
hours per day on machine A and 30 hours on machine B. Profit gained by the manufacturer
from a chair and table is 2 and 10, respectively. What should be the daily production of each
of the two products?
3. A company produces two types of leather belts, say A and B. Belt A is of superior quality and
Bi s inferior. Profit on the two is 40 and 30 cents per belt, respectively. Each belt of type A
requires twice as much a required by a belt of type B. If all the belts were of type B, the
company could produce 1,000 belts per day. But the supply of leather is sufficient only for
800 belts per day. Belt A requires a fancy buckle and only 400 of them are available per day.
For belt B only 700 buckles are available per day. How should the company manufacture the
two types of belts in order to have a maximum overall profit?
4. Eden and Bethel breweries Ltd has two bottling plants, one located at one located at Hawassa
and the other at Dilla. Each plant produces three drinks: whisky, beer and brandy, named A,
B and C, respectively. The number of Bottles produced per day is as follows:
Plant at
Drink Hawassa Dilla
Whisky 1,500 1,500
Beer 3,000 1,000
Brandy 2,000 5,000
A market survey indicates that during the month of July, there will be a demand of 20,000
bottles of whisky, 40,000 bottles of beer and 44,000 bottles of brandy. The operating cost per
day for plants at Hawassa and Dilla are 600 and 400 monetary units. For how many days
should each plant be run in July so as to minimize the production cost, while still meeting the
market demand?
5. The agricultural research institute suggested to a farmer to spread out at least 4800 kg of a
special phosphate fertilizer and not less than 7200 kg of a special nitrogen fertilizer to raise
productivity of crops in this field. There are two sources for obtaining these- mixtures A and
B. Both of these are available in bags weighing 100 kg each and they cost Birr 40 and 24
respectively. Mixture A contains phosphate and nitrogen equivalent of 20 kg and 80 kg
respectively, while mixture B contains these ingredients equivalent of 50 kg each. Write this
as a linear programming problem and determine how many bags of each type the farmer
should buy in order to obtain the required fertilizers at minimum cost.
6. A company machines and drills two castings X and Y. The time required to machine and drill
one casting including machine set up time is as follows:
Casting Machine hours Drilling hours
X 4 2
Y 2 5
There are two lathes three drilling machines. The working week is of 40 hours; there is no
lost time and over time. Variables costs for both castings are $120 per unit while total fixed
costs amount to $1,000 per week. The selling price of casting X is $300 per unit. There are
no limitations on the number of X and Y casting that can be sold. The company wishes to
maximize its profit. You are required to (i) formulate a linear programming model for the
problem, and (ii) solve the problem using the graphical approach.
7. A company processes two manufacturing plants, each of which can produce three products:
X, Y and Z fro a common raw material. However, the proportions in which the products are
produced are different in each plant and so are the plant’s operating cost per hour. Following
are the data on production per hour and costs together with current orders in hand for each
product.
Products Operating cost
Plant X Y Z Per hour ($)
A 2 4 3 9
B 3 3 2 10
Orders on hand 50 24 60
You are required to use the graphic method to find out the number of production hours to
fulfil the orders on hand at minimum cost.
8. A company manufactures two kinds of machines, each requiring a different manufacturing

technique. The deluxe machine requires 18 hours of labour, 8 hours of testing and yields a
profit of $400. The standard machine requires 3 hours of labour, 4 hours of testing and yields a
profit of $200. There are 800 hours of labour and 600 hours of testing available each month. A
marketing forecast has shown that the monthly demand for the standard machine is to be more
than 150. The management wants to know the number of each model to be produced monthly
that will maximize total profit. Formulate as linear programming and solve it using the graphic
approach.
9. A company produces two types of presentation goods A and B that require gold and silver.
Each unit of type A requires 3 g of silver and 1 g of gold while B requires 1 g of silver and 2
g of gold. The company can produce 9 g of silver and 8 g of gold. If each unit of type A
brings a profit of $ 40 and that of type B $50, determine the number of units of each type that
should be produced to maximize the profit.
10. The ABC Company has been a producer of picture tubes for television sets and certain
printed circuits for radios. The company has just expanded into full-scale production and
marketing of AM and AM-FM radios. It has built a new plant that can operate for 48 hours
per week. Production of an AM radio in the new plant will require 2 hours and production of
AM-FM radio will require 3 hours. Each AM radio will contribute $40 to profit while an
AM-FM radio will contribute $80 to profit. The machine department, after extensive
research, has determined that a maximum of 15 AM radios and 10 AM-FM radios can be
sold each week. Formulate this problem as an LP model and solve it using the graphical
method to determine the optimal production mix of AM-FM radios that will enable the
company to maximize the profit.
11. A company manufactures two products: A and B. Product A yields $30 per unit and product
B $40 per unit towards fixed costs. It is estimated that sales of product A for the coming
month will not exceed 20 units. Sales of product B have not been estimated, but the company
does have a contract to supply at least 10 units to a regular customer. Machine hours
available for the coming month are 100 and products A and B take 4 hours each, respectively
to produce. Labour hours available are 180 and products A and B take 4 hours and 6 hours of
labour, respectively. Materials available are restricted to 40 units of two products while each
uses one unit material per unit. The company wishes to maximize contribution. Using the
graphic method, find the optimum product mix.
12. A company manufactures two types of machines, each requiring a different manufacturing
technique. The deluxe machine requires 18 hours of labour, 9 hours of testing, and yields a
profit of Birr 400. The standard machine requires 3 hours of labour, 4 hours of testing, and
yields a profit of Birr 200. There are 800 hours of labour and 600 hours of testing available
each month. A market forecast has shown the monthly demand for the standard machine to
be no more than150. Management wants to know the number of each model to produce
monthly that will maximize total profit. Formulate and solve this as a linear programming
problem using a graphic method.
13. A farm is engaged in breeding pigs. The pigs are fed on various products grown on the farm.
Because of the need to ensure certain nutrient constituents, it is necessary to buy additional
one or two products, called A and B. The nutrient content (vitamins and proteins) in each unit
of the products are as follows:
Nutrient Nutrient contents in the product Minimum nutrient

A B amount
1 36 6 108
2 3 12 36
3 20 10 100
Product A costs Birr 20 and product B costs Birr 40 per unit. How much of the products A and B should
be purchased at the lowest possible cost so as to provide the pigs nutrient not less than the minimum
required as given in the table.
2.2.2 THE SIMPLEX METHOD
2.2.2.1 INTRODUCTION
Most real life problems when formulated as an LP model have more than two variables
and are too large for the graphical solution method, as the graphical method is conveniently used
to solve the problems involving only two variables. Thus, we need a more efficient method to
suggest an optimal solution for such problems. In this chapter, we shall discuss a procedure
called the simplex method for solving an LP model of any magnitude. In other words, the
simplex method can be used to solve LP problems containing two or more variables. The
simplex method was developed by G B Datzing in 1947.
The concept of the simplex method is similar to the graphical method. In graphical
method, extreme points of the feasible solution space are examined to search for an optimal
solution at one of them. For LP problems with several variables, we may not be able to graph the
feasible region, but the optimal solution will still lie at an extreme point of the many-sided,
multi-dimensional figure (called an n-dimensional polyhedron) that represents the area of
feasible solution. The simplex method examines the extreme points in a systematic manner,
repeating the same set of steps of the algorithm until the optimal solution is reached. It is for this
reason that it is also called the iterative method.
Since the number of extreme points (corners or vertices) of feasible solution space is
finite, the method assures an improvement in the value of objective function as we move from
one iteration (extreme point) to another and achieve optimal solution in a finite number of steps
and also indicates when an unbounded solution is reached. In other words, the simplex method is
an algebraic procedure that starts at a feasible extreme point of the simplex (or convex set),
normally the origin, and systematically moves from one feasible extreme point to another until
optimum (or optimal) extreme point is located. At each iteration, the procedure tests the one
extreme (corner) point for optimality, and if not optimum, chooses another extreme point of the
convex set that is formed by the constraints and non-negativity conditions of the linear
programming problem.
2.2.2.2 STANDARD FORM OF AN LP PROBLEM.
The use of the simplex method to solve an LP problem requires that the problem be
converted into its standard form. The standard form of the LP problem should have the following
characteristics:
(i) All the constraints should be expressed as equations by adding slack or surplus
and/or artificial variables.
(ii) The right-hand side of each constraint should be made non-negative; if it is not, this
should be done by multiplying both sides of the resulting constraint by -1.
(iii) The objective function should be of the maximization type.
For your ready reference, the standard form of the LP problem is expressed as:
Optimize (max or min) Z = c1x1 + c2x2 + … + cnxn + 0s1 + 0s2 … + 0sm
Subject to the linear constraints:
a11x1 + a12x2 + …+ a1nxn + s1 = b1
a21x1 + a22x2 +… + a2nxn + s2 = b2
. . . . . .
. . . . . .
. . . . . .
am1x1 + am2x2 + … + amnxn +sm = bm
x1, x2,…., xn, s1, s2, …., sm ≥ 0
where cj ( j= 1, 2, …, n) in the objective function are called the profit or cost coefficients, the
constraints bi (i= 1, 2, …, m) are called resources and the constraints aij (i= 1, 2, …, m; j= 1, 2,
…, n) are called structural coefficients.
It may be noted that the above form is nothing but a system of m linear equations in n
variables where m<n. A solution to this system is a particular set of n values (zero, negative or
positive) which are assumed by the n variables such that the system of m equations is satisfied,
i.e., all the constraints are true.
A solution is feasible if all m variables in it assume non-negative values (i.e., positive or
zero). On the other hand, a basic feasible solution is a solution which is feasible and has at most
m positive valued variables (i.e., to say that the remaining n-m variables are zero). If less than m
variables are positive valued, the solution is said to be degenerate basic feasible solution.
In practice, the problem is not in the standard form as stated above and has to be
converted into the standard form. The constraints are generally inequalities, with either ‘less
than’ or ‘greater than’ signs or in mixed form. In order to convert the inequality constraint into
equality, we introduce slack or surplus variables.
In economic terminology, slack variables represent unused capacity and surplus variables
represent excess amount and the contribution (cost or profit coefficient) associated with them is
zero.
An inequality of the “less than or equal to” type is transformed into an equality by the
addition of a non-negative slack variable. The slack variables can be thought of as imaginary
products, each requiring for its production 1 unit of capacity from only one of the resources of
zero units of capacity from the other, and each yielding a profit of zero, i.e., a slack variable
corresponds to the amount of unused capacity for the constraint to which it is added.
Let in a particular problem, the constraints m appears as

a11x1 + a12x2 + …+ a1nxn ≤ bi: i = 1, 2… m.
By adding a suitable positive quantity si to the left-hand side, the inequality constraint can
be written as:
a11x1 + a12x2 + …+ a1nxn + si ≤ bi: i = 1, 2… m.
This new quantity si is called slack variable, not a fixed quantity. Moreover, slack variable may
be interpreted as
Slack = R.H.S. – L.H.S.
An inequality of the “greater than or equal to” type is transformed into an equality by the
subtraction of a non-negative surplus variables. These surplus variables represent the excess
amount by which a particular requirement is me. If the m constraints appear as
a11x1 + a12x2 + …+ a1nxn ≥ bi: i = 1, 2… m.
then by subtracting positive quantity si from the left-hand side, the inequality constraint can,
therefore, be written as:
a11x1 + a12x2 + …+ a1nxn - si ≥ bi: i = 1, 2… m.
this new quantity is called the surplus variable or negative slack variable.
Remarks: Three types of additional variables, namely
 Slack variables (s)

 Surplus variables (-s)
 Artificial variable (A)
are added in the given LP problem to convert it into the standard form for the following reasons:
a) These variables allow us to convert inequalities into equalities, thereby converting
the given LP problem into a form that is amenable to algebraic solution.
b) These variables permit us to make a more comprehensive economic interpretation
of a final solution.
c) Help us to get an initial feasible solution represented by the columns of the

identity matrix.
The summary of the extra variables to be added in the given LP problem to convert it into a
standard form is given in Table 2.1 here below:
Table 2.1 How extra variables are added to convert LP problem into standard form
Types of Extra variables Coefficients of extra variables in
constraints needed the objective function
Max Z Min Z
Less than or equal Slack variable is 0 0
to (≤) added
Greater than or A surplus variable 0 0
equal to (≥) is subtracted, and
an artificial
variable is added -M +M
Equal to (=) Only an artificial -M +M
variable is added
Remark: A slack variable represents unused resource, either in the form of time on a machine,
labour hours, money, warehouse space or any number of such resources in various business
problems. Since these variables yield no profit, therefore, such variables are added to the original
objective function with zero coefficients.
2.2.2.3 THE SIMPLEX ALGORTHM (MAXIMAZATION CASE)

The solution steps of the simplex method can be outlined as follows:
1. Formulate the linear programming model of the real world problem, i.e., obtain a
mathematical representation of the problem’s objective function and constraints.
2. Express the mathematical model of LP problem in the standard form by adding slack
variables in the left-hand side of the constraints and assign a zero coefficient to these in the
objective function.
Thus, we can restate the problem in terms of equations:
Optimize (max or min) Z = c1x1 + c2x2 + … + cnxn + 0s1 + 0s2 … + 0sm

Subject to the linear constraints:
a11x1 + a12x2 + …+ a1nxn + s1 = b1
a21x1 + a22x2 +… + a2nxn + s2 = b2
. . . . . .
. . . . . .
. . . . . .
am1x1 + am2x2 + … + amnxn +sm = bm
x1, x2,…., xn, s1, s2, …., sm ≥ 0
Note that the slack variables have been assigned zero coefficients in the objective
function. The reason is that these variables typically contribute nothing to the value of the
objective function.
3. Design the initial feasible solution. An initial basic feasible solution is obtained by setting:
x1= x2 =…= xn = 0. Thus, we get s1= b1, s2 = b2,…, sm = bm

4. Set up the initial simplex tableau. For computational efficiency and simplicity, the initial
basic feasible solution, the constraints of the standard LPP as well as the objective function
can be displayed in a tabular form, called the simplex tableau as shown below:
Initial Simplex Tableau 1

Cj (contribution per unit) C1 c2 … cn 0 0 …. 0
Value of
Basic variables CB basic Coefficient matrix Identity matrix Minimum
B variables Ratio
bi = XB x1 x2 … xn s1 s2 … sn XB/aij
s1 CB1 b1=XB1 a11 a12 … a1n 1 0 … 0
s2 CB2 b2 = XB2 a21 a22 … a2n 0 1 … 0
. . .
. . . .
. . .
. . .
. . .
. . . .
sm CBm bm = XBm am1 am2 … amn 0 0 … 0
Z = ∑CBiXj Z= ∑CBiXBj 0 0 … 0 0 0 … 0
Net contribution cj - zj c1-z1 c2-z2 … cn-zn 0 0 … 0
The interpretation of the data in Tableau 1 is given as under. Other simplex tableau will
have similar interpretations.
i) In the first row labeled “Cj”, we write the coefficients of the variables in the
objective function. These values will remain the same in subsequent tableaus.
i) The second row shows the major column headings.
ii) In the first column labeled “Basic variables” (also called product mix column) are
listed the basic variables
iii) In the second column labeled “CB”, we list the coefficients of the current basic
variables in the objective function. Thus, the coefficients of s1, s2, …, sm are written
in the CB column.
iv) In the next column (also called quantity column), we write the solution values of the
basic variables.
v) The body matrix (under non-basic variables) in the initial simplex tableau consists
of the coefficients of the decision variables in the constraint set. The entries in the
body matrix can be interpreted as physical rates of substitution.
vi) The identity matrix (or basis matrix) (under s1, s2, …, sm) in the initial simplex
tableau represents the coefficients of the slack variables in the constraints set. Each
simplex tableau contains an identity matrix under basic variables.
vii) To find an entry in the Zj row under a column, we multiply the entries of that
column by the corresponding entries of CB–column and add the products, i.e., Zj =
∑CBiXj. The Zj-row entries will all be equal to zero in the initial simplex tableau as
the iteration of the optimum value starts from the origin. The Zj entry under the
“solution or quantity column” gives the current value of the objective function. The
other Zj entries represent the decrease in the value of objective function that would
result if one of the variables not included in the solution were brought into the
solution.
viii) The last row labeled “Cj – Zj”, also called the index row or net evaluation row, is
used to determine whether or not the current solution is optimum. The calculation
of Cj – Zj row simply involves subtracting each Zj value from the corresponding Cj
value for that column, which is written at the top of that column. We observe that
Cj – Zj values are meaningful for the non-basic variables only. This is because for
basic variables, Zj = 1 x Cj = Cj so that Cj – Zj = Cj – Cj = 0.
Remark: The entries in the Zj – Cj row represent the net contribution to the
objective function that results by introducing one unit of each of the respective
column variables. A plus value indicates that a greater contribution can be made by
bringing the variable for that column into the solution. A negative value indicates
the amount by which contribution would decrease if one unit of the variable for that
column were brought into the solution.
5. We test if the current solution is optimum or not. If all the elements or entries in the Cj – Zj
row (i.e., index row) are negative or zero, then the current solution is optimum. If there
exists some positive number, the current solution can be further improved by removing one
basic variable from the basis and replacing it by some non-basic one.
6. Further, iterate towards an optimum solution. To improve the current feasible solution, we
replace one current basic variable (called the departing variable) by a new non-basic
variable called the entering variable.
i) We now determine the variable to enter into the solution mix next. One way of
doing this is by identifying the column with the largest positive value in the Cj – Zj
row is called the key or pivot column (indicated by ↑). The non-basic variable at the
top of the key column is the entering variable that will replace a basic variable.
ii) Next we determine the departing (leaving) variable to be replaced in the basis
solution. This is accomplished by dividing each number in the quantity (XB) column
by the corresponding number in the key column selected in step 6(i). We compute
the ratio b1/a1j, b2/ a2j, …, bm /amj. The row corresponding to the minimum of these
ratios is the key row or pivot row (indicated by ←). The corresponding variable in
the key row known as the departing variable will leave the basis.
iii) We identify the key or pivot element. This is the number that lies at the intersection
of the key column and key row of the given simplex tableau.
7. Evaluate the new solution by constructing second simplex tableau. After identifying the
entering and departing variable, all that remains is to find the new basic feasible solution by
constructing a new simplex tableau from the current one. Now we evaluate or update the
new solution in the following way:
a) New values for the key row are computed by simply dividing every element of the
key row (including bi) by key element.
b) The new values of the elements in the remaining rows for the new simplex tableau
can be obtained by performing elementary row operations on all rows so that all
elements except the key element in the key column are zero. In other words, for
each row other than the key row, we use the formula:
New row number = old row number – (corresponding entry in key row)
x (corresponding fixed ratio).
c) New entries in the CB column and XB column are entered in the new table of the
current solution.
d) Compute Zj and Cj – Zj row. If all the numbers in Cj – Zj row are either negative or
zero, an optimum solution has been obtained.
8. If any of the numbers in Cj-Zj row is positive, repeat the steps (6-7) again until an optimum
solution has been obtained.
Remarks: Rules for ties. In choosing the key column and key row, whenever there is a tie
between two numbers, the following rules may be followed:
i) The column farthest to the left may be selected if there is a tie between two
numbers in the index row.
ii) The nearest ratio to the top may be selected whenever there is a tie between two
replacement ratios in the ratio column.
Example 2.1. A manufacturer has two products P1 and P2, both of which are produced in two
steps by machines M1 and M2. The process time per hundred for the products on the machines
are:
Products M1 M2 Contribution per (100 units)
P1 4 5 10
P2 5 2 5
Available hours 100 80
The manufacturer is in a market upswing and can sell as much as he can produce of
both products. Formulate the problem as LP model and determine optimum product mix, using
simplex method.
Solution
To solve the problem, repeat the steps which have been discussed just here above.
1. Formulation of the LP model:
Maximize (total contribution) Z = 10x1 + 5x2

4x1 + 5x2 ≤ 100 (constraint on machine 1)
5x1 + 2x2 ≤ 80 (constraint on machine 2)
x1, x2 ≥ 0
Where x1= the number of units of product P1

x2 = the number of units of product P2
1 Express the mathematical model of LP problem in the standard form by converting the
constraints to equations by introducing the slack variables. The first step in the simplex
method is to convert each inequality constraint into an equation by adding a slack variable to
each constraint. This can be done as follows:
Maximize Z = 10x1 + 5x2 + 0s1 + 0s2
4x1 + 5x2 + s1 = 100
5x1 + 2x2 + s2 = 80
x1, x2, s1, s2 ≥ 0
Here the slack variables, s1 and s2 represent the idle or unused capacity (if any) on the
machines M1 and M2. Since this idle capacity will be either positive or zero, the variables s1
and s2 are shown as non- negative. Further, the contribution per hour of idle capacity on the
two machines is taken as zero in the objective function.
3. Develop an initial Simplex Tableau or Simplex Matrix. An expansion of its parts and how
it is derived is given below.
a) Starting from the left-hand side of the table, the first column contains variables
(referred to as basic variables) constituting the product mix.
b) In the second column, the column Cj indicates the contribution per unit for the slack
variables s1 and s2. Since the profits are not made on unused time, the contribution
As the initial solution is not to produce any product, the total given capacity has
become unused capacity, which is shown in the third column. Every number in the
quantity column must be zero or positive.
c) As the initial solution is not to produce any product, the total given capacity has
become unused capacity, which is shown in the third column. Every number in the
quantity column must be zero or positive.
Table 1. Parts of initial Simplex tableau.

Product mix profit per unit Quantity Real variables’ Slack variables
Column column column column Column
↓ ↓ ↓ ↓ ↓
Basic CB Solution 10 5 0 0 ← profit per unit
Variables values
BV XB x1 x2 s1 s2 ←variable row
s1 0 100 4 5 1 0 rows illustrating constraint

s2 0 80 5 2 0 1 equations (coefficients only).
body matrix Identity matrix

consisting of consisting of
coefficients of coefficients of
real product slack variables
variable
d) The numbers in the body matrix represent the physical ratio of substitution. For this
table, the column 4,5 means, that if we wish to produce a unit of x1, we will have to
give away 4 units of s1 and 5 units of s2. Similarly, 5, 2 can be interpreted. In the
same manner, we can say that the entries in the unit matrix represent the physical
ratios of exchange.
e) The numbers at the top of the columns of body and unit matrices represent the
coefficients of the respective variables in the objective function.
f) Zj and Cj-Zj (index or net evaluation row). We may complete the initial simplex
tableau by adding two final rows. These last two rows provide us with important
economic information, including the total profit and the answer as to whether the
current solution is optimum.
We compute the Zj value for each column of the initial solution in Table 2 by
multiplying the zero contribution values of each number in the Cj column by each number in
that row and jth column and then add up the products so obtained. The Zj value for the
quantity column provides the total contribution (gross profit in this case) of the given
solution.
Zj (for gross profit) = (profit per unit of s1) x (No. of units of s1) + (profit per unit of s2) x (No. of units
of s2)
=Rs 0 x 100 units + Rs 0 x 80 units = Rs 0 profit.
Zj (for column x1) =Rs 0 ( 4) + Rs 0 (5) = Rs 0
Zj (for column x2) = Rs 0 (5) + Rs 0 (2) = Rs 0
Zj (for column s1) = Rs 0 (1) + Rs 0 (0) = Rs 0
Zj (for column s2) = Rs 0 (0) + Rs 0 ( 1) =Rs 0
The Cj – Zj number in each column represents the net profit, i.e., the profit gained
minus the profit given up, that will result from introducing 1 unit of each product or variable
into the solution. It is not calculated for the quantity column. To compute these numbers,
simply subtract the Zj total for each column from the Cj value at the very top of that
variable’s column. The calculations for the net profit per unit (i.e., the Cj –Zj row or index
row) in this case are:
Column
x1 x2 s1 s2
Cj Rs10 Rs 5 Rs 0 Rs 0
Zj Rs 0 Rs 0 Rs 0 Rs 0
Cj – Zj Rs10 Rs 5 Rs 0 Rs 0
Table 2. Initial Simplex Tableau Completed

Cj→ 10 5 0 0
Basic Solution
variables↓ CB values x1 x2 s1 s1
s1 0 100 4 5 1 0
s2 0 80 5 2 0 1
Z= 0 , Zj 0 0 0 0
Index row Cj – Zj 10 5 0 0
Remark: By examining the numbers in the Cj – Zj row of table 2, we find that total profit
can be increased by Rs 10 for each unit of x1 added to the solution mix or by Rs 5 for each
unit of x2 added to the solution mix. Thus, a positive number in the Cj –Zj row indicates that
profits can be improved by that amount per unit of x1 added. On the other hand, a negative
number in the Cj – Zj row would indicate the amount by which profits would decrease if one
unit of the variable heading that column were added to the solution. Hence, the optimum
solution is reached when no positive numbers are there in Cj-Zj row.
4. After an initial simplex tableau is set up, the next step is to determine if the
improvement is possible. The computational procedure is as follows:
a) Choosing the entering variable. To decide which of the variables will enter the
solution next (it must be either x1 or x2, since they are the only two non-basic
variables at this point), we select the one with the largest positive Cj – Zj value.
Variable x1, has a Cj –Zj value of Rs 10, implying that each unit of x1, added into
the solution mix will contribute Rs 10 the overall profit. Variable x2, has a Cj – Zj
value of only Rs 5. The other two variables s1 and s2, have zero values and can add
nothing more to profit. Hence, we select x1 as the variable to enter the solution mix,
and identify its column (with an arrow) as pivot or key column.
b) Choosing the departing variable. Since we have chosen a variable to enter the
solution mix, we have also to decide which variable is to be replaced. This is done
in the following manner:
Firstly, divide each number in the quantity column, i.e., 100 and 80 by the
corresponding numbers in the key column, i.e., 4 and 5.
Secondly, select the row with the smallest non-negative ratio as the row consisting
of the departing variable and it is known as the key row. In this case, the ratio
would be:
S1 row: 100 hrs / 4 hrs per unit = 25 units of x1, s2 row: 80 hrs / 5 hrs = 16 units of
x1. As the s2 row has the smallest positive ratio, it is called replaced row, or the
pivot row or key row. This row will be replaced in the next solution by 16 units of
x1, i.e., the variable s2 (unused time) will be replaced by 16 units of x1 in the next
solution.
The number at the intersection of key row and key column is referred to as the pivot or
key number which is 5 in the present case.
Table 3. Initial Simplex Tableau (Key Row, Key Number and Key Column)
Cj 10 5 0 0 Minimum
Ratio
Basic Solution XB/ Xi (aij)
Variables values
B CB XB x1 x2 s1 s2
s1 0 100 4 5 1 0 100/4 = 25
s2 0 80 5* 2 0 1 80/4 = 16→key row
Zj 0 0 0 0 0
Cj - Zj 10 5 0 0
↑ Key column * Key number
5. Developing second simplex tableau. Having chosen the key column and the key row, a
second simplex tableau can be developed, providing an improved solution.
a) Compute new values for the key row. For this we have to simply divide each number in the
key row by key number. The key row now becomes:
Cj Basic variables solution values x1 x2 s1 s2

10 x1 80/5 1 2/5 0 1/5
It may be noted that x1 is now in the solution mix and that 16 units of x1 are being
produced. The Cj value is listed as Rs 10 contribution per unit of x1 in the solution.
This will definitely provide with a more profitable solution than the Rs 0 generated in
the initial solution.
b) Compute new values (derived numbers) for each remaining row. To complete the
second tableau, we compute new values for the remaining row (i.e., s1 row) as
follows:
New row number = Old row number – (corresponding number in key row) x
(corresponding fixed ratio).
Where fixed ratio = Old row number in key column
Key number
Thus, the new row s1 for second simplex tableau is derived as follows (corresponding
fixed ratio = 4/5):
100 - (80 x 4/5) = 36
4 - (5 x 4/5) = 0
5 - (2 x 4/5) = 17/5
1 - (0 x 4/5) = 1
0 - (1 x 4/5) = -4/5
These results are now entered in Simplex Tableau II. The final step of the second
iteration is to introduce the effect of the objective function. This involves computing
the Zj and Cj- Zj rows. Recall that the Zj entry for the quantity column gives us the
gross profit for the current solution. The other Zj values represent the gross profit
given up by adding one unit of each variable into this new solution. The Zj’s are
calculated as follows:
Zj (for total profit) = Rs 0 (36) + Rs 10 (16) = Rs 160
Zj (for x1 column) = Rs 0(0) + Rs 10 (1) = Rs 10
Zj (for x2 column) = Rs 0 (17/5)+Rs 10(2/5) = Rs 4
Zj (for s1 column) = Rs 0 (1) + Rs 10 (0) = Rs 0
Zj (for s2 column) = Rs 0 (-4/5) + Rs 10 (1/5) = Rs 2
It may be noted that the current profit Rs 160 as against Re. 0 in the first tableau. The
Cj – Zj numbers represent the net profit that will result in given production mix, if we
add one unit of each variable into the solution.
Column
x1 x2 s1 s2
Cj for column Rs 10 Rs 5 Re 0 Re 0
Zj for column Rs 10 Ra 4 Re 0 Re 2
Cj – Zj for column Re 0 Re 1 Re 0 Rs (-2)
Table 4. Second Simplex Tableau

Cj 10 5 0 0 Minimum
BV Ratio
B CB XB x1 x2 s1 s2 XB/ aij (xi)
s1 0 36 0 17/5* 1 -4/5 36/(17/5) →KR
x1 10 16 1 2/5 0 1/5 16/(2/5)
Zj 160 10 4 0 2
Cj – Zj 0 1 0 -2
↑ Key column * Key number
6. Developing third simplex tableau. The presence of a positive number under the x2 column
of the Cj – Zj row of the second tableau indicates that the total contribution can be increased
further. Hence the process used to develop the second solution must now be repeated to
obtain a third solution. Accordingly, we find that:
a) The variable x2 will enter the solution next by virtue of the fact that its Cj – Zj value
(+1) is the largest (and only) positive number in the row. This means that for every
unit of x2 that we produce, the objective function will increase in value by Re. 1. The
x2 column is the new key column.
b) Again, each number in the quantity column is divided by its corresponding number in
the x2 column.
For the s1 row: 36 = 180 and for the x1 row: 16 / (2/5) = 40.
17/5 17
The s1 row has the smallest ratio, meaning that variable s1 will leave the basis and be
replaced by x2. The new key row, key column and key number are shown in table 5.
c) The key row is replaced by dividing every number in it by key number, i.e., 17/5. The
entire new x2 row will look like this:
Cj basic variables solution values x1 x2 s1 s2
5 x2 180 / 17 0 1 5/17 -4/17
It will be placed in the new simplex tableau in the same row position that s1 was in
before.
d) The new row x1 for table III is derived as follows:
(Old Row No.) – (Corresponding Number in Key Row). (Corresponding Fixed Ratio)
ORN – (CNKR) x (CFR) = NRN
16 - (36 x 2/17) = 200 / 17
1 - (0 x 2/17) = 1
2/5 - (17/5 x 2/17) = 0
0 - (1 x 2/17) = -2/17
1/5 - (-4/5 x 2/17) = 5/17
e) Hence, the new x1 row will appear in the third tableau in the following position:
BV CB XB x1 x2 s1 s2
x2 5 180/17 0 1 5/17 -4/17
x1 10 200/17 1 0 -2/17 5/17
e) Finally, the Zj and Cj – Zj rows for the third tableau can be calculated as discussed
earlier.
f) The net profit per unit of product appears as follows:
Column
x1 x2 s1 s2
10 5 0 0
Zj for column 10 5 5/17 30/17
Cj – Zj column 0 0 -5/17 -30/17
All results for the third iteration of the simplex method are summarized in table 5.
Note that since every number in the tableau’s Cj – Zj row is zero oe negative,
optimum solution has been attained.
Table 5. Third Simplex Tableau

Cj 10 5 0 0
BV CB XB x1 x2 s1 s2
zx2 5 180/17 0 1 5/17 -4/17
x1 10 200/17 1 0 -2/17 5/17
Zj 2900/17 10 5 5/17 30/17
Cj - Zj 0 0 -5/17 -30/17
Hence, the optimum solution is: x1 = 200/17, x2 = 180/17

s1 = 0, slack hours in the Machine M1
s2 = 0, slack hours in the Machine M2
Profit = Rs 2900/17 for the optimum solution
Remarks 1. Since it is always possible to make an arithmetical error when one is going through
the numerous simplex steps and iterations, it is always advisable to verify the final solution. This
can be done as follows:
First constraint: 4x1 + 5x2 ≤ 100 (Machine M1 hours)
4(200/17) + 5(180/17) ≤ 100
100 ≤ 100
Second constraint: 5x1 + 3x2 ≤ 80 (Machine M2 hours)
5(200/17) + 2(180/17) ≤ 80
80 ≤ 80
Objective function: Profit = 10x1 + 5x2
= 10 (200/17) + 5(180/17)
= Rs 2900/ 17.
Interpretation of the final simplex table:
a) Opportunity cost. The terms in Zj indicate the opportunity cost. If we do not utilize one unit
of x1, the loss of profit is Rs 10 and non-utilization of one unit of x2 cost Rs 5.
b) Shadow cost. In our previous solution, the row Zj gives
2900/17 = 10x1 + 5x2 + 5/17s1 + 30/17s2
For maximum value of Z we put s1 = 0 and s2 = 0 so that Z = 2900/17. The coefficient of
non-basic variables, i.e., s1 and s2 is called ‘shadow cost’. They represent the decrease in the
optimum value of the objective function resulting from a unit increase in a non-basic
variable.
SIMPLEX ALGORITHM (Minimization Case)
In solving simplex algorithm problems consisting of “≥” or “=”type, we are forced to use
artificial variables.
USE OF ARTIFICIAL VARIABLE:

We have seen that in the computational procedure of the simplex method, it is most
convenient to have the slack variables as the starting (initial) basic variables. Thus, if the
original constraint is an equation or is of the type “≥” we may no longer have a ready starting
basic feasible solution.
In order to obtain an initial basic feasible solution, we first put the given LPP into its
standard form and then a non-negative variable is added to the left side of each of equation
that lacks the much needed starting basic variables. The so-added variable is called an
artificial variable and plays the same role as slack variable in providing the initial basic
feasible solution. However, since such artificial variables have no physical meaning from the
standpoint of the original problem, the method will be valid only if we are able to force these
variables to be out or at zero level when the optimum solution is attained. In other words, to
get back to the original problem, artificial variables must be driven to zero in the final
solution; otherwise the resulting solution may be infeasible.
Two methods are generally employed for the solution of linear programming problem
having artificial variables:
1. Two-phase Method; and
2. Big-M Method or Method of Penalties.
Two-phase method:
Linear programming problems, in which constraints may also have “≥” and “=” signs
after ensuring that all bi are ≥ 0, are considered in this section. In such problems, basis matrix
is not obtained as an identity matrix in the starting simplex table; therefore, we introduce a
new type of variable called the artificial variable. Basically, these variables are fictitious and
can not have any physical meaning. The artificial variable technique is merely a device to get
the starting basic feasible solution. So that simplex procedure may be adopted as usual until
the optimal solution is obtained. Artificial variables can be eliminated from the simplex table
as and when they become zero (non-basic). The process of eliminating artificial variables is
performed in Phase I of the solution, and Phase II is used to get an optimal solution. Since
the solution to the LP problem is completed in two phases, it is called “Two-Phase Simplex
Method” due to Dantzig, Orden and Wolfe.
Remarks:
1. The objective of phase I is to search for a B.F.S. to the given problem. It ends up
either giving a B.F.S. or indicating that the given LPP has no feasible solution at all.
2. The B.F.S. obtained at the end of phase I provides a starting B.F.S. for the given LPP.
Phase-two is then just the application of simplex method to move towards optimality.
3. In phase II, care must be taken to ensure that an artificial variable is never allowed to
become positive, if were present in the basis. Moreover, whenever some artificial
variable happens to leave the basis, its column must be deleted from the simplex table
altogether.
N.B. The iterative procedure of the algorithm may be summarized as below:
Phase I
Step1. Write the given LPP into its standard form and check whether there exists a
starting basic feasible solution.
a) If there is a ready starting basic feasible solution, go to phase 2.
b) If there does not exist a ready starting basic feasible solution, go on to the next
step.
Step 2. Add the artificial variable to the left side of each equation that lacks the needed
starting basic feasible variables. Construct an auxiliary objective function aimed at
minimizing the sum of all artificial variables.
Thus the new objective is to
Minimize z = A1 + A2 + …+ An (convert this problem into maximization form).
i.e., Maximize z = -A1-A2- …- An
where Ai (i = 1, 2, …, m) are the non-negative artificial variables.
Step3. Apply simplex algorithm to the specially constructed LPP. The following three cases
may arise at the least interaction.
a) max z*< 0 and at least one artificial variable is present in the basis with positive
value. In such a case, the original LPP does not possess any feasible solution.
b) max z* = 0 and at least one artificial variable is present in the basis at zero value. In
such a case, the original LPP possess the feasible solution. In order to get the basic
variable, then proceed directly to phase 2 or else eliminate the artificial basic variable
and then proceed to phase 2.
c) Maximum z* = 0 and no artificial variable is present in the basis. In such a case, a
basic feasible solution to the original LPP has been found. Go to phase 2.
Phase 2
Step 4. Consider the optimum basic feasible solution of phase 1 as a starting basic feasible
solution for the original LPP. Assign actual coefficients to the variables in the objective
function and a value zero to the artificial variables that appear at zero value in the final
simplex table of phase 1. And then apply usual simplex algorithm to the modified
simplex table to get the optimum solution of the original problem.
Self-test questions:
a) Explain the term ‘Artificial Variable’ and its use in linear programming.
b) What do you mean by two-phase method in linear programming problems, why is it
used?
This technique is well explained by the following example:
Example 2.2 Solve the following LP problem by using the two-phase simplex method.
Minimize Z = x1 + x2
2x1 + x2 ≥ 4
x1 + 7x2≥ 7
x1, x2 ≥ 0
Solution: After adding surplus variables s1 and s2 and artificial variables A1 and A2, the
problem becomes (converting it into maximization problem):
Maximize Z* = - x1 –x2
2x1 + x2 – s1 + A1 = 4
x1 + 7x2 –s2 + A2 = 7
x1, x2, s1,s2,A1, A2 ≥ 0
where Z* = - Z
Phase 1: This phase starts by considering the following auxiliary LP problem:
Maximize Z* = - A1 – A2
2x1 + x2 – s1 + A1 = 4
x1 + 7x2 –s2 + A2 = 7
x1, x2, s1,s2,A1, A2 ≥0
The initial solution is presented in the following table 2.1
Table 2.1 Initial Solution
Cj → 0 0 0 0 -1 -1
Variables profit solution x1 x2 s1 s2 A1 A2 XB / aij
in basis per unit values
B CB b (XB)
A1 -1 4 2 1 -1 0 1 0 4/1=4
A2 -1 7 1 7* 0 -1 0 1 7/7=1→
Z* = - 11 zj -3 -8 1 1 -1 -1
Cj- Zj 3 8 -1 -1 0 0
↑ * KN
Artificial variable A1 and A2 are now removed one after the other maintaining the
feasibility of the solution.
Iteration 1 will start by applying the following row operations to get an improved
solution by entering variable x2 in the basis in the place of A2 and remove A2 from the basis as
shown in Table 2.2. Note that variable x1 cannot be entered into the basis as it would create an
infeasible solution (the solution that satisfies the objective function and all the constraints). If x1
is entered the solution becomes only zero, which is infeasible solution. Therefore, we enter s2
into the basis instead of x2. Then s2 is used to remove A1. After removing both the artificial
variables (A1 and A2), we delete their column totally. This is because, once they are out, we
never enter them into the basis again.
Table 2.2 Improved solution
Cj → 0 0 0 0 -1
B CB XB x1 x2 s1 s2 A1 XB / aij
A1 -1 3 13/7 0 -1 1/7* 1 3/(1/7) = 21→
x2 0 1 1/7 1 0 -1/7 0 1/(-1/7) = -7
Z* = -3 Zj -13/7 0 1 -1/7 -1
Cj - Zj 13/7 0 -1 1/7 0
↑
Iteration 2: To remove A1 from the solution shown in Table 2.2, we enter variable s2 in
the basis by applying the following row operation as shown in Table 2.3. Here it may be noted
that if variable x1 is chosen to enter into the basis, it will lead to an infeasible solution.
Table 2.3 Improved solution

Cj 0 0 0 0 XB/ aij
B CB XB x1 x2 s1 s2
s2 0 21 13 0 -7 1
x2 0 4 2 1 -1 0
Z* = 0 Zj 0 0 0 0
Cj-Zj 0 0 0 0
Since all Cj-Zj ≤ 0 correspond to non-basic variable, the optimal solution: x1= 0, x2 = 4,
s1= 0, s2 = 21, A1 = 0, A2 = 0 with Z* = 0 is reached. However, this solution may or may not be
the basic feasible solution to the original problem. Thus, we have to move to phase II to get an
optimal solution to our original LP problem.
Table 2.4 using the original objective function

Cj -1 -1 0 0
B CB XB x1 x2 s1 s2
s2 0 21 13 0 -7 1 21/13 →
x2 -1 4 2 1 -1 0 4/2 = 2
Z* = -4 Zj -2 -1 1 0
Cj - Zj 1 0 -1 0
↑
Iteration I: Introduces variable x1 into the basis and removing s2 from the basis by
applying the usual row operation.
The improved basis feasible solution so obtained is given in Table 2.5. Since in Table 2.5
Cj - Zj ≤ 0 for all non-basic variables, the current solution is optimal. Thus, the optimal basic
feasible solution to the given LP problem is: x1= 21/13, x2 = 10/13, and Max Z* = - 31/13 or
Z = 31/13.
Table 2.5 Optimal Solution

Cj→ -1 -1 0 0
B CB XB x1 x2 s1 s2
x1 -1 21/13 1 0 -7/13 1/13
X2 -1 10/13 0 1 1/13 -2/13
Z* = -31/13 Zj -1 -1 6/13 1/13
Cj-Zj 0 0 -6/13 -1/13
Example 2.3
Minimize Z= x1 – 2x2 -3x3
-2x1 + x2 + 3x3 = 2
2x1 +3x2 +4x3 = 1
x1, x2, x3 ≥ 0
Solution: Convert the objective function into maximization form by adding artificial variable A1
and A2 in the constraints of the given LP problem so as the problem becomes:
Maximize Z* = - x1 + 2x2 + 3x3

-2x1 + x2 + 3x3 + A1= 2
2x1 + 3x2 + 4x3 + A2 = 1
x1, x2, x3, A1, A2 ≥ 0
Where Z* = - Z
Phase I: This phase starts by considering the following LP problem:

Maximize Z* = -A1 – A2
-2x1 + x2 + 3x3 + A1 = 2
2x1 + 3x2 + 4x3 + A1 = 1
x1, x2 , x3, A1, A2 ≥ 0
The initial solution is presented in Table 2.6, here below:
Table 2.6 Initial Soution
Cj→ 0 0 0 -1 -1
B CB XB x1 x 2 x3 A1 A2 XB / aij
A1 -1 2 -2 1 3 1 0 2/3
A2 -1 1 2 3 4* 0 1 ¼→
Z* = -3 Zj 0 -4 -7 -1 -1
Cj - Zj 0 4 7 0 0
↑
To remove artificial variable A2 from the solution shown in Table 2.6, introduce x3 into the
basis by applying the usual row operation.
The improved solution so obtained is given in Table 2.7. Since in the same Table Cj- Zj ≤ 0
corresponds to non-basic variables, the optimal solution is: x1 = x2 = 0, x3 = ¼, A1 = 5/4, and
A2 = 0 with Max Z* = -5/4. But at the same time, the value of Z* < 0 and the artificial variable
A1 appears in the basis with positive value 5/4. Here, the given original LP problem does not
possess any feasible solution. Therefore, we stop it here before going to phase 2.
Table 2.7 Optimal but not feasible solution
Cj → 0 0 0 -1
B CB XB x1 x2 x3 A1 XB / aij
A1 -1 5/4 -7/2 -5/4 0 1
x3 0 1/4 ½ ¾ 1 0
Z* = -5/4 Zj 7/2 5/4 0 -1
C j- Zj -7/2 -5/4 0 0
Example 2.4. Minimize Z = 40x1 + 24x2

20x1 + 50x2 ≥ 4800 Divide both sides by 10 and the equation
80x1 + 50x2 ≥ 7200 will be rewritten as follows:
x1, x2 ≥ 0
Maximize Z* = -40x1 – 24x1

2x1 + 5x1 –s1 + A1 = 480
8x1 + 5x2 –s2 - A2 = 720
x1, x2, s1, s2, A1, A2≥ 0
Where Z* = - Z
Phase I This phase starts by considering the following auxiliary LP problem.
Maximize Z* = -A1-A2
2x1 + 5x2 - s1 + A1 = 480
8x1 + 5x2 – s2 + A2 = 720
x1, x2, s1, s2, A1, A2≥ 0
Self-test problems. Use two-phase simplex method to solve the following questions;
1. Minimize z = x1 + x2
2x1 + x2≥ 4
x1 +7x2 ≥ 7
x1, x2 ≥ 0
2.minimize Z= 3x1 –x2
2x1 + x2 ≥ 2
x1+ 3x2 ≤ 2
x2 ≤ 4.
x1, x2 ≥0
3. Minimize Z = 40x1 + 24x2

20x1 + 50x2 ≥ 4800
80x1 + 50x2 ≥ 7200
x 1 , x2 ≥ 0
2.2.2.4.3 The Big – M Method

The Big-M method is another method of removing artificial variables from the basis. In
this method, we assign coefficients to artificial variables, undesirable from the objective function
point of view. If the objective function Z is to be minimized, then a very large positive price
(called penalty) is assigned to each artificial variable. Similarly, if Z is to be maximized, then a
very large negative price (also called penalty) is assigned to each of these variables. The penalty
will be designated by –M for a maximization problem and + M for a minimization problem,
where M > 0.
The Big-M method for solving an LP problem can be summarized in the following steps.
Steps of algorithm
Step 1 Express the LP problem in the standard form by adding slack variables, surplus variables
and artificial variables. Assign a zero coefficient to both slack and surplus variables and a very
large positive coefficient + M (minimization case) to artificial variable in the objective function.
Step 2 The initial basic feasible solution is obtained by assigning zero value to original variables.
Step 3 Calculate the values of Cj – Zj in last row of the simplex table and examine these values.
i) If all cj – zj ≥ 0, then the current basic feasible solution is optimal.
ii) If for a column, k, ck -zk is most negative and all entries in this column are negative, then
the problem has an unbounded optimal solution.
iii) If one or more cj – zj < 0, (minimization case), then select the variable to enter into the
basis with the largest negative value. That is,
ck – zk = Min {cj-zj: cj- zj < 0}
Step 4 Determine the key row and key element in the same manner as discussed in the simplex
algorithm of the maximization case.
Remarks: At any iteration of the simplex algorithm, any one of the following cases may arise:
1. If at least one artificial variable is present in the basis with zero value and the coefficient
of M in each cj-zj (j= 1, 2, …, n) values is non-negative, then the given LP problem has
no solution. That is, the current basic feasible solution is degenerate.
2. If at least one artificial variable is present in the basis with positive value and the
coefficient of M in each cj - zj (j = 1, 2,…, n) values is non-negative, then the given LP
problem has no optimum basic feasible solution. In this case, the given LP problem has a
pseudo optimum basic feasible solution.
Example 2.4 Use the penalty (Big-M) method to solve the following problem.
2x1 + 4x2 ≤ 12
2x1 + 2x2 = 10
5x1 + 2x2 ≥ 10
and x1, x2 ≥ 0
Solution: Introduce slack variable s1, surplus variable s2 and artificial variable A1 and A2 in the
constraints of the given LP problem to convert it into standard form. The standard form of the LP
problem is stated as follows:
Minimize Z = 5x1 + 3x2 + 0s1 + 0s2 + MA1 + MA2

2x1 + 4x2 + s1 = 12
2x1 + 2x2 + A1= 10
5x1 + 2x2 – s2 + A2 = 10
x1, x2, s1, s2, A1,A2 ≥ 0
An initial basic feasible solution is obtained by letting x1 = x2 = s2 = 0. Therefore, the

initial basic feasible solution is: s1 = 12, A1 = 10, A2 = 10 and Min Z = 10M + 10M = 20M. Here
it may be noted that the columns which correspond to the current basic variables and form the
basis (identity matrix) are s1 (slack variable), A1 and A2 (both artificial variables). The initial
basic feasible solution is given in Table 2.8. Since the value c1 – z1= 5 – 7M is the smallest
value, therefore x1 becomes the entering variable. To decide which basic variable should leave
the basis, the minimum ratio is calculated as shown in Table 2.8 here below.
Table 2.8 Initial Solution

Cj → 5 3 0 0 M M
B CB XB x1 x2 s1 s2 A1 A2 XB / aij
s1 0 12 2 4 1 0 0 0 12 / 2 = 6
A1 M 10 2 2 0 0 1 0 10 / 2 = 5
A2 M 10 5* 2 0 -1 0 1 10 /5 = 2→
Z* = 20M Zj 7M 4M 0 -M M M
Cj - Zj 5-7M 3-4M 0 M 0 0
↑
Iteration 1: Introduce x1 into the basis and remove A2 from the basis by applying the row
operation of simplex algorithm. The new solution is shown in Table 2.9.
Table 2.9 Improved Solution.

Cj→ 5 3 0 0 M
B CB XB x1 x2 s1 s2 A1 XB/ aij
s1 0 8 0 16/5* 1 2/5 0 8/(16/5) =5/2→
A1 M 6 0 6/5 0 2/5 1 6/(6/5) = 5
x1 5 2 1 2/5 0 -1/5 0 2/(2/5) = 5
Z* = 10 + 6M Zj 5 (6M/5)+ 2 0 (2M/5)- 1 M
Cj-Zj 0 (-6M/5)+ 1 0 (-2M/5)+1 0
↑
Iteration 2: Since the value of c2-z2 in Table 2.9 is largest negative value, variable x2 is chosen
to enter into the basis. For introducing variable x2 into the basis and to remove s1 from the basis
we apply the row operation. The new solution is shown in Table 2.10.
Table 2.10 Improved Solution.

Cj→ 5 3 0 0 M
B CB XB x1 x2 s1 s2 A1
x2 3 5/2 0 1 5/16 1/8 0 (5/2)/(1/8) = 20
A2 M 3 0 0 -3/8 1/4* 1 3/(1/4) = 12→
x1 5 1 1 0 -1/8 -1/4 0 -
Z* =(25/2)+ 3M Zj 5 3 (-3M/8) +(5/16) (M/4)-(7/8) M
Cj-Zj 0 0 (3M/8)-(5/16) (-M/4)+(7/8) 0
↑
Iteration 3: As c4- z4 < 0 in s2-column, current solution is not optimal. Thus, introduce s2 into
the basis and remove A1 from the basis by applying the row operation as usual. The new solution
is shown in Table 2.11.
Table 2.11 Optimal Solution

Cj→ 5 3 0 0
B CB XB x1 x2 s1 s2
x2 3 1 0 1 ½ 0
s2 0 12 0 0 -3/2 1
x1 5 4 1 0 -1/2 0
Z* = 23 Zj 5 3 -1 0
Cj - Zj 0 0 1 0
Since in Table 2.11 cj – zj ≥ 0, an optimal solution is arrived at with value of variables as:
x1 = 4, x2 = 3, s1 = 0, s2 = 12 and Min Z = 23.
Example 2.5. A product is manufactured by blending three different raw materials. The finished
product should meet certain quality requirements. Given the following data what is your
recommendation with regard to quantity for raw materials to be blended, which will meet the
quality requirements with minimum cost.
Quality characteristics Contribution to quality Minimum quality requirements

A B C
1 3 0 1 10
2 5 1 2 15
3 1 2 0 8
Cost of raw materials per 2 5 3

unit (in Rs)
Solution: The appropriate mathematical formulation of the above problem is:

Minimize (cost) Z = 2x1 + 5x2 + 3x3
3x1 + 0x2 + x3 ≥ 10
5x1 + x2 + 2x3 ≥ 15
x1 + 2x2 + 0x3 ≥ 8
x1, x2, x3 ≥ 0
Minimize Z = 2x1+ 5x2+ 3x3+ 0s1+ 0s2+0s3+ MA1+ MA2+ MA3
3x1+0x2+x3-s1+A1 = 10
5x1+x2 +2x3-s2+A2 = 15
x1+2x2+0x3 –s3+A3= 8
x1,x2,x3,s1,s2,s3,A1,A2,A3 ≥ 0
From the above system of equations, starting basic feasible solution is:
A1= 10, A2= 15 and A3 = 8,
which can be displayed in the following simplex tableau 1.
Table 2.12. Initial Simplex Tableau

Cj 2 5 3 0 0 0 M M M Minimum
BV CB XB x1 x2 x3 s1 s2 s3 A1 A2 A3 ratio
A1 M 10 3 0 1 -1 0 0 1 0 0 10/3
A2 M 15 5* 1 2 0 -1 0 0 1 0 15/5=3←KR
A3 M 8 1 2 0 0 0 -1 0 0 1 8/1= 8
Zj 9M 3M 3M –M –M -M M M M
Cj -Zj 2-9M 5-3M 3-3M M M M 0 0 0
↑KC * KN.
Divide all the elements in the key row by key number as follows to find the new row entry in the
replacement tableau.
For key row: 15/5= 3, 5/5=1, 1/5, 2/5, 0, -1/5, 0, 0, 1/5, 0.
To calculate new entries in the replacement tableau, in the rows
other than the key row, use the following formula:
ORE – (CEKR x FR).
For A1 Row: 10 - (15 x 3/5) = 1 For A3 row: 8 - (15 x 1/5) = 5
3 - (5 x 3/5) = 0 1 - (5 x 1/5) = 0
0 - (1 x 3/5) = -3/5 2 - (1 x 1/5) = 9/5
1 - (2 x 3/5) = -1/5 0 - (2 x 1/5) = -2/5
-1 - (0 x 3/5) = -1 0 - (0 x 1/5) = 0
0 - (-1 x 3/5) = 3/5 0 - (-1 x 1/5) = 1/5
0 - ( 0 x 3/5) = 0 -1 - (0 x 1/5) = -1
1 - (0 x 3/5) = 1 0 - (0 x 1/5) = 0
0 - (1 x 3/5) =-3/5 0 - (1 x 1/5) = -1/5
0 - (0 x 3/5) = 0 1 - (0 x 1/5) = 1
Thus, the second simplex tableau will be filled with this information and it is as follows:
Table 2.13. Simplex Tableau II introduces x1 and replaces A2.

A1 M 1 0 -3/5 -1/5 -1 3/5 0 1 0 -
x1 2 3 1 1/5 2/5 0 -1/5 0 0 0 15
A3 M 5 0 9/5* -2/5 0 1/5 -1 0 1 25/9←KR
Zj 2 6M+2 -3M+4 -M 4M-2 -M M M
5 5 5 5 5 5
Cj - Zj 0 23-6M 11+3M M -4M+2 M 0 0
5 5 5 5 5 5
↑KC *KN.
For Key Row: 25/9, 0, 1, -2/9, 0, 1/9, -5/9, 0.

For x1 Row: 3 - (5 x 1/9) = 22/9
1 - (0 x 1/9) = 1
1/5 - (9/5 x 1/9) = 0
2/5 -(-2/5x1/9) = 4/9
0 - (0 x 1/9) = 0
-1/5- (1/5 x 1/9) = -2/9
0 - (-1 x 1/9) = 1/9
0 - ( 0 x 1/9) = 0
For A1 Row: 1 - ( 5 x –3/9) = 8/3
0 - ( 0 x -3/9) = 0
-3/5 – (9/5 x -3/9) = 0
-1/5 – (-2/5 x -3/9)= -1/3
-1 - ( 0 x -3/9)= -1
3/5 - ( 1/5 x -3/9)= 2/3
0 - (-1 x -3/9) = -1/3
1 - (0 x -3/9) = 1
Table 2.14. Simplex Tableau 3 introduces x2 and replaces A3.

A1 M 8/3 0 0 -1/3 -1 2/3* -1/3 1 4←KR
x1 2 22/9 1 0 4/9 0 -2/9 1/9 0 -11/5
x2 5 25/9 0 1 -2/9 0 1/9 -5/9 0 45
Zj 2 5 -M-2 -M 2M+1 -M-23 M

3 9 3 9 3 9
Cj - Zj 0 0 M +29 M -1-2M M+23 0
3 9 9 3 3 9
↑KC * KN
Now here s2 is the incoming variable and A1 is the leaving variable. To find the entries of the
replacement table, divide all the elements of the key row by the key number and to find the
entries of the other corresponding rows use the formula ORE – (CEKR x FR) = NRE.
Accordingly, the entries of the replacement table are as follows:
For Key Row: 8/3 / 2/3 = 4

0 / 2/3 = 0
0 / 2/3 = 0
-1/3/ 2/3 = -1/2
-1 / 2/3 = -3/2
2/3 / 2/3 = 1
-1/3 / 2/3 = -1/2
For x1 Row: 22/9 – (8/3 x -1/3) = 10/3
1 - (0 x -1/3) = 1
0 - (0 x -1/3) = 0
4/9 - (-1/3 x -1/3) = 1/3
0 - (-1 x -1/3) =-1/3
-2/9 - (2/3 x -1/3) = 0
1/9 - (-1/3 x -1/3) = 0
For x2 Row: 25/9 – (8/3 x 1/6) = 7/3
0 - (0 x 1/6) = 0
1 - (0 x 1/6) = 1
-2/9 - (-1/3 x 1/6) = -1/6
0 - (-1 x 1/6) = 1/6
1/9 - (2/3 x 1/6) = 0
-5/9 - (-1/3 x 1/6) = -1/2
Table2.15. Simplex Tableau four introduces s1 and replaces x2.
Cj 2 5 3 0 0 0 M M M
BV CB XB x1 x2 x3 s1 s2 s3 A1 A2 A3
S2 0 4 0 0 -1/2 -3/2 1 -1/2 -
x1 2 10/3 1 0 1/3 -1/3 0 0 -
x2 5 7/3 0 1 -1/6 1/6* 0 -1/2 14← KR
Zj 55/3 2 5 -1/6 1/6 0 -5/2
Cj -Zj 0 0 17/6 -1/6 0 5/2
↑KC *KN
Is the solution optimal now? No, because there is a negative number in the index row, and
therefore, it is necessary to find the key-column by taking the largest negative number, if there
are more than one negative numbers in the index row. However, in this case there is only one
negative number -1/6 in the Cj – Zj row. The column which is associated with this negative
number is called the key-column and the variable at the top of this column is said entering
variable. Then, by dividing XB by the key column (aij’s) find outgoing variable in the minimum
ratio column and take the least number as to indicate the key-row and thus the outgoing variable.
To find out the entries of the replacement table, repeat the steps which have been used above: 1.
by dividing all the elements of the key-row by the key-number. To find the entries of the
corresponding rows use the formula which was given here above.
Table2.16. Final Simplex Tableau

Cj 2 5 3 0 0 0 M M M
S2 0 25 0 9 -2 0 1 -5
x1 2 6 1 2 0 0 0 -1
S1 0 14 0 1 -1 1 0 -3
Zj 12 2 4 0 0 0 -2
Cj - Zj 0 1 3 0 0 2
Since all the entries in Cj – Zj row are either zero or positive, the optimum solution is
obtained and is given by: x1= 6 and x2 = x3 = 0 and minimum value of z is 12. S1 is 14 and s2 is
25, which shows that the organization is not using the resources effectively and efficiently. It has
to use more idle resources to achieve the organizational goal, which most of the time is believed
to be profit for the profit-making organizations.
Example 2.6. A product is manufactured by blending three different raw materials. The finished
product should meet certain quality requirements. Given the following data what is your
recommendation with regard to quantity for raw materials to be blended, which will meet the
quality requirements with minimum cost.
Quality characteristics Contribution to quality Minimum quality requirements
A B C
1 3 0 1 10
2 5 1 2 15
3 1 2 0 8
Cost of raw materials per
unit (in Rs) 2 5 3
Solution: The appropriate mathematical formulation of the above problem is:

Minimize (cost) Z = 2x1 + 5x2 + 3x3
3x1 + 0x2 + x3 ≥ 10
5x1 + x2 + 2x3 ≥ 15
x1 + 2x2 + 0x3 ≥ 8
x1, x2, x3 ≥ 0
Minimize Z = 2x1+ 5x2+ 3x3+ 0s1+ 0s2+0s3+ MA1+ MA2+ MA3
3x1+0x2+x3-s1+A1 = 10
5x1+x2 +2x3-s2+A2 = 15
x1+2x2+0x3 –s3+A3= 8
x1,x2,x3,s1,s2,s3,A1,A2,A3 ≥ 0
From the above system of equations, starting basic feasible solution is:
A1= 10, A2= 15 and A3 = 8,
which can be displayed in the following simplex tableau 1.
Table 2.17 initial Simplex Tableau

A1 M 10 3 0 1 -1 0 0 1 0 0 10/3
A2 M 15 5* 1 2 0 -1 0 0 1 0 15/5=3←KR
A3 M 8 1 2 0 0 0 -1 0 0 1 8/1= 8
Zj 9M 3M 3M –M –M -M M M M
Cj -Zj 2-9M 5-3M 3-3M M M M 0 0 0
↑KC * KN.
Divide all the elements in the key row by key number as follows to find the new row entry in the
replacement tableau.
For key row: 15/5= 3, 5/5=1, 1/5, 2/5, 0, -1/5, 0, 0, 1/5, 0.
To calculate new entries in the replacement tableau, in the rows
other than the key row, use the following formula:
ORE – (CEKR x FR).
For A1 Row: 10 - (15 x 3/5) = 1 For A3 row: 8 - (15 x 1/5) = 5
3 - (5 x 3/5) = 0 1 - (5 x 1/5) = 0
0 - (1 x 3/5) = -3/5 2 - (1 x 1/5) = 9/5
1 - (2 x 3/5) = -1/5 0 - (2 x 1/5) = -2/5
-1 - (0 x 3/5) = 1 0 - (0 x 1/5) = 0
0 - (-1 x 3/5) = 3/5 0 - (-1 x 1/5) = 1/5
0 - ( 0 x 3/5) = 0 -1 - (0 x 1/5) = -1
1 - (0 x 3/5) = 1 0 - (0 x 1/5) = 0
0 - (1 x 3/5) =-3/5 0 - (1 x 1/5) = -1/5
0 - (0 x 3/5) = 0 1 - (0 x 1/5) = 1
Thus, the second simplex tableau will be filled with this information and it is as follows:
Table 2.18 Simplex Tableau II introduces x1 and replaces A2.

A1 M 1 0 -3/5 -1/5 -1 3/5 0 1 0 -
x1 2 3 1 1/5 2/5 0 -1/5 0 0 0 15
A3 M 5 0 9/5* -2/5 0 1/5 -1 0 1 25/9←KR
Zj 2 6M+2 -3M+4 -M 4M-2 -M M M
5 5 5 5 5 5
Cj - Zj 0 23-6M 11+3M M -4M+2 M 0 0
5 5 5 5 5 5
↑KC *KN.
For Key Row: 25/9, 0, 1, -2/9, 0, 1/9, -5/9, 0.

For x1 Row: 3 - (5 x 1/9) = 22/9
2 - (0 x 1/9) = 1
1/5 - (9/5 x 1/9) = 0
2/5 -(-2/5x1/9) = 4/9
0 - (0 x 1/9) = 0
-1/5- (1/5 x 1/9) = -2/9
0 - (-1 x 1/9) = 1/9
0 - ( 0 x 1/9) = 0
For A1 Row: 1 - ( 5 x –3/9) = 8/3
0 - ( 0 x -3/9) = 0
-3/5 – (9/5 x -3/9) = 0
-1/5 – (-2/5 x -3/9)= -1/3
-1 - ( 0 x -3/9)= -1
3/5 - ( 1/5 x -3/9)= 2/3
0 - (-1 x -3/9) = -1/3
1 - (0 x -3/9) = 1
Table 2.19 Simplex Tableau 3 introduces x2 and replaces A3.

A1 M 8/3 0 0 -1/3 -1 2/3* -1/3 1 4←KR
x1 2 22/9 1 0 4/9 0 -2/9 1/9 0 11/5
x2 5 25/9 0 1 -2/9 0 1/9 -5/9 0 25
Zj 2 5 -M-2 -M 2M+1 -M-23 M
3 9 5 9 3 9
Cj - Zj 0 0 M +29 M -1-2M M+23 0
3 9 9 3 3 9
↑KC * KN
Now here s2 is the incoming variable and A1 is the leaving variable. To find the entries of the
replacement table, divide all the elements of the key row by the key number and to find the
entries of the other corresponding rows use the formula ORE – (CEKR x FR) = NRE.
Accordingly, the entries of the replacement table are as follows:
For Key Row: 8/3 / 2/3 = 4

0 / 2/3 = 0
0 / 2/3 = 0
-1/3/ 2/3 = -1/2
-1 / 2/3 = -3/2
2/3 / 2/3 = 1
-1/3 / 2/3 = -1/2

For x1 Row: 22/9 – (8/3 x -1/3) = 10/3
1 - (0 x -1/3) = 1
0 - (0 x -1/3) = 0
4/9 - (-1/3 x -1/3) = 1/3
0 - (-1 x -1/3) =-1/3
-2/9 - (2/3 x -1/3) = 0
1/9 - (-1/3 x -1/3) = 0
For x2 Row: 25/9 – (8/3 x 1/6) = 7/3
0 - (0 x 1/6) = 0
1 - (0 x 1/6) = 1
-2/9 - (-1/3 x 1/6) = -1/6
0 - (-1 x 1/6) = 1/6
1/9 - (2/3 x 1/6) = 0
-5/9 - (-1/3 x 1/6) = -1/2
Table 2.20 Simplex Tableau four introduces s1 and replaces x2.

Cj 2 5 3 0 0 0 M M M
S2 0 4 0 0 -1/2 -3/2 1 -1/2 -
x1 2 10/3 1 0 1/3 -1/3 0 0 -
x2 5 7/3 0 1 -1/6 1/6* 0 -1/2 14← KR
Zj 55/3 2 5 -1/6 1/6 0 -5/2
Cj -Zj 0 0 17/6 -1/6 0 5/2
↑KC *KN
Is the solution optimal now? No, because there is a negative number in the index row, and
therefore, it is necessary to find the key-column by taking the largest negative number, if there
are more than one negative numbers in the index row. However, in this case there is only one
negative number -1/6 in the Cj – Zj row. The column which is associated with this negative
number is called the key-column and the variable at the top of this column is said entering
variable. Then, by dividing XB by the key column (aij’s) find outgoing variable in the minimum
ratio column and take the least number as to indicate the key-row and thus the outgoing variable.
To find out the entries of the replacement table, repeat the steps which have been used above: 1.
by dividing all the elements of the key-row by the key-number. To find the entries of the
corresponding rows use the formula which was given here above.
Table 2.21. Final Simplex Tableau

Cj 2 5 3 0 0 0 M M M
S2 0 25 0 9 -2 0 1 -5
x1 2 6 1 2 0 0 0 -1
S1 0 14 0 1 -1 1 0 -3
Zj 12 2 4 0 0 0 -2
Cj - Zj 0 1 3 0 0 2
Since all the entries in Cj – Zj row are either zero or positive, the optimum solution is
obtained and is given by: x1= 6 and x2 = x3 = 0 and minimum value of z is 12. S1 is 14 and s2 is
25, which shows that the organization is not using the resources effectively and efficiently. It has
to use more idle resources to achieve the organizational goal, which most of the time is believed
to be profit for the profit-making organizations.
Example 2.7 A small jewellery manufacturing company employs a person who is a highly
skilled gem cutter, and it wishes to use this person at least 6 hours per day for this purpose. On
the other hand, the polishing facilities can be used any amount up to 8 hours per day. The
company specializes in three kinds of semiprecious stones P, Q and R. Relevant cutting,
polishing and cost requirements are listed in the following table. How many gemstones of each
type should be processed each day to minimize the cost of the finished stones? What is the
minimum cost?
P Q R
Cutting 2 hr 1 hr 1 hr
Polishing 1 hr 1 hr 2 hr
Cost per stone Rs 30 Rs 30 Rs 10
Solution: Let x1, x2 and x3 represent the number of type P, Q and R stones finished per day,
respectively, then the appropriate mathematical formulation of the given linear programming
problem is:
Minimize Z = 30x1 + 30x2 + 10x3
2x1 + x2 + x3 ≥ 6
x1 + x2 + 2x3 ≤ 8
x1, x2, x3 ≥ 0
Introducing slack, surplus and artificial variables, the modified problem can be rewritten as
follows:
Minimize Z = 30x1 + 30x2 + 10x3 + 0s1 + 0s2 + MA1
2x1 + x2 + x3 – s1 + A1 = 6
x1 + x2 + 2x3 + s2 =8
x1, x2, x3, s1, s2, A1 ≥ 0
From the above system of equations, a starting basic feasible solution is:
A1 =6 and s2 = 8, which can be displayed in the following table:
Table 2.22 Initial Simplex Tableau

Cj 30 30 10 0 0 M Minimum
BV CB XB x1 x2 x3 s1 s2 A1 ratio
A1 M 6 2* 1 1 -1 0 1 6/2 = 3←KR
s2 0 8 1 1 2 0 0 1 8/1 =8
Zj 2M M M -M 0 M
Cj - Zj 30-2M 30-M 10-M M 0 0
↑KC * KN
Taking the largest negative number in the index row, x1 is the incoming variable and taking the
smallest number from the minimum ratio column, A1 is the leaving variable. To find the entries
of the replacement table, divide all the elements of the key row by the key number. On the other
hand, to find the entries of the other corresponding rows use the formula ORE – (CEKR x FR) =
NRE. Accordingly, the entries of the replacement table are as follows:
Key Row Entries (x1): 3, 1, 1/2, 1/2, -1/2, 0, 1/2.

Corresponding Row entries: ORE – (CEKR x FR).
8 - (6 x 1/2) = 5
1 - (2 x 1/2 )= 0
1 - (1 x 1/2 )= 1/2
2 – (1 x 1/2)= 3/2
0 - (-1 x 1/2)=1/2
0 - (0 x 1/2) = 1/2
Table 2.23. Simplex Tableau II introduces x1 and replaces A1
Cj 30 30 10 0 0 M Minimum
BV CB XB x1 x2 x3 s1 s2 A1 ratio
x1 30 3 1 ½ 1/2 -1/2 0 3/ (1/2)= 6
s2 0 5 0 ½ 3/2* 1/2 1/2 5/(3/2)= 10/3←KR
Zj 30 15 15 -15 0
Cj - Zj 0 15 -5 15 0
↑KC *KN
Here the negative number in the index row is -5. Therefore, x3 is the incoming variable
and dividing XB’s by aij’s of the key column, the least number is 10/3. Therefore, the leaving
variable is s2 and the key number is 3/2. To find the x3 entries in the following tableau, divide
all elements of key row (s2 row) in the above table by the key number, which is 3/2. To find the
entries of the corresponding row, use the formula which was discussed above briefly.
Key column entries: 10/3, 0, 1/3, 1, 1/3, 2/3
Corresponding row entries, according to the given formula:
3 – (5 x 1/3) = 4/3
1 - (0 x 1/3) = 1
½ - (1/2 x 1/3) = 1/3
½ - (3/2 x 1/3) = 0
-1/2- (1/2 x 1/3) =-2/3
0 - (1 x 1/3) = -1/3
Table 2.24. Final Simplex Tableau introduces x3 and replaces s2.
Cj 30 30 10 0 0 M
BV CB XB x1 x2 x3 s1 s2 A1
x1 30 4/3 1 1/3 0 -2/3 -1/3
x3 10 10/3 0 1/3 1 1/3 2/3
Zj 220/3 30 40/3 10 -50/3 -10/3
Cj - Zj 0 50/3 0 50/3 10/3
Since all entries in the Cj – Zj row are either zero or positive, the optimum solution to the
problem is given by: x1= 4/3, x2 = 0, x3 = 10/3 with minimum Z = 220/3, i.e., a minimum cost
of Rs 731/3 for gemstones will be realized if 11/3 type of A, no type of B and 31/3 type C stones
are processed each day to minimize the production cost.
Example 2.8. A chemical company produces two compounds A and B. The following table
gives the units of ingredients C and D per kg of compounds A and B as well as minimum
requirements of C and D and cost per kg of A and B. Using the simplex method, find the
quantities of A and B which would give a supply of C and D at minimum cost.
Compound Minimum requirement

A B
Ingredients C 1 2 80
Cost per kg D 3 1 75
Profit margin 4 6
Solution: The LP model of the given problem is:

x1 + 2x2 ≥ 80
3x1+ x2 ≥ 75
x1, x2 ≥ 0.
The problem can be standardized by introducing surplus and artificial variables as follows:
Minimize Z = 4x1 + 6x2 + 0s1 + 0s2 + MA1+ MA2
x1 + 2x2 –s1 + 0s2 + A1 + 0A2 = 80
3x1 + x2 + 0s1 – s2 + 0A1 + A2 = 75
x1, x2, s1, s2, A1, A2 ≥ 0
Table 2.25. Initial Simplex Tableau

Cj 4 6 0 0 M M Minimum
BV CB XB x1 x2 s1 s2 A1 A2 ratio
A1 M 80 1 2 -1 0 1 0 80
A2 M 75 3* 1 0 -1 0 1 25← KR
Zj 4M 3M -M -M M M
Cj - Zj 4-4M 6-3M M M 0 0
↑KC *KN
x1 row entries in the replacement tableau are: 25, 1, 1/3, 0, -1/3, 0.
Corresponding row entries are: 80 -(75 x 1/3) = 55
1 -(3 x 1/3) = 0
-1 - (0 x 1/3) = -1
0 - (-1 x 1/3) = 1/3
1 - (0 x 1/3) = 1
Table 2.26 Simplex Tableau II introduces x1 and replaces A2
Cj 4 6 0 0 M M Minimum
BV CB XB x1 x2 s1 s2 A1 A2 ratio
A1 M 55 0 5/3* -1 1/3 1 33← KR
x1 4 25 1 1/3 0 -1/3 0 75
Zj 4 5M/3 + 4/3 -M M/3- 4/3 M
Cj - Zj 0 14/3 -5M/3 M 4/3 – M/3 0
↑ KC * KN
X2 row in the replacement tableau: 33, 0, 1, -3/5, 1/5

X1 row in the replacement tableau: 25 – (55 x 1/5) = 14
1 - (0 x 1/5) = 1
1/3 - (5/3 x 1/5) = 0
0 - (-1 x 1/5) = 1/5
-1/3 – (1/3 x 1/5) =-2/5
Table 2.27 Final Simplex Tableau introduces x2 and replaces A1.

Cj 4 6 0 0 M M
BV CB XB x1 x2 s1 s2 A1 A2
x2 6 33 0 1 -3/5 1/5
x1 4 14 1 0 1/5 -2/5
Zj 254 4 6 -14/5 -2/5
Cj - Zj 0 0 14/5 2/5
Since all entries in the Cj – Zj row are either zero or positive, the optimum solution is
obtained and is given by: x1 = 14, x2 = 33 and minimum Z = 254. Thus, 14 kg of A and 33 kg of
B should be produced in order to have a minimum cost of Rs 254.
SELF TEST PROBLEMS.
Some self test problems are given here below. Attempt them using the Big-M
method as discussed here above.
1. Maximize Z = x1 + 2x2 + 3x3
x1 – x2 + x3 ≥ 4
x1 + x2 + 2x3 ≤ 8
x1 – x3 ≥2
x1, x2, x3 ≥ 0
3. A bicycle manufacturer makes two models- a sports cycle and a racer. In order to make a
sports model, 6 man hours are needed, while a racing model requires 10 man hours. The
manufacturer can employ no more than 15 men and these men work 8 hours per day for 6
days each week. The cost of material amounts to Rs 500 per cycle and the manufacturer’s
weekly quota of such materials may not exceed Rs 40,000. The firm has a contract to supply
at least 30 sports models and 20 races per week. How many cycles of each type should be
made in order to obtain the maximum possible profit, if the profit on each sports cycle is Rs
100 and on each racing model is Rs 300? Use the simplex method.
4. An animal feed company must produce 200 kg of a mixture consisting of ingredient x1 and x2
daily. x1 costs Rs 3 per kg and x2 costs Rs 8 per kg. Not more than 80 kg of x1 can be used
and at least 60 kg of x2 must be used. Find how much of each ingredient should be used if the
company wants to minimize costs.
5. A diet is to contain at least 20 ounces of protein and 15 ounces of carbohydrate. There are
three foods A, B and C available in the market, costing Rs 2, Re 1 and Rs 3 per unit,
respectively. Each unit of A contains 2 ounces of protein and 4 ounces of carbohydrate; each
unit of B contains 3 ounces of protein and 2 ounces of carbohydrate; each unit of C contains
4 ounces of protein and 2 ounces of carbohydrate. How many units of each food should the
diet contain so that the cost per unit diet is minimized?
6. A person requires 10, 12 and 12 units of chemicals A, B and C, respectively for his garden.
A liquid product contains 5, 2 and 1 unit of A, B and C, respectively per jar. A dry product
contains 1, 2 and 4 units of A, B and C per unit. If the liquid product sells for Rs 3 per jar and
the dry product for Rs 2 per carton, how many of each should be purchased in order to
minimize the cost and meet the requirement?
7. Solve all the problems solved using graphic method using a simplex method to substantiate
your understanding in the area.
2.3 SENSITIVITY ANALYSIS

Sensitivity analysis (post-optimality analysis) is used to analyze the LPP beyond the
determination of the optimal solution. It begins with the final simplex tableau. Its purpose is to
explore how changes in any of the parameters of a problem, such as the coefficients, coefficients
of the objective function, or the right-hand side values, would affect the solution.
In the preceding chapters, the formulation and solution of LPP treated the parameters of a
problem as if they were known and fixed. Unfortunately, in practice, the parameters of the
problem often are no more than educated guesses. Consequently, the optimal solution may or
may not be optimal depending on how sensitive that solution is to alternate values of parameters.
Hence, a decision maker usually would want to perform sensitivity analysis before implementing
a solution. If the additional analysis satisfies the decision maker that the solution is reasonable,
he or she can proceed with greater confidence in using the solution. Conversely, if sensitivity
analysis indicates that the solution is sensitive to changes that are within the realm of possibility,
the decision maker will be warned that more precise information on parameters is needed.
Even if the parameters of a problem are known with a high degree of certainty, a
decision maker might still want to use sensitivity analysis in order to determine how
changes in parameters would affect the final solution. For instance, a manager may want to
consider obtaining an additional amount of some scarce resource that might be available in
which case the manager would want to know the answers to questions such as:
1. Will an increase in the right-hand side of this constraint affect the objective function?
2. If so, how much of the resource can be used?
3. Given the answer to the preceding question, what will be the revised optimal solution?
In contrast, the decision maker might be facing a situation in which the amount of a scarce
resource available is less than the original amount, in which case the issues would be:
1. Will the decreased level of the resource have an impact on the value of the objective
function?
2. If yes, how much of an impact will it have, and what will be the revised optimal solution?
In general, sensitivity analysis analyses how the solution would be affected if the parameters
such as cj, bi, or aij of the problem change. For instance, if the price of the product is changed by
the marketing department, it may alter the products coefficients in the objective function.
Example
A firm that assembles computers and component equipment is about to start production of two
new micro-computers. Each type of micro-computer will require assembly time, inspection time
and storage space. The amount of each of these resources that can be devoted to the production
of micro-computers is limited. The manager to the firm would like to determine the quantity of
each microcomputer to produce in order to maximize the profit generated by sales of these micro
computers.
In order to develop a suitable model of the problem, the manager has met with design and
manufacturing personnel. As a result of these meetings, the manager has obtained the following
information.
Type – 1 Type – 2
Profit per unit $60 $50
Assembly time per unit 4 hrs 10 hrs
Inspection time per unit 2 hrs 1 hr
Storage space per unit 3 cubic ft 3 cubic ft.
The manager has also acquired information in the availability of company resources. The
weekly amounts of them are as follows:
Resource amount available
Assembly time 100 hours
Inspection time 22 hours
Storage space 39 cubic feet
The manager also met with the firm’s marketing manager and learned that the demand for
micro computers was such that whatever combination of these two types of micro computers is
produced all of the output can be sold.
The LPP model of the aforementioned micro computer problem is indicated here below:

Subject to:
4x1 + 10x2 ≤ 100
2x1 + x2 ≤ 22
3x1 + 3x2 ≤ 39
x1, x2 ≥ 0
A change in the RHS of a Constraint
The first step in determining how a change in the RHS (right-hand side) of a constraint (e.g.,
the amount of scarce resource that is available for use) would influence the optimal solution is to
examine the shadow prices in the final simplex tableau. These are the values in the Z-row in the
slack columns. The final tableau for the micro computer problem is shown in table 2.3.1.
Table 2.3.1 Shadow prices in the microcomputer final tableau.

C 60 50 0 0 0
Basis x1 x2 s1 s2 s3 Quantity
S1 0 0 0 1 6 -16/3 24
X1 60 1 0 0 1 -1/3 9
X2 50 0 1 0 -1 2/3 4
Z 60 50 0 10 40/3 740
Cj-Zj 0 0 0 -10 -40/3
Negatives of shadow prices

The shadow prices are 0, 10, and 40/3. Note that the negatives of the shadow prices appear in
the bottom row of the table. Because they differ only in sign, the values in the bottom row are
sometime also referred to as shadow prices.
Shadow price is a marginal value; it indicates the impact that a one-unit change in
amount of a constraint would have on the value of the objective function. More specifically,
a shadow price reveals the amount by which the value of the objective function would increase if
the level of the constraint was increased by one unit. Table 2.3.1 reveals that the shadow prices
are $0, for s1i.e., the first constraint, assembly time), $10 for s2 (i.e., the second constraint,
inspection time), and $40/3 for s3 (i.e., the third constraint, storage space). This tells us that if the
amount of assembly time was increased by one hour, there would be no effect on profit; if
inspection time was increased by one hour, the effect would be to increase the profit by
$10; and if storage space was increased by one cubic foot, profit would increase by $40/3, or
$13.33. The reverse also holds true. That is, by using the negative sign of each shadow price, we
can determine how much a one-unit decrease in the amount of each constraint would decrease
profit. Hence, a one unit decrease in assembly time would have no effect because its shadow
price is $0. However, a one-unit decrease in inspection time would decrease profit by $10 and a
one-unit decrease in storage space would decrease profit by $13.33. In effect, shadow prices are
a manager’s ‘window’ for gauging the impact that changes have on the value of the objective
function.
What the shadow prices do not tell us is the extent to which the level of a scarce resource can
be changed and still have the same impact per unit. For example, we know that a one unit
increase in inspection time will increase profit by $10. Because of linearity, a two unit increase
in inspection time will mean an increase of $20, and a ten unit increase in inspection time will
mean an increase of 10($10), or $100, in profit. However, at some point, the ability to use
additional amounts of a resource will disappear because of the fixed amounts to the other
constraints. In other words, limits on assembly time and storage space mean that only a certain
amount of additional inspection time can be used and still have a feasible solution.
Conversely, a similar situation can arise when considering the potential impact of a decrease
in the RHS of a constraint. For instance, the assembly constraint has a shadow price of $0, which
indicates that a one unit decrease in the amount of assembly time available will have no impact
on profit. However, we know that some assembly time is required to produce the computers,
which means that it cannot be decreased indefinitely. At some point, fewer assembly hours will
restrict output. Therefore, we need to determine the range over which we can change the right-
hand side quantities and still have the same shadow price. This is called the range of feasibility,
or the right-hand side range.
The key to computing the range of feasibility for the constraint lies in the final simplex
tableau. More specifically, the values in the body of the final tableau in each slack column can be
used to compute the range of feasibility for the corresponding constraint. The final tableau for
the microcomputer problem is repeated in the Table 2.3.2.
Table 2.3.2 Final Tableau for microcomputer problem

C 60 50 0 0 0
Basis X1 x 2 s 1 s 2 s3 Quantity
S1 0 0 0 1 6 -16/3 24
X1 60 1 0 0 1 -1/3 9
X2 50 0 1 0 -1 2/3 4
Zj 60 50 0 10 40/3 740
Cj-Zj 0 0 0 -10 -40/3
The slack variable columns of the table indicate the values needed to compute the ranges of
feasibility. For each constraint, the entries in the associated slack column must be divided into
the values in the quantity column. Because there are three entries in each column, there will be
three ratios after the division. For example, for the storage column (s3) values, the resulting ratios
are:
S3 Quantity Quantity/ S3
-16/3 24 24/ (-16/3) = -4.5
-1/3 9 9/(-1/3) = -27
2/3 4 4/ (2/3) = +6
In the same manner, we can calculate the resulting substitution ratios for other slack
variables, too. In the context of this problem, we can calculate the substitution ratio of S2 and can
decide the range of RHS value. For S1, Cj – Zj value is 0, which shows that there is a slack of 24
hours unused. We have, therefore, to subtract 24 unused hours from the total availability of 100
hours. Thus, the lower limit of assembly time will be 76 hours and will increase indefinitely
upward.
As it can be seen from the table, unlike the simplex calculations, negative ratios are
acceptable. Two of these ratios (S2 and S3) indicate the extent to which the constraint level can
be changed and still have the current shadow price remain valid. The smallest positive ratio
indicates how much the constraint level can be increased before it reaches the lower limit of its
range of feasibility. Thus, the storage constraint can be decreased by 6 cubic feet before it hits
the lower limit of its range of feasibility. Conversely, the smallest negative ratio (i.e., the
negative ratio closest to zero) indicates how much the storage constraint can be increased before
it reaches its upper limit of feasibility. Hence, the storage level can be increased by 4.5 cubic feet
before it hits that upper limit.
Perhaps it seems strange that a positive ratio relates to a decrease and a negative ratio to an
increase. However, the positive ratio indicates the amount that that must be added to the lower
limit to achieve the current constraint level (i.e., how much the current level is above the lower
limit). Thus, knowing the current level, we must subtract that amount to obtain the lower limit.
Thus, for storage constraint, the current level is 39. Thus, we have:
Lower limit + 6 = 39, so lower limit = 39 – 6 = 33 cubic feet.
Similarly, the smallest negative ratio reveals how much the current level is below the upper
limit, so that amount must be added to the current level to determine the upper limit. For the
storage constraint the upper limit shall be:
Upper limit – 4.5 = 39, so upper limit = 39 + 4.5 = 43.5 cubic feet.
The same general rule applies when computing the upper and lower limit on the range of
feasibility for a maximization problem.
Allowable decrease: The smallest positive ratio

Allowable increase: The smallest negative ratio closest to zero
For a minimization problem, the rules are reversed. The allowable decrease is the negative
ratio closest to zero and the allowable increase is the smallest positive ratio.
Example 1
Determine the range of feasibility for each of the constraints in the microcomputer problem.
Solution
Table 2.3.3 illustrates the computations and resulting ranges. It is important to recognize
when determining ranges of feasibility that each range is determined under the assumption that
the levels of the other constraints will not change. If multiple changes are contemplated, the
entire problem will have to be reworked using the revised values.
You are probable wondering why these ratios tell us how much latitude there is for feasible
changes in a constraint level. Recall that the values in the body of any simplex tableau are
substitution rates. They indicate how much, and in what direction, a one unit change in a column
variable will cause the current quantity value to change. For example, in the final tableau, the
values in the S3 column and the quantity column are:
Basis S3 Quantity
S1 -16/3 24
X1 -1/3 9
X2 2/3 4
Z 40/3
The value in the S3 (storage) column tells us the following: A one unit increase in storage
space will:
1. Cause s1 (assembly slack) to decrease by16/3 = 5.33 units
2. Cause x1 to decrease by 1/3 = 0.33 units
3. Cause x2 to increase by 2/3 = 0.67 units
4. Cause profit to increase by 40/3 = $13.33
Because the quantity column entries indicate how much of s1, x1 and x2 are currently in
solution, dividing each of those entries by the respective substitution rates in the s3 column will
indicate the limit on possible changes that will reflect the shadow price of 40/3. Since the
substitution rates apply in either direction (i.e., for a one unit increase or a one unit decrease in
storage space), we can determine the potential for both changes at the same time. The smallest
positive ratio reveals the amount that the current level of the constraint is above the lower limit,
and the lowest negative ratio reveals the amount that the current level of the constraints is below
the upper limit.
Assembly Inspection Storage
0 0 0
s1 s2 s3 Quantity
1 6 -16/3 24
0 1 -1/3 9
0 -1 2/3 4
0 10 40/3 740
0 -10 -40/3
Now determine the upper and lower ranges from the above information in the table.
Accordingly:
Table 2.3.2 Final Tableau for microcomputer problem
Assembly (S1) Inspection (S2) Storage (S3)
24/1=24 24/6 = 4 24/(-16/3) = -4.5
9/0 = undefined. 9/ 1 = 9 9/(-1/3) = -27
4/0 = undefined. 4 /-1 =-4 4/(2/3) = +6
Original amount 100 hours 22 hours 39 cubic ft.
Upper limit (range) None 22 + 4 = 26 39 + 4.5 = 43.5
Lower limit (range) 100-24 = 76 22 – 4 = 18 39 – 6 = 33
When a decision-maker becomes involved with the changing constraint levels, that person wants
to know not only the range over which the level can be changed, but also what impact a
contemplated change would have on the optimal solution. Fortunately, when the proposed
change is within the range of feasibility, very little effort is required to obtain the resulting
optimal solution. Again, the key values are the substitution rates for the constraint in question, as
the next two examples may illustrate.
Example 2
The manager in the microcomputer problem is contemplating one of the two possible changes in
the level of the storage constraint. One change would be an increase of 3 cubic feet in its level
and the other would be an increase of 8 cubic feet in its level. Determine the revised optimal
solution for each possible change.
Solution
The first step in analyzing the effect of a constraint level change is to check whether the change
is within the range of feasibility. We previously determined that the upper limit of that range for
the storage constraint is 39 + 4.5. Hence, an increase of three cubic feet is within the range, but
an increase of eight cubic feet is not.
The effect of an increase of three cubic feet can be computed in this way:
S3 Quantity Current Change Revised
Basis CB solution solution
S1 0 -16/3 24 24 + 3 (-16/3) 8 (S1)
X1 60 -1/3 9 9 + 3 (-1/3) 8 (x1)
X2 50 2/3 4 4 + 3 (2/3) 6 (x2)
Z 40/3 740 740 + 3(40/3) 780 profit
For an increase in storage space of 8 cubic feet, since the upper limit of the feasible range for
storage is 4.5 cubic feet, the amount of increase above 4.5 cubic feet will be excess, or slack.
Moreover, the new optimal solution will occur at the point where the constraint level equals its
upper limit. Therefore, the additional amount needed to achieve the upper is used to compute the
revised solution. Thus:
Basis CB Current solution Change Revised solution

s1 0 24 + 4.5(-16/3) = 0
x1 60 9 + 4.5(-1/3) = 7.5
x2 50 4 + 4.5(2/3) = 7.0
Z 740 + 4.5(40/3) 800
Note, however, that beyond the upper limit s3 would come into solution replacing s1, which
would no longer be slack. The amount of slack would be 8 – 4.5 = 3.5 cubic feet. Consequently,
the revised solution would be:
S3= 3.5
X1= 7.5
X2 = 7
Profit = 80
CHAPTER THREE
1.3 Transportation problem
Introduction
Basic transportation problem was stated by F.L. Hitchcock in 1994, and later on expanded by T.C.
Koopmans and W.W. Cooper. Since then it is in a vast use in solving the problems of algorithmic
nature. Thus, transportation problem is a particular case of linear programming problem. This can
be stated in LPP model and can also be solved by simplex method. Wherein, then, the necessity to
develop a separate technique called Transportation Technique as far as it can be solved using
simplex method. The answer to this question is that the nature and conditions of transportation
problem is such that these can be solved by much simplex techniques compared to simplex. This
simpler technique is called transportation technique. The present chapter is devoted to the
discussion of this technique presenting illustrations and examples to make the subject matter more
easily understandable to the users of this note.
The objective of this chapter is to minimize cost of transportation of products when they are
shifted from production center to consumption area satisfying demand and exhausting the supply
fully.
Assumptions:
1) All goods are homogeneous. So any origin can supply to any destination.
2) The unit cost of transportation is a direct linear function of the quantity shipped over any
route.
3) The supply quantity of origins is equal to the demand quantity of destination. (Not a
necessary assumption).
Problem:
A firm which imports and supplies steel has three warehouse and three retail stores spread in
different states of the country. The weekly capacity of the warehouses is given below:
Warehouse weekly capacity (tones)

A 50
B 15
C 55
Demand for steel by the three stores is:
Stores weekly demand

1 25
2 50
3 45
The manager of the firm has estimated the cost per tone of steel to ship over each of the possible
routes:
Warehouse store 1 Store 2 Store 3
A 12 20 15
B 9 11 4
C 20 14 8
Required: Develop a transportation model and find out the minimum cost.
Finding the initial feasible solution can be done in two different ways. They are
a) the Northwest corner method
b) The minimum cost method (intuitive method).
The Northwest corner method (NWC): Here we start with the northwest corner
cell. Solving for optimality, the initial feasible solution must satisfy the following two
conditions. They are:
1) the total supply equals to the total demand,
2) the number of occupied cells should equal one less than the sum of the
number of rows and the number of columns in the transportation table [(n +
m) – 1].
Using Northwest Corner Method

To #1 #2 #3 Supply
From
12 20 15 50
A 25 25
9 11 4 15
B 15
20 14 8 55
C 10 45
25 50 45 120
Demand
TC = 12(25) + 20(25) + 11(15) + 14(10) + 8(45)

= 300 + 500 + 165 + 140 + 360
= $1465.
The Intuitive Method and its steps:

1. Identify the cell that has the lowest unit cost. If there is a tie select one arbitrarily.
Allocate a quantity to this cell.
2. Cross out the cell in the row or column that has been exhausted (or both) and adjust
the remaining row or column total, accordingly.
3. Identify the cell with the lowest cost from the remaining cells and allocate a quantity
for it.
Repeat step 2 and 3 until all supply and demand have been allocated.
Using intuitive method

To #1 #2 #3 Supply
From
12 20 15
A 25 25 50
9 11 4
B 15 15
-- 20 14 8
C 25 30 55
Demand 25 50 45 120
TC= 12(25) +20(25) +4(15) +14(25) +30(8)

=300 + 500 + 60 + 350 + 240
=$1450
N.B. some times we can arrive at the optimum solution by chance when we apply
Northwest corner method and intuitive method. Here, as you might see it, we have got a
different solution using an intuitive method. But, we don’t know whether the solution is
optimum or not in both the cases unless we test them using optimality testing methods
called stepping-stone method and MODI Method.
After allocating the supply to satisfy demand of different stores, we can test whether the
optimum solution has been reached or not using the following two methods:
1) the stepping stone method

2) the modified distribution method (MODI-Method)
1. The stepping stone method

This method is used to evaluate the initial solution for optimality using northwest corner
method and intuitive method. The method is used to evaluate the empty cells and check
the improvement potential of each empty cell. Here we use stepping stone path. When
this method is in use, we step off the occupied cells to evaluate the empty cells. To this
effect, use the above table assigned with northwest corner approach. Accordingly, take
unassigned cells, for example, A-3, and make straight lines to other occupied cells.
Assign positive sign for the empty cell and make negative the next one and positive and
negative in that order until you come back to the empty cell from which you started
earlier. Do the same to all unoccupied cells. If all the others are positive, then assigning
to them never reduces the cost. If there is negative, if one unit is assigned to that negative
cell, the cost will reduce the negative times the number of units assigned to the cell.
Testing for optimality using stepping stone method.

To #1 #2 #3 Supply
From
12 20 15 50
A 25 25
9 11 4 15
B 15 _ +15
20 14 _ 8 55
C 25 + 45 30
25 50 45 120
Demand
Unoccupied cells are: A-3 = 15-20+14-8= +1

B-1= 9-12+20-11= +6
B-3= 4-11+14-8 = -1
C-1= 20-14+20-12= +14
If we assign to A-3, the cost of assigned units increases by 1. If we assign to cell B-1, the
cost of assigned units increases by 6. If we assign to cell B-3, the cost of assigned units
will decline by 1. If we assign to cell C-1, the cost will increase by 14. Therefore, it is
better to assign to cell number B-3. Assign and test for optimality.
TC= 12(25) +20(25) +4(15) +14(25) +8(30)
=$1450
Take the same problem and test for optimality using Modi method. Before directly
embarking up on computing the problem using modi method, let’s discuss how it is used.
Modi Method:
Here row index number ri and column index number ki is calculated for each occupied
cell.
Cell cost = row index + column index.

We start by giving row index for the first row r1= 0 which may be used as a base for
calculating others.
Cell evaluation = cell cost – row index- column index.
When cell evaluations are positive or zero, an optimal solution has been reached. If one
or more is negative there is improvement potential and the cell with the largest negative
value should be brought into solution.
Developing an improved solution requires focusing on an unoccupied cell that has the
largest negative cell evaluation. Improving the solution involves reallocating quantities in
the transportation table. The stepping stone path for that an unoccupied cell is necessary
for determining how many units can be reallocated while retaining the balance of supply
and demand for that table. The positive signs in the path indicate the quantity to be added
and the negative signs indicate unit to be subtracted. The limit on subtraction is the
smallest quantity in a negative position along the cell path. This quantity should be
subtracted from quantity in each cell with a negative sign and added to the quantity in
each cell with a positive sign. Cell evaluation = cc – ri – ci. Using this formula, we
assign 0 to r1 and calculate for c1.
12 20 14
To #1 #2 #3 Supply
From
12 20 15 50
A 25 25
9 11 4 15
B 15 - 15 +
20 14 8 55
C 10 25 + 45 30 -
0 25 50 45 120
Demand
-9
-6
Accordingly:
A-3= 15-14- 0 = +1
B-1= 9-12- -9= 9-12+9= +6
B-3= 4-14- -9= 13-14= -1
C-1= 20-12- -6 = +14
According to the result of test, shift some values to B-3 using stepping stone method to
trace the route.
TC= 12(25) + 20(25) + 4(15) + 14(25) + 8(30)

=300 + 500 + 60 + 350 + 240
=$1450
Special Issues
1) Alternate optimal solution: When we evaluate a cell, if we get neither –ve nor +ve but a zero, then
an allocation to that cell is an alternate optimal solution. We can find out the alternate solution by
reallocating the maximum number of units possible around the stepping stone path for that cell.
2) Degeneracy: happens when the number of occupied cells is less than (m+n-1). Here it is not possible
to proceed with an optimal solution.
3) Unacceptable route: It can be dealt by attaching a very large positive cost (M) to the route which is
not acceptable.
4) A case of unequal supply and demand: Such variations are treated by adding a dummy row or
dummy column.
N.B. If we use intuitive method the last allocation belongs to the dummy row. Quantities in the
dummy row in the optimal solution are not shipped rather they serve to indicate suppliers will hold
the excess supply at how much or which destination won’t receive its total demand and how much it
will be short of it.
3.1 Self test problem
1. Solve the following problem allocating it using 1) NW corner method and Intuitive or (least
cost method) Method and testing it using stepping stone and modi methods each one after the
other.
Costs
Markets
To A B C D
From
Warehouses
X 12 18 6 25
Y 8 7 10 18
Z 14 3 11 20
Availability at warehouse:
x = 200 units, y= 500 units, z= 300 units,
Demand in the markets:

A=180 units, B= 320 units, C= 100 units, D= 400 units.
2. Based on the table below, solve the following problem using NW corner method for
initial feasible solution and test it using MODI Method. What is the optimal solution?
Assign it again using an intuitive method and test its optimality using a stepping stone.
Are the two optimal solutions, obtained through modi method and stepping stone method
equal or different. Why?
To #1 #2 #3 Supply
From
6 4 1 50
A
3 8 7 40
B
4 4 2 60
C
20 95 35 150
Demand
3. The problem is given as follows. Solve it using NWC method and test it using stepping
stone method.
To #1 #2 #3 Supply
From
10 12 7 180
1
14 11 6 100
2
9 5 13 160
3
11 7 9 120
4
240 200 220
Demand
Chapter 4
Assignment problems:
Assignment problem occurs when the manager in the organization wants to

assign n objects to m facilities on a one to one basis.
E.g. Assigning workers to tasks,

Assigning workers to machines
Assigning workers to jobs.
The fundamental objective of making assignment is to minimize cost of
completing or carrying out an assignment or to maximize profit from
carrying out a task. The method used to solve this kind of problem is called
Hungarian method. It is based on opportunity cost concept.
Steps in Hungarian method:
1) Identify the minimum cost element in each row and subtract it from all
elements in that row. This results in the first reduced cost matrix.
2) Subtract the minimum element in each column of then first reduced cost
matrix from all elements in the column.
3) Determine if an assignment with a total reduced cost of zero is possible from
the second reduced matrix. If so, this assignment is optimal. If not proceed
to step 4.
4) Draw a minimum number of horizontal and/or vertical lines to cover all
zeros. If the minimum number of straight lines is the same as the number of
rows or equivalent columns in the matrix, an optimal solution is reached. If
not, subtract the smallest element from not covered numbers by a line and
add this same element to all elements laying at the intersection of the two
lines.
5) Determine if an optimal assignment is possible. If not, repeat step 4 and 5
until an optimal solution is reached.
Example: Solve the following problem using assignment method.
Employees
Jobs A B C D Row min
1 15 20 18 24 15
2 12 17 16 15 12
3 14 15 19 17 14
4 11 14 12 13 11
Employees
Jobs A B c D Row min
1 0 5 3 9
2 0 5 4 3
3 0 1 5 3
4 0 3 1 2
Col. min 0 1 1 2
Employees
Jobs A B c D Row min
1 0 4 2 7
2 0 4 3 1
3 0 0 4 1
4 0 2 0 0
Jobs A B c D
1 0 3 1 6
2 0 3 2 0
3 1 0 4 1
4 1 2 0 0
Assignment:
1-A= 15
2-D= 15
3-B= 15
4-C= 12
Total= $57
Example 2:
A firm has five jobs that must be assigned to 5 work crews. Because of
varying work experience of crews, each work crew is not able to complete
each job with the same effectiveness. The cost of each work crew to do each
job is given in the cost matrix as shown below. The objective is to assign the
jobs to work crews so as to minimize the total cost of completing all jobs.
Required: work out the optimal assignment plan for the firm.
Employees
Jobs J1 J2 J3 J3 J5
1 41 72 39 52 25
2 22 29 49 65 81
3 27 39 60 51 40
4 45 50 48 52 37
5 29 40 45 26 30
Prepare row matrix and column matrix and compute the solution.
Accordingly:* Solution = $155.
Example 3:
M A B C D
J
I 6 12 7 15
II 11 8 11 7
III 16 14 15 12
IV 9 9 11 6
Compute the solution. * Solution= $35.
Special Cases:
1) A case of unequal number of rows and columns
Unbalanced case:
Unbalanced A.P. is solved in similar manner that of unbalanced T.P. In this case
we make a Dummy job or Dummy Machine, as the case may be, to balance the
matrix. Costs in such rows or columns represented by Dummy will be treated as
zeros. Having reduced to balanced matrix, the problem is now solved in the
usual manner.
Jobs A B
Machines
I 5 7
II 4 2
III 3 6
Jobs A B C
Machines
I 5 7 0
II 4 2 0
II 3 6 0
Now, solve it in the usual manner. As there is zeros at the row minimum,
find only column minimum and proceed as usual.
2. Rout problem
TO A B C D E
FROM
I M 4 7 3 4
II 4 M 6 3 4
III 7 6 M 7 5
IV 3 3 7 M 7
VI 4 4 5 7 M
Solve it in usual manner. Don’t assign to the routes having problems being
represented by M in the cells. Find row minimum and column minimum and
assign it as usual. The solution indicates the minimum cost of setup to be
$20.
Chapter 5:
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Prepared by Dr.

Brehanu Borji (Associate Professor)

Quantitative Analysis for Business Decisions

1. Operations Research – An overview

1.1 The origin and Development of operations research

The term Operations Research, was first coined in

Government of Great Britain appealed to the people and

Work, Mathematics, Commerce and Engineering. With

However, the following definition is proposed for this

According to S L Cook 1977, Operations Research has

6. O.R. is applied decision theory. It uses scientific,

N.B. - O.R. is a team effort. Team efforts are as old

Activity 1.1: Define the meaning of Operations

1.3 NATURE AND CHARACTERISTIC OF

Some significant features of O.R. are given here under

consideration. For this purpose, it is necessary that a

vii) Wholistic Approach. While arriving at a decision,

It is not so easy to exhaustively list down the features

1.4 APPLICATIONS OF OPERATIONS RESEARCH

Operation Research is mainly concerned with the

Some applications of O.R. in the functional areas of

Purchasing, Procurement and Exploration

Research and Development

1.5 OPPORTUNITIES AND SHORTCOMINGS OF

The use of O.R. to improve decision-making has

solve such complex problems without using O.R.

1) There are certain problems which a decision-maker may

managers and hence fail to gain their support and

LINEAR PROGRAMMING PROBLEM (LPP)

a) Physical models: Physical model is

i) Iconic models: They are basically scaled up/

concrete but they are easier to manipulate as

formulation are fixed at predetermined values so that

The mathematical models comprise three basic

iii) Uncontrollable variables: These variables are

Activity 1.2: Review Questions

The different components of mathematical models are tied

The term formulation is used to mean the process of

on one variable has a proportional influence or impact

What is linear programming? “Linear programming is

2.b) CHARACTERISTICS OF LINEAR PROGRAMMING

1. Objectives. Objectives can be expressed in a standard

2. c) Definition of terms employed in LPP

equations in m variables is called a basic solution. The (n-

an appropriate variable to make it equality (=) equation.

h) Surplus Variable. Some times, constraints are given

2. d) Advantages of Linear Programming.

Following are certain advantages of linear programming:

maker can employ his productive factors effectively by

2. e) Limitations of Linear Programming.

concerning business and industrial problems, are linearly

2.1 FORMULATION OF MATHEMATICAL MODEL OF LP

The procedure for mathematical formulation of a linear

Simplex Tableau: This is a tableau prepared to show and

meter of suiting requires 3 minutes in weaving, 2 minutes in

The data can be summarized as follows before formulating an LPP model.

Products in meters Availability

LPP model formulation

Example 2.2: A small scale manufacturer produces two types of

The summarized data of the above problem is as follows:

LPP model formulation:

Example 2.3: A firm can produce 3 types of clothes A, B and

The LPP model formulation: