Aeacc19 - Management Science Unit 1

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Quantitative Techniques: Guide for decision making 2
Quantitative Techniques:
Guide for decision making
A Learning Package for
AEACC19 – Management Science
John Philip S. Racaza
“For classroom use only.”

Quantitative Techniques: Guide for decision making

A learning package for AEACC19 Management Science
by
And
Jose Rizal Memorial State University
All rights reserved. No part of this module may be reproduced, distributed, or transmitted
in any form or by any means including photocopy, recording, picture taking, or other
electronic mechanical methods of reproduction, without the express prior written
permission of the author except in case of brief quotations embodied in this module
Page and Cover Designed by: John Philip S. Racaza
ISBN ___________
First Edition ________
JOSE RIZAL MEMORIAL STATE UNIVERSITY

The Premier University in Zamboanga del Norte
Governor Guading Adasa Street, Sta Cruz, Dapitan City, 7101
Zamboanga Del Norte, Philippines
Telephone No. (065) 908-8294
jrmsu@edu.ph

Course Introduction
The course Management Science is for Bachelor in Accountancy, Bachelor of
Science in Accounting Information System, Bachelor of Science in Internal Auditing and
Bachelor of Science in Management Accounting learners. This is a course on the use of
Management Science in solving management decision problems and is meant to assist
students in acquiring special competence in the scientific management approach to
problem solving. It aims to provide learners with an awareness of standard tolls in
Management Science/ Operations Research (MR/OR), and an appreciation of relevant
techniques in mathematical model building, mathematical programming and decision
analysis. The course also seeks to develop within the student's ability to recognize
potential application areas in their future jobs, as well as the meaning utilization of the
Management Science tools and techniques in the government, local industry, and in
business particularly in the areas of finance, marketing, production and human resource
management.
This course will utilize a flexible learning package which include course
introduction, course syllabus, learning guide, learning contract, summative assessments
are included that will provide to the students as to what the course is all about, the course
requirements, and what are the activities and assessments to be accomplished.
This learning package is distinct from other books because it has the following
major parts:
Course Introduction – It presents the vital information about the course.
Course Syllabus – This provides vital information on the course outcomes,

learning outcomes, activities, assessments, grading system and the course requirements.
Learning Guide – This provides significant information as to the students’

schedules of submitting the output and the course requirements, feedback modality,
communication mechanism, and the contact information of the instructor/professor and
other authorities of the University/Campus.
Learning Contract – It is a document which contains the commitment of the

learners in accomplishing the activities which includes also the Data Privacy Act,
plagiarism rules, safety reminders, and parents’ support.
Summative Assessments – These are forms which include the summative

assessment plan, summative assessment instructions, and assessment rubrics.
Flexible Learning Module – This is the meat of the package that contains the
front contents, module content (learning outcomes, pretest, content, learning activities,
and assessments), and the back contents.
Moreover, the flexible learning module included in this FLS Package composed of
3 units. Each unit draws different functional areas of business. In particular, the course will
cover a variety of applications of management science in the different areas of a
management. It provides outcomes-based education model being implemented in both
basic and higher education institutes.
I hope that you will have a meaningful and fruitful learning in this course.
- Author

Contents
Page
Copyright 3
Course Introduction 4
Course Syllabus 6
Learning Guide 9
Learning Agreement 12
Summative Assessment Plan 13
Flexible Learning Module 14
References 65
Glossary 66
Rubrics 68
User’s Evaluation Form 69
About the Author 71

Course Syllabus

Initiate in resolving emerging business issues and problems with innovative thinking
having a global perspective by following the international accounting and auditing
standards in the areas of financial accounting and reporting, cost accounting and
management, internal control, taxation, and accounting information system applying
1 accounting software in generating reports ang making decisions.
Apply extensive learnings in the Philippine Financial Reporting Standards, Philippine
Standards on Auditing, National Internal Revenue Code, Accountancy Law and other
regulatory frameworks necessary for them to excel in actual workplace while
establishing competence, professionalism, ethics, integrity, objectivity and due care for
2 the pursuit of a rewarding career in all fields of Accountancy.
Proactively communicate innovative ideas and relevant information in making financial
Program Outcomes 3 and nonfinancial decisions with stakeholders across all communication platforms.
Conduct accountancy research through independent studies of relevant literature and
appropriate use of accounting theories and methodologies analyzing results of the
study by applying technology as a tool and make business decisions based on the
4 findings of the research.
Exercise high moral and ethical standards committing to good corporate citizenship
and social responsibility in performing functions as accountant while maintaining Rizal’s
5 ideals of nation building, curiosity and community service.
Conduct accountancy research through independent studies of relevant literature and
appropriate use of accounting theories and methodologies analyzing results of the
study by applying technology as a tool and make business decisions based on the
6 findings of the research.
This is a course on the use of Managament Management Science in solving management
decision problems and is meant to assist students in acquiring special competence in the
scientific management approach to problem solving. It aims to provide students with an
awareness of standard tolls in Management Science/ Operations Research (MR/OR), and an
Course Description appreciation of relevant techniques in mathematical model building, mathematical programming
and decision analysis. The cousrse also seeks to develop within the student's ability to
recognize potentiak application areas in their future jobs, as well as the meaning utilization of the
Management Science tools and techniques in the government, local industry, and in business
particularly in the areas of finance, marketing, production and human resource management.
The overall goal of the course is to let the students be analyze and resolve constraints in making
Course Outcome financial decision in the workplace. The specific course outcome are as follows
Apply different business quantitative methods in making business managerial
1 decisions.


Learning Guide
The key to successfully finish this material lies in your perseverance to sincerely
and honestly perform the learning activities and accomplish the assessments. This flexible
learning package is developed with the aim to aid your learning for this course. Aside from
meeting the content and performance standards of this course in performing all the
learning activities and assessments, you will be able to learn the skills and values which
are needed in achieving the future skills and the graduate attributes to become globally
competitive individuals.
Classroom Rules and Conduct
The following are the rules that will help and guide you to be on track and
successfully finish this course:
1. Schedule and manage your time to read and understand every component
of this learning package.
2. Study on how you can manage to perform all the learning activities in
consideration with your resources and accessibility to technology. Do not
ask questions that are already answered in the guide.
3. If you did not understand the readings and the other tasks, read again. If
there are still clarifications and questions, feel free to reach me through
the contact information indicated in this guide.
4. Do not procrastinate. As much as possible, follow the time table.
5. Read and understand the assessment and technology tools as indicated
in the directions in every assessment or activity.
6. Before the end of the midterms, you will be tasked to send back the
material trough the pigeon boxes in your department. For online learners,
you will submit your output and other tasks in the google classroom. While
waiting for my feedback of your accomplished module, you may continue
on accomplishing the tasks in the succeeding units that are scheduled for
the finals.
7. Most importantly, you are the learner; thus, you do all the tasks in your own.
You may ask assistance and guidance from your parents, siblings or
friends, but all the activities shall be performed by you alone.
8. Course requirements must be submitted as to schedule.
9. Plagiarism is strictly prohibited. Be aware that plagiarism in this course
would include not only using another’s words, but another’s specific
intellectual posts in social media. Assignments must be done independently
and without reference to another student’s work. Any outside sources used
in completing an assignment, including internet references must be fully
cited on any homework assignment or exercise.
10. All students should feel free to talk to the instructor face-to-face or through
media during office hours.

11. Academic accommodations are available for students with special needs.
Students with special needs should schedule an appointment with the
instructor early in the semester to discuss any accommodations for this
course.
Study Schedule
Week Unit Title Activities

August 24-September 11,
Orientation Distribution of FLPs
2020
September 14 - Linear Programming Graphical

September 25, 2020 Method
Situational Analysis
September 28 - Unit 1 - Making decision (with Problem Solving)
October 9, 2020 using linear programming Graphical Method
(with Problem Solving)
October 12-23, 2020
Simplex Method – Computer
Software
October 26 – (with Problem Solving)
Assignment Model
November 6, 2020 Assignment Model – Computer
Software
November 9 –
Transportation Model (with Problem Solving)
November 27, 2020
using Computer Software
November 30, 2020 –
(with Problem Solving)
December 25, 2020
Manual Method
Decision Theory Situational Analysis
December 28, 2020 -
(with Problem Solving) -
January 5, 2021
Computer Software
January 6, 2021 Submission of Final Assessment
Evaluation
To pass the course, you must observe the following:

1. Read the course module and answer the pretest, quizzes, self-
assessment activities.
2. Write your thoughts and suggestions in the comment boxes.
3. Perform all the learning activities.

4. Accomplish the assessments.

5. Submit the course requirements.
6. Perform the Summative Assessments
Technology Tools
In order to perform all the learning activities and accomplish the assessments,
you will need these software applications: word processing, presentation, publication
and spreadsheet. These are applications that are available in your desktop or laptop that
will not require internet connection. These materials will be submitted through the pigeon
boxes. For online learners, materials will be uploaded in google classroom.
Feedback Modality and Communication Mechanisms
Feedback system will be facilitated through text messaging. If you need to call,
send me a message first and wait for me to respond. Do not give my CP number
to anybody. I will not entertain messages or calls from numbers that are not registered.
You may send your clarifications and questions through the google classroom.

Grading Plan
The term grade is computed using the formula:
Formative/student engagement 30%

Summative (Major output and
requirements) 70%
TOTAL 100%
Midterm Grade = 100% of the Midterm Grade

Final Grade = 50% of the Midterm Grade + 50% of the Final
Grade
Contact Information
Person/Office Email address CP number

Instructor jmcantina@jrmsu.edu.ph 09399168104
IMDO main.imd@jrmsu.edu.ph 09399168104
FLS
CAS
DSAS
Library
DRMMO


LEARNING AGREEMENT
By signing this learning agreement, I commit to the following terms and conditions
of Jose Rizal Memorial State University in the implementation of Flexible Learning System.
Specifically, I commit to observe the following:
1. That I must observe all guidelines of the state pertaining to the prevention of COVID,
specifically to stay home, to observe physical distancing and the use of face masks
when interacting with others.
2. That I shall prioritize my health and safety while I comply with all the necessary learning
activities and assessments needed in my enrolled courses.
3. That I will exhaust all means of complying the requirements at home or in a less risky
place and location that will not allow me to be exposed to other people.
4. That I have already read and understood all instructions pertaining to my enrolled
courses.
5. That I commit to do all the learning activities diligently, following deadlines and the
learning guide enabling me to deliver the course requirements.
6. That I commit to answer all forms of assessment in the learning package honestly.
7. That I shall initiate in giving feedback to my instructor at least once every two weeks.
8. That I shall not reproduce or publish any part of the learning package content without
the written consent of the University and the author/s.
9 . That I shall not commit any form of plagiarism in all course requirements.
Conformed:
Name and signature of student Date signed
Name and signature of parent/guardian Date signed
Contact Number of Parent/Guardian

**Please email the signed copy of this learning agreement to your instructor as soon as
you have received the learning package.


Form No. F16: Summative Assessment Plan
Scoring/ Weight
Course Title of (%) in
No. Description Grading
Outcomes Assessment Final
Standard Grade
1 Demonstrate Situational Students will Rubric/Point 70%
skills in Analysis be given System
applying the (with cases to (Product-
principles of Problem answer and based
financial Solving) also Assessment)
reporting problems to
standards solve.
through
situational
analysis and
problem
solving.


Quantitative Techniques:
Guide for decision making
AEACC19 – Management Science

Quantitative Techniques: Guide for decision making

AEACC19 - Management Science
by
And
All rights reserved. No part of this module may be reproduced, distributed, or transmitted
in any form or by any means including photocopy, recording, picture taking, or other
electronic mechanical methods of reproduction, without the express prior written
permission of the author except in case of brief quotations embodied in this module
Page and Cover Designed by: John Philip S. Racaza
ISBN ___________
First Edition ________

The Premier University in Zamboanga del Norte
Governor Guading Adasa Street
Santa Cruz, Dapitan City, 7101
Zamboanga Del Norte, Philippines
Telephone No. (065) 908-8294
jrmsu@edu.ph

Preface
This module aims to guide the faculty and as well as the learners the
significance in making managerial decisions using quantitative techniques in
business. Also, the goals and initiative of this module to provide faculty and
learners to attain the University’s goals and objectives within the entire learning
process.
Management science plays a significant role specially in making financial

decision. In this course, students will learn how to deal managerial decision facing
different constraints and probabilities in order to have concrete managerial
decision either maximize revenue or minimize cost. This module is intended also
for future entrepreneurs, leaders, and decision-makers that initiate and create solid
analysis of quantitative techniques that are based on fact and available information
in resolving business related issues. In this module, it teaches individuals to make
significant decisions for business sustainability and growth.
This piece of work is a result of the new normal system of education amidst
COVID-19 pandemic which is aligned with the CHED memoranda. This work is to
cater the needs of all learners in the province and neighboring provinces to
continue their studies become professionals despite crisis.
This module is designed for the use of undergraduate students of Business

Accountancy Programs. Faculty in other field may also find this module useful in
their endeavor. Concepts, characteristics and approaches in studying
management science towards the end are discussed in this module.

Acknowledgment
My foremost gratitude to the Lord God Almighty who constantly poured His
wisdom in realizing this module.
I am forever grateful to the following individuals who consistently support in

making this module, to Dr. Daylinda Luz R. Laput, University President of Jose
Rizal Memorial State University, Dr. Alice Mae Arbon, OIC- Vice President for
Academic Affairs and Dr. Jannette J. Icao OIC - Vice President for Research,
Development and Extension for their guidance and valuable criticisms and
suggestions to this module formulation. Dr. Wilfredo D. Carreon Jr., System Dean
of the College of Business and Accountancy, a very understanding and supportive
mentor for his insight and input, Dr. Jovelyn M Cantina, Director for Instructional
Materials and Development, for her constructive and valuable critiques, comments
and suggestions and to the faculty and staff of the College of Business and
Accountancy in Jose Rizal Memorial State University who guided me along my
way to finish this module.
To my parents, brothers and sisters for the love and spiritual support that
strengthens me during the process of this module.
Lastly, I would like to thank my friends and colleagues who extended their
support and imparting their knowledge, and most especially to my dear students
for their youthful optimism and inspiration in realizing this module.

Contents
Page
Copyright 17
Acknowledgment 18
Preface 19
Unit 1 Managerial Decision using Linear Programming 21
Unit 2 Assignment and Transportation Model
Unit 3 Decision Theory
References 67
Glossary 68
Rubrics 70
Answer Key 71
User’s Evaluation Form 72

Unit 1- Managerial Decision using Linear Programming

Management is a process used to achieve certain goals through the

utilization of resources. Management Science (MS), an approach to managerial
decision making based on the scientific method, makes extensive use of
quantitative analysis.

Learning Outcomes
At the end of this unit, you will be able to:
 Prepare and perform interpretation using different types of linear programming

that are necessary to make business management decisions.
Pretest
True or False
Directions: Encircle letter T if your answer is TRUE or F if the answer is FALSE.
T F 1. Skill in quantitative analysis can be obtained by studying a book.

T F 2. If you were hired as Management Science Analyst, you would spend all your
time observing decision-making environments.
T F 3. The final step in Management Science is implementing the solutions who have
found.
T F 4. You cannot maximize all the criteria for a good management information system
simultaneously.
T F 5. Management Science applications tend to be found mainly in the area of
organizational behavior.

Thank you for answering the test. Please see the back content

for the answer key or you may view it in the google class.

The next section is the content of this unit. It contains
vital information of the topics. Please read the content.

Content
Definition and Characteristics of Management Science
Management Science
A variation of names exists for the body of knowledge involving quantitative

approaches to decision making; in addition to management science, two other widely
known and accepted names are operations research and decision science. Today, many
use the terms Management Science (MS), Operations Research (OR), and Decision
Science (DS) interchangeably.
There are many definitions of management science; different authors give different
views as regards to its definitions.
 Management Science is the application of scientific methods, techniques and tools
to problems involving the operations of systems so as to provide those in control
of the operations with optimum solutions to the problems (Fábry, 2003).
 According to Taylor (2013) management science is the application of a scientific
approach to solving management problems in order to help managers make better
decisions.
 Anderson, Sweeney, Williams, Camm and Martin, (2012) stated that management
science is an approach to decision making based on the scientific method, makes
extensive use of quantitative analysis.
Characteristics of Management Science
Management science, in a broad understanding of management, it requires an

appreciation of, classical, behavioral, and quantitative approaches. In the perspective of
classical is all about learning ways to see the growth in the efficiency of the workers and
also it includes the whole organization that presents through a scientific management
theory and administrative theory; while the behavioral approach is concerned of learning
ways to recognize individual’s behavior, groups or teams, and motivate and lead them
effectively. For the quantitative perspective is getting ways to develop and improve
operations, allocation of resources and making decisions, which is represented by the
Management Science and Operation Management (Hassan and Zaazou, 2018).
It can also be briefly defined as the application of scientific method to the analysis
and solution of managerial decision problems Fábry (2003). Fabry mentioned the following
major characteristics of management science:
 A primary focus on managerial decision making.

 The application of the scientific approach to the decision-making process.
 The examination of the decision situation from a broad perspective; i.e. the
application of a system approach.
 The use of methods and knowledge from several disciplines.
 A reliance on formal mathematical models.
 The extensive use of computers.
Decision-Making

Decision-making is the process whereby an individual, group or organization

reaches conclusions about what future actions to pursue given a set of objectives and
limits on available resources. This process will be often iterative, involving issue-framing,
intelligence-gathering, coming to conclusions and learning from experience (Russo,
2014).
Fábry (2003) concluded decision-making is a conclusion of the process. Decision

making is a systematic process and can be basically described by the following steps, (1)
define the problem, (2) search for alternative courses of action, (3) evaluate the
alternatives, and (4) select one alternative.
Decision making is a systematic process and it may consider the structure of

system which consist of three related parts: inputs, processes and outputs. Inputs enter
the system which are the raw materials, human, cash. Then, processes convert the inputs
into outputs which may use force, workers, operating procedures, machines and etc.
Lastly, outputs leave the system in the form of finished goods or served customers. More
likely, in many applications, outputs are connected with the objective of the management
which are to maximize profit and minimize total costs.
Systems also emphasize and consider closed and open systems. Wherein a
closed system is totally independent of and fully isolated from influences of the
environment (external factors). An open system is significantly interconnected with the
environment; this type of system exchanges information, material, energy, people with the
environment (internal factors). This systems approach includes searching and describing
all the relations between the elements in decision making and the real world. Also, using
management science technique is a significant assumption, as it requires precise
explanation of a problem. Only this approach allows the preparation and design of the
problem in the mathematical way.
Model and Modeling
A management science model is fundamental term of a current problem situation.

It could be illustrated in the form of a chart or graph, however often times, sets of
mathematical relationships are presented in a management science model in a form of
numbers and symbols (Taylor, 2013). While modeling is the process in conducting real-
world problems and relating them in mathematical relationships.
Figure 1. Modeling Process
Note: Adopted from Fabry, (2003). Management Science.

According to Levin, Rubin, Stinson and Gardner, (2001) Management Science

model helps managers make better decisions. When a company hires a Management
Science specialist most likely it will help and guide the manager in making better decisions.
Nonetheless, the model is only a simplified illustration of the real-world scenario and
therefore it is diverse and only significant, relevant items or properties that can be used in
management science model.
Definition of the Problem
Fábry (2003) identifies the first step in management science model is the
recognition of the problem and its definition in real-world setting. Every decision maker
wants to know the bits of information along with process of production and all the other
important data needed in accounting department, finance, marketing, etc. Moreover,
Taylor (2013) states that once the problem has determined then the problem exists, the
problem must be clearly and concisely defined. Improperly defining a problem can easily
result in no solution or an inappropriate solution. Therefore, the limits of the problem and
the degree to which it pervades other units of the organization must be included in the
problem definition.
Formulation and Construction of the Model
According to Anderson, et .al (2012) defines models as representations of real

objects or situations and can be presented in various forms. Representations of a problem
by a system of symbols and mathematical relationships or expressions. Such models are
referred to as mathematical models and are a critical part of any quantitative approach to
decision making.
Formulation and construction of a mathematical model is the key issue of the

modeling process. The problems determined is being transformed into the mathematical
relationships like numbers, symbols, parameters, variables, functions, equations,
inequalities, etc. In this case, variables correspond to the amounts of products, parameters
are the raw materials, prices, budget, etc. The several constraints in a mathematical
model, especially in equalities and inequalities, where it does not allow a specific unit to
exceed production possibilities and which assure that the produced amount is on the
demanded level. The model includes the objective function for revenue or total cost. The
simpler the model, the better in its handling the solution to the problem.
Nevertheless, the simplest models could be too far from what is real since because
it might have no sense to implement results because of low significant value. The most
multifaceted model, for example, with particular and precise (nonlinear) relationships
between variables, could have a perfect representation of reality however, it could hardly
be solved. When constructing a new model, it is important to remember the rule: finding a
proper balance between the level of simplified model and the good representation of reality
(Fábry, 2003).
Solution
Taylor (2013) stated that once a model has been constructed in management
science, they are solved using the management science techniques. A management
science solution technique usually applies to a specific type of model. Thus, the model
type and solution method are both part of the management science technique. Then, it is

able to say that a model is solved because the model represents a problem. When we
refer to model solution, we also mean problem solution.
Moreover, Fabry (2003) stated that solution to the proposed model is more or less
an applied technique. When making a decision on the form of applied model, the use of
methods, principles or techniques must be put in consideration. The typical goal of most
problems is to find an optimal solution, which is the best of all feasible solutions that would
satisfy all the limitations (constraints). The optimal solution may either gives highest
revenue or lowest total cost, while considering all the constraints. These solutions
determine how many items of each product should produce and what revenue that can
expect.
With the use of technology, like computers and software, has brought new
opportunities in solving wide range of real problems and it is now possible to have efficient
results. The possibility in using software gives individual the control, ease in entering the
inputs and provides informative output. In this case, model validation and sensitivity
analysis are also an important step in making business decisions. Validation of the model
is its comparison with the real system. The better a model represents the reality, the more
valid it is. The main point in validation is to compare its performance with some past data
that are available for the actual system.
Sensitivity analysis is a convenient tool in examining the impact of changes in

inputs on changes in outputs. Example, there is specific raw material, however the raw
materials are mostly the limitative factor for the production and hence for the attainable
revenue. What will happen to the proposed production, if there is be an addition unit of
raw materials that you are going to avail? Then, using the additional unit of the raw
material, it will produce more goods and gain more profit.
Implementation
After the validation and sensitivity analysis in the modeling process,

implementation is the final and very important step. Implementation is the original purpose
of the whole process and the main point in creating the model for the management - not
the model itself, but adjustment of reality according to the recommendations from the
results in the modeling process. On the other hand, creation of the model in a wrong way
and lacks validation, it would seriously harm the real system. In order to achieve the best
business management results, each step must be carefully considered and cannot be
skipped (Fabry, 2003).
Implementation, according to Taylor (2013) is a critical but often overlooked step

in the process. It is not always a given that once a model is developed or a solution found,
it is automatically used. Commonly the person responsible for putting the model or solution
to use is not the same person who developed the model, and thus the user may not fully
understand how the model works or exactly what it is supposed to do.
Management Science Techniques
Management Science have grown rapidly in business sectors, private institutions

and even in government sectors. Concurrently, the scope of the problems responded by
Management Science practitioners expanded as well. Management science techniques

could be applied in managerial problems in different fields of Accounting, Finance,

Marketing, Production or Operations, and Organizational Development or Human
Resource (Levin et. al 2002).
For solving these and many other problems the following techniques can be used:
Linear Programming
Linear programming is one of the best-known tools of management science. This

method mostly defines the problem as the maximizing or minimizing a linear function, in
relation to a set of linear constraints (Fábry 2003). According to Levin, et. al. (2001) linear
programming can be used to determine optimal combinations of resources of a firm to
achieve a given objective or to allocate scarce resources optimally.
Integer Linear Programming
Integer linear programming is an approach used for problems that can be set up
as linear programs, with the additional requirement that some or all of the decision
variables be integer values (Anderson, Sweeney, Williams, Camm & Martin, 2012).
Moreover, (Fabry, 2003) Further requirements for the values of variables are added to the
original linear model (i.e. the model with the linear function and linear constraints). All or
some of the variable values have to be an integer. The special type of those variables is
binary variable (0-1 variable), value of which can be 0 or 1.
Goal Programming
According to Taylor (2013) goal programming is a variation of linear programming

in that it considers more than one objective (called goals) in the objective function. Goal
programming models are set up in the same general format as linear programming
models, with an objective function and linear constraints. The model solutions are very
much like the solutions to linear programming models.
Distribution Models
A network is a graphical description of a problem consisting of circles called nodes

that are interconnected by lines called arcs. Specialized solution procedures exist for
these types of problems, enabling us to quickly solve problems in such areas as
transportation system design, information system design, and project scheduling
(Anderson, Sweeney, Williams, Camm & Martin, 2012).
Non-Linear Programming
Fabry (2002) models used in this area of management science are similar to the
models of linear programming; however, there is an important difference between them:
nonlinear models contain nonlinear objective function and/or some nonlinear constraints.
Methods used for solving tasks from this area of management science are, of course,
rather different from the linear programming methods.
Project Management
Anderson, Sweeney, Williams, Camm, and Martin (2012) stated that in project
management, managers are responsible for planning, scheduling, and controlling projects

that consist of numerous separate jobs or tasks performed by a variety of departments,

individuals, and so forth. The PERT (Program Evaluation and Review Technique) and
CPM (Critical Path Method) techniques help managers carry out their project scheduling
responsibilities.
Inventory Models
This area of management science techniques deals with the situations where units
(e.g. customers) need to be served by a number of channels (e.g. vendors). As the number
of vendors is limited, some of the units have to wait for the service in a queue. Hence the
alternative name for the waiting line models: Queuing Models. In real situations both the
process of units’ arrivals and the service times are random and the probabilistic approach
is necessary. Simple waiting line models can be solved analytically (exact solution using
derivative formulas), whereas for complex queuing systems the technique of simulation is
required. The main managerial goal in waiting line models is the decision about the
number of service lines (finding a proper balance between size of the queue and the total
service cost) (Fabry, 2003).
Simulation
In simulation, a mathematical model is constructed (typically using a computer)

that replicates a real-world system under analysis, and then that simulation model is used
to solve problems in the “simulated” real-world system (Taylor, 2013). Simulation is a
computer experimentation with a simulation model aimed at describing and evaluating the
real system’s behavior - the computer program simulates the real system. The typical
situations for successful use of simulation are complex waiting line models and inventory
models (Fabry, 2003).
Decision Analysis
Decision analysis can be used to determine optimal strategies in situations

involving several decision alternatives and an uncertain or risk-filled pattern of events.
Forecasting
Forecasting methods support the manager’s prediction of future aspects of a

business operation. Statistics and econometrics offer many techniques based on time-
series and regression analysis. The main managerial goal is to project future trends
following the previous behavior of the system. The well-known are the methods of Moving
Averages, Least Squares, Exponential Smoothing, etc. Since the statistical significance is
very important for these models, the manager’s experience with hypotheses validation
and statistical tests is necessary.
Markov Analysis
Markov process models are useful in studying the evolution of certain systems
over repeated trials. For example, Markov processes have been used to describe the
probability that a machine, functioning in one period, will function or break down in another
period.

Within this unit we will only focus on in Linear Programming:

Graphical Method and Simplex Method.
Please use extra sheets in solving different problems (examples) of
linear programming. Graphing papers, calculator and laptop are
necessary tools in answering the linear programming: graphical and
simplex method.
Linear Programming
Refers to planning through the use of linear relationship of the variable involved. It
applies mathematical techniques to find the best possible solutions to problems in spite of
limited resources. A good manager can maximize profit or minimize cost without violating
the limitation and restriction of variables, such as time and quantity of available raw
material (Penicilla & Dacillo, 2016).
Two methods are introduced in Linear Programming – graphical and simplex

method. Graphical method can only be used if the problem has two or three variables,
since there are only two coordinates axes in a plane and three coordinates in space. While
simplex method involves three variables in maximization and minimization problems.
Graphical Method
In general, linear programming models help managers determine solutions and

make decisions for problems that will achieve some objective in which there are
restrictions, such as limited resources or a recipe or perhaps production guidelines
(Taylor, 2013).
This kind of method is in the form of graph that is used to arrive at the optimum
solution. The optimum solution is one that makes the objective function as large as
possible in the case of maximization and as small as possible in the case of minimization
problems. The set of all points in the graph satisfying the constraints is called feasible
region. The points are located at the feasible region of the graph (Penicilla & Dacillo,
2016).
A linear program has two parts: the objective function and the constraints. The
objective function is a mathematical expression introduced by the words “maximize” or
“minimize”. The constraints are introduced by the word “subject to.” The mathematical
expression in the constraints is written as inequalities. Two kinds of constraints may occur.
Explicit constraints mean that a condition expressed in a mathematical sentence is derived
from the condition problems. Implicit constraints are implied conditions such as when time
or raw materials are variables in the problems. These factors must always be expressed
in positive values.
Mathematical Formulation
According to Taylor (2013) there are three steps in applying the linear
programming technique. First, the problem must be identified and can be solved by linear
programming. Second, the unstructured problem must be formulated as a mathematical
model. Third, the model must be solved by using established mathematical techniques.
The linear programming technique derives its name from the fact that the functional

relationships in the mathematical model are linear, and the solution technique consists of
predetermined mathematical steps—that is, a program. In this part, the formulation of the
mathematical model that represents the problem and then with solving this model by using
a graph.
The following procedures, steps and example discussed below was created and
develop by Taylor, (2013).
Linear Programming: Maximization Problems
Corona Stoneware Enterprise is a small crafts operation run by barangay health

workers. The enterprise hires skilled craftsperson to produce clay bowls and mugs with
authentic designs and colors. The two main resources used by the enterprise are special
pottery clay and skilled labor. Given these limited resources, in order to maximize profit
the enterprise wants to know how many bowls and mugs to produce each day. This is
generally referred to as a product mix problem type. This scenario is illustrated in Figure
2.
Figure 2
Corona Stoneware Enterprise
Note: Adopted from Taylor (2013), Introduction to Management Science, 11th

Edition.
The mug and bowl have the following resource requirements for production which
are the labor and clay, and profit per item produced the parameters of the problem.

Table 1
Summary of Resource Requirement
Resource Requirement
Product Labor (hr/unit) Clay (lb/unit) Profit (P/Unit)
Bowl 2 8 200
Mug 4 6 250
There are 80 hours of labor and 240 pounds of clay available each day for
production. First, we will formulate the problem as a linear programming model by defining
each component of the model separately and then combining the components into a sole
model. The following are the steps in this formulation process:
Summary of LP Model Formulation Steps
Step 1: Define the decision variables

How many bowls and mugs to produce?
Step 2: Define the objective function

Maximize profit
Step 3: Define the constraints

The resources (clay and labor) available
Decision Variables
In this case, the management focuses on how many bowls and mugs they need to
produce. The number of bowls and mugs to be produced are represented by variables
which are resented below.
x₁ = number of bowls to produce

x₂ = number of mugs to produce
The objective of the enterprise is to maximize total profit. The enterprise’s profit is
the sum profits collected from each bowl and mug. Profit derived from bowls is determined
by multiplying the unit profit of each bowl, P200, by the number of bowls produced, x₁.
Similarly, profit derived from mugs is determined from the unit profit of a mug, P250,
multiplied by the number of mugs produced, x₂. Thus, total profit, which we will define as
Z, can be expressed mathematically as 200x₁ + 250x₂ by placing after the term maximize
of the profit function. We express the objective of the firm—to maximize total profit:
maximize Z = 200x₁ + 250x₂

where
Z = total profit

P200x₁ = profit from bowls

P250x₂ = profit for mugs
Model Constraints
In this problem, two resources are used for production—labor and clay—both of
which are limited and which are needed to produce both products. For each bowl produced
requires 2 hours of labor. Therefore, the labor used for the production of bowls is 2x₁
hours. Likewise, each mug requires 4 hours of labor; thus, the labor used to produce mugs
every day is 4x₂ hours. The sum of the individual amounts of labor used for each product
is the total labor used and is symbolically presented below:
2x₁ + 4x₂
However, the amount of labor represented by 2x₁ + 4x₂ is limited to 80 hours per day;
thus, the complete labor constraint is
2x₁ + 4x₂ ≤ 80 hr.
The “less than or equal to” ≤ inequality is given instead of an equality = because
the only 80 hours of labor is a maximum limitation that can be used, not an amount that
must be used. This constraint allows the enterprise some flexibility; the company is not
restricted to using exactly 80 hours but can use whatever amount is necessary to
maximize profit, up to and including 80 hours. This implies that it is possible not to use the
all the time available (i.e. 80 hours).
The constraint for clay is expressed in the same way as the labor constraint.
Because each bowl requires 8 pounds of clay, the amount of clay used daily for the
production of bowls is 8x₁ pounds; and because each mug requires 6 pounds of clay, the
amount of clay used daily for mugs is 6x₂. Given that the amount of clay available for
production each day is 240 pounds, the material constraint can be formulated as
8x₁ + 6x₂ ≤ 240 lb
A final restriction is that the number of bowls and mugs produced must be either
zero or a positive value because it is impossible to produce negative items. These
restrictions are referred to as nonnegativity constraints and are expressed mathematically
as
x₁ ≥ 0, x₂ ≥ 0
The complete linear programming model for this problem can now be summarized as
follows:
maximize Z = 200x₁ + 250x₂
subject to
2x₁ + 4x₂ ≤ 80
8x₁ + 6x₂ ≤ 240
x₁, x₂ ≥ 0
The solution of this model will result in numeric values for x₁ and x₂ that will
maximize total profit, Z. As one possible solution, consider x₁ = 5 bowls and x₂ = 10 mugs.

First, we will substitute this hypothetical solution into each of the constraints in order to
make sure that the solution does not require more resources than the constraints show
are available:
2(5) + 4(10) ≤ 80
50 ≤ 80
and
8(5) + 6(10) ≤ 240
50 ≤ 240
Because neither of the constraints is violated by this hypothetical solution, we say

the solution is feasible (i.e., possible). Substituting these solution values in the objective
function gives Z = 200(5) + 250(10) = P3,500. However, for the time being, we do not have
any way of knowing whether P3,500 is the maximum profit.
Now consider a solution of x₁ = 10 bowls and x₂ = 20 mugs. This solution results

in a profit of
Z = 200(10) + 250(20)
= 2,000 + 5,000
= 7,000
Although this is certainly a better solution in terms of profit, it is infeasible (i.e., not
possible) because it violates the resource constraint for labor:
2(10) + 4(20) ≤ 80
100 ≤ 80
The solution to this problem must maximize profit without violating the constraints.
The solution that achieves this objective is x₁ = 24 bowls and x₂ = 8 mugs, with a
corresponding profit of P6,800. The determination of this solution is shown using the
graphical solution approach in the following section.
Graphical Solutions of Linear Programming Models
The formulation of a mathematical model, the next stage in the application of linear
programming to a decision-making problem is to find the solution of the model. A common
solution approach is to solve algebraically the set of mathematical relationships that form
the model either manually or using a computer program, thus determining the values for
the decision variables. However, because the relationships are linear, some models and
solutions can be illustrated graphically.
The graphical method is realistically limited to models with only two decision
variables, which can be represented on a graph of two dimensions. Models with three
decision variables can be graphed in three dimensions, but the process is quite
cumbersome, and models of four or more decision variables cannot be graphed at all.
Although the graphical method is limited as a solution approach, it is very useful at

this point in our presentation of linear programming in that it gives a picture of how a
solution is derived. Graphs can provide a clearer understanding of how the computer and

mathematical solution approaches presented in subsequent chapters work and, thus, a

better understanding of the solutions.

Graphical Solutions of Linear Programming Models
The product mix model will be used to demonstrate the graphical interpretation of
a linear programming problem. Recalling the problem above by Corona Stoneware
Enterprise’s attempt to decide how many bowls and mugs to produce daily, given limited
amounts of labor and clay. The complete linear programming model was formulated as
minimize Z = P200x₁ + P250x₂

subject to
2x₁ + 4x₂ ≤ 80 hr. of labor
8x₁ + 6x₂ ≤ 240 lb. of clay
x₁, x₂ ≥ 0
where
x₁ = number of bowls produced
x₂ = number of mugs produced
Figure 3 is a set of coordinates for the decision variables x₁ and x₂, on which the
graph of our model will be drawn. Note that only the positive quadrant is drawn (i.e., the
quadrant where x₁ and x₂ will always be positive) because of the nonnegativity constraints,
x₁ ≥ 0 and x₂ ≥ 0.
Figure 3.
Coordinates of Graphical Analysis

Edition.
The first step in drawing the graph of the model is to plot the constraints on the
graph. This is done by treating both constraints as equations (or straight lines) and plotting
each line on the graph. Let’s consider the labor constraint line first:

2x₁ + 4x₂ ≤ 80
A simple procedure for plotting this line is to determine two points that are on the
line and then draw a straight line through the points. One point can be found by letting x₁
= 0 and solving for x₂:
(0) + 4x₂ 80
x₂ 20
Thus, one point is at the coordinates x₁ = 0 and x₂ = 20. A second point can be
found by letting and solving for x₂ = 0:
2x₁ + 4x₂ = 80
x₁ = 40
Now we have a second point, x₁ = 40, x₂ = 0. The line on the graph representing
this equation is drawn by connecting these two points, as shown in Figure 4. However,
this is only the graph of the constraint line and does not reflect the entire constraint, which
also includes the values that are less than or equal to ≤ this line. The area representing
the entire constraint is shown in Figure 5.
Figure 4.
Graph of the Labor Constraint
Figure 5
The Labor Constraint Area
Note: Adopted from Taylor (2013), Introduction

to Management Science, 11th Edition

To test the correctness of the constraint area, we check any two points—one inside
the constraint area and one outside. For example, check point A in Figure 5, which is at
the intersection of x₁ = 10 and x₂ = 10. Substituting these values into the following labor
constraint,
2x₁ + 4x₂ ≤ 80
2(10) + 4(10) ≤ 80
60 ≤ 80
shows that point A is indeed within the constraint area, as these values for x₁ and x₂ yield
a quantity that does not exceed the limit of 40 hours. Next, we check point B at x₁ = 40
and x₂ = 30:
2(40) + 4(30) ≤ 80
200 ≤ 80
Point B is obviously outside the constraint area because the values for x₁ and x₂
yield a quantity (200) that exceeds the limit of 80 hours.
We draw the line for the clay constraint the same way as the one for the labor
constraint— by finding two points on the constraint line and connecting them with a straight
line. First, let x₁ = 0 and solve for x₂:
8(0) + 6x₂ = 240
x₂ = 40
Performing this operation results in a point, x₁ = 30, x₂ = 40. Next, we let x₂ = 0and then
solve for x₁:
8x₁ + 6(0) =240
x₁ 30
This operation yields a second point, x₁ = 30, x₂ = 0. Plotting these points on the
graph and connecting them with a line gives the constraint line and area for clay, as shown
in Figure 6
Figure 6
Constraints Area for the Clay


Edition
Combining the two individual graphs for both labor and clay (Figures 5 and 6)
produces a graph of the model constraints, as shown in Figure 7. The shaded area in
Figure 7 is the area that is common to both model constraints. Therefore, this is the only
area on the graph that contains points (i.e., values for x₁ and x₂) that will satisfy both
constraints simultaneously. For example, consider the points R, S, and T in Figure 8. Point
R satisfies both constraints; thus, we say it is a feasible solution point. Point S satisfies
the clay constraint (8x₁ + 6x₂ ≤ 240) but exceeds the labor constraint; thus, it is infeasible.
Point T satisfies neither constraint; thus, it is also infeasible.
The shaded area in Figure 8 is referred to as the feasible solution area because
all the points in this area satisfy both constraints. Some point within this feasible solution
area will result in maximum profit for Corona Stoneware Enterprise. The next step in the
graphical solution approach is to locate this point.
Figure 7
Graph of Both Model Constraints
Figure 8
Graph of Both Model Constraints
Note: Adopted from Taylor (2013), Introduction to Management Science, 11th Edition

The Optimal Solution Point
The second step in the graphical solution method is to locate the point in the
feasible solution area that will result in the greatest total profit. To begin the solution
analysis, we first plot the objective function line for an arbitrarily selected level of profit.
For example, if we say profit, Z, is P4,000, the objective function is
P4,000 = 200x1 + 250x2

Plotting this line just as we plotted the constraint lines results in the graph shown
in Figure 9. Every point on this line is in the feasible solution area and will result in a profit
of P4,000. However, let us see whether an even greater profit will still provide a feasible
solution. For example, consider profits of P6,000 and P8,000, as shown in Figure 10.
A portion of the objective function line for a profit of P6,000 is outside the feasible
solution area, but part of the line remains within the feasible area. Therefore, this profit
line indicates that there are feasible solution points that give a profit greater than P4,000.
Now let us increase profit again, to P8,000. This profit line, also shown in Figure 10, is
completely outside the feasible solution area. The fact that no points on this line are
feasible indicates that a profit of P8,000 is not possible.
Figure 9
Objective Function Line for Z = P4,000
Figure 10
Alternative Objective Function Lines for profits,
Z = P4,000, P6,000, P8,000
Note: Adopted from Taylor (2013), Introduction

to Management Science, 11th Edition

Because a profit of P4,000 is too great for the constraint limitations, as shown in
Figure 10, the question of the maximum profit value remains. We can see from Figure 10
that profit increases as the objective function line moves away from the origin (i.e., the
point x1 = 0, x2 = 0). Given this characteristic, the maximum profit will be attained at the
point where the objective function line is farthest from the origin and is still touching a point
in the feasible solution area. This point is shown as point B in Figure 11.
To find point B, we place a straightedge parallel to the objective function line 4,000
= 200x1 + 250x2 in Figure 11 and move it outward from the origin as far as we can without
losing contact with the feasible solution area. Point B is referred to as the optimal (i.e.,
best) solution.
The Solution Values
The third step in the graphical solution approach is to solve for the values of x1 and
x2 once the optimal solution point has been found. It is possible to determine the x1 and x2
coordinates of point B in Figure 11 directly from the graph, as shown in Figure 12. The
graphical coordinates corresponding to point B in Figure 12 are x1 = 24 and x2 = 8.
Figure 11
Identification of Optimal Decision Point
Figure 12
Optimal Solution Coordination

Edition

This is the optimal solution for the decision variables in the problem. However,
unless an absolutely accurate graph is drawn, it is frequently difficult to determine the
correct solution directly from the graph. A more exact approach is to determine the solution
values mathematically once the optimal point on the graph has been determined. The
mathematical approach for determining the solution is described in the following pages.
First, however, we will consider a few characteristics of the solution.
In Figure 11, as the objective function was increased, the last point it touched in
the feasible solution area was on the boundary of the feasible solution area. The solution
point is always on this boundary because the boundary contains the points farthest from
the origin (i.e., the points corresponding to the greatest profit). This characteristic of linear
programming problems reduces the number of possible solution points considerably, from
all points in the solution area to just those points on the boundary. However, the number
of possible solution points is reduced even more by another characteristic of linear
programming problems.
The solution point will be on the boundary of the feasible solution area and at one
of the corners of the boundary where two constraint lines intersect. (The graphical axes,
you will recall, are also constraints because x1 ≥ 0 and x2 ≥ 0.) These corners (points A, B,
and C in Figure 12) are protrusions, or extremes, in the feasible solution area; they are
called extreme points. It has been proven mathematically that the optimal solution in a
linear programming model will always occur at an extreme point. Therefore, in our sample
problem the possible solution points are limited to the three extreme points, A, B, and C.
The optimal extreme point is the extreme point the objective function touches last as it
leaves the feasible solution area, as shown in Figure 11.
From the graph shown in Figure 11, we know that the optimal solution point is B.
Because point B is formed by the intersection of two constraint lines, as shown in Figure
12, these two lines are equal at point B. Thus, the values of and at that intersection can
be found by solving the two equations simultaneously.
First, we convert both equations to functions of:
2x1 + 4x2 = 80
½ (2x1 = 80 - 4x2) ½
x1 = 40 - 2x2
and
8x1 + 6x2 = 240
1/8 (8x1 = 240 - 6x2) 1/8
x1 = 30 – 3x2/4
Now, we let x1 in the first equation equal x1 in the second equation,
40 - 2x2 = 30 – 3x2/4
and solve for x2:
5x2 /4 = 10
x2 = 8
Substituting x2 = 8 into either one of the original equations gives a value for x1:

x1 = 40 - 2x2
x1 = 40 – 2(8)
x1 = 24
Thus, the optimal solution at point B in Figure 12 is x1 = 24 and x2 = 8. Substituting

these values into the objective function gives the maximum profit,
Z = P200x1 + P250x2
Z = P200(24) + P250(8)
Z = P4,800 + P2,000
Z = P6,800
In the case of Corona Stoneware Enterprise, the solution indicates that if the
enterprise produces 24 bowls and 8 mugs, it will earn P6,800, the maximum daily profit
possible given the resource constraints.
Given that the optimal solution will be at one of the extreme corner points, A, B, or
C, we can also find the solution by testing each of the three points to see which results in
the greatest profit, rather than by graphing the objective function and seeing which point
it last touches as it moves out of the feasible solution area. Figure 13 shows the solution
values for all three points, A, B, and C, and the amount of profit, Z, at each point.
As indicated in the discussion of Figure 11, point B is the optimal solution point
because it is the last point the objective function touches before it leaves the solution area.
In other words, the objective function determines which extreme point is optimal. This is
because the objective function designates the profit that will accrue from each combination
of x1 and x2 values at the extreme points. If the objective function had had different
coefficients (i.e., different x1 and x2 profit values), one of the extreme points other than B
might have been optimal.
Figure 13
Solutions at all corner points

Assuming that that the profit for a bowl is P350 instead of P200, and the profit for
a mug is P100 instead of P250. These values result in a new objective function, Z = P350x1
+ P100x2. If the model constraints for labor or clay are not changed, the feasible solution
area remains the same, as shown in Figure 14. However, the location of the objective
function in Figure 14 is different from that of the original objective function in Figure 11.
The reason for this change is that the new profit coefficients give the linear objective
function a new slope.
Figure 14
Optimal solution with 350x1 + 100x2
The slope can be determined by transforming the objective function into the
general equation for a straight line, y = a + bx, where y is the dependent variable, a is the
y intercept, b is the slope, and x is the independent variable. For our sample objective
function, x2 is the dependent variable corresponding to y (i.e., it is on the vertical axis),
and x1 is the independent variable. Thus, the objective function can be transformed into
the general equation of a line as follows:
Z = 350x1 + 100x2
100x2 = Z - 350x1
x2 = – 3.5x1
a b c
Thus, the optimal solution at point C in Figure 14 is x1 = 30 bowls, x2 = 0 mugs,

and P10,500 profit. Altering the objective function coefficients results in a new solution.
Summary of the Graphical Solution Steps
The steps for solving a graphical linear programming model are summarized here:

1. Plot the model constraints as equations on the graph; then, considering the inequalities
of the constraints, indicate the feasible solution area.
2. Plot the objective function; then, move this line out from the origin to locate the optimal
solution point.
3. Solve simultaneous equations at the solution point to find the optimal solution values.
Or
2. Solve simultaneous equations at each corner point to find the solution values at each
point.
3. Substitute these values into the objective function to find the set of values that results
in the maximum Z value.
Linear Programming: Minimization Problems
There are two types of linear programming problems: maximization problems

(Corona Stoneware Enterprise example) and minimization problems. A minimization
problem is formulated the same basic way as a maximization problem, except for a few
minor differences. The following sample problem will demonstrate the formulation of a
minimization model.
A farmer is preparing to plant a crop in the spring and needs to fertilize a field.
There are two brands of fertilizer to choose from, Super-crop and Flash-crop. Each brand
yields a specific amount of nitrogen and phosphate per bag, as follows:
Table 2
Summary of chemical contribution
Chemical Contribution
Brand Nitrogen Phosphate
(lb/bag) (lb/bag)
Super-crop 1 8
Flash-crop 2 6
The farmer’s field requires at least 8 pounds of nitrogen and at least 48 pounds of
phosphate. Super-crop costs P30 per bag, and Flash-crop costs P15. The farmer wants
to know how many bags of each brand to purchase in order to minimize the total cost of
fertilizing. This scenario is illustrated in Figure 15.
The steps in the linear programming model formulation process are summarized
as follows:
Summary of LP Model Formulation Steps
Step 1: Define the decision variables
How many bags of Super-crop and Flash-crop to buy
Step 2: Define the objective function

Minimize cost
Step 3: Define the constraints
The field requirements for nitrogen and phosphate
Figure 15
Fertilizing Farmer’s Field

Edition
Decision Variables
This problem contains two decision variables, representing the number of bags of
each brand of fertilizer to purchase:
x1 = bags of Super-crop
x2 = bags of Flash-crop
The Objective Function
The farmer’s objective is to minimize the total cost of fertilizing. The total cost is
the sum of the individual costs of each type of fertilizer purchased. The objective function
that represents total cost is expressed as:

Minimize Z = P30x1 + 15x2

where
P30x1 = cost of bags of Super-crop
P15x2 = cost of bags of Flash-crop
Model Constraints
The requirements for nitrogen and phosphate represent the constraints of the
model. Each bag of fertilizer contributes a number of pounds of nitrogen and phosphate
to the field. The constraint for nitrogen is
x1 + 2x2 ≥ 8 lb
where
x1 = the nitrogen contribution (lb.) per bag of Super-crop
x2 = the nitrogen contribution (lb.) per bag of Flash-crop
Rather than a ≤ (less than or equal to) inequality, as used in the Corona Stoneware
Enterprise model, this constraint requires a ≥ (greater than or equal to) inequality. This is
because the nitrogen content for the field is a minimum requirement specifying that at least
8 pounds of nitrogen be deposited on the farmer’s field. If a minimum cost solution results
in more than 8 pounds of nitrogen on the field, that is acceptable; however, the amount
cannot be less than 8 pounds.
The constraint for phosphate is constructed similar to the constraint for nitrogen:
8x1 + 6x2 ≥ 48 lb
With this example, we have shown two of the three types of linear programming
model constraints, ≤ and ≥. The third type is an exact equality, =. This type specifies that
a constraint requirement must be exact. For example, if the farmer had said that the
phosphate requirement for the field was exactly 48 pounds, the constraint would have
been
8x1 + 6x2 = 48 lb
As in our maximization model, there are also nonnegativity constraints in this

problem to indicate that negative bags of fertilizer cannot be purchased:
x1, x2 ≥ 0
The complete model formulation for this minimization problem is
Minimize Z = P30x1 + P15x2

subject to
x1 + 2x2 ≥ 8 lb of nitrogen
8x1 + 6x2 ≥ 48 lb of phosphate
x1, x2 ≥ 0
Graphical Solution of a Minimization Model
The same process in the graphical solution of a minimization model as in a

maximization model. The fertilizer example will be used to demonstrate the graphical
solution of a minimization model.

The first step is to graph the equations of the two model constraints, as shown in
Figure 16. Next, the feasible solution area is chosen, to reflect the inequalities in the
constraints, as shown in Figure 17.
Figure 16
Constraint lines for fertilizer model
Figure 17
Feasible Solution Area

Edition
After the feasible solution area has been determined, the second step in the
graphical solution approach is to locate the optimal point. Recall that in a maximization
problem, the optimal solution is on the boundary of the feasible solution area that contains
the point(s) farthest from the origin. The optimal solution point in a minimization problem
is also on the boundary of the feasible solution area; however, the boundary contains the
point(s) closest to the origin (zero being the lowest cost possible).
As in a maximization problem, the optimal solution is located at one of the extreme

points of the boundary. In this case, the corner points represent extremities in the
boundary of the feasible solution area that are closest to the origin. Figure 18 shows the
three corner points—A, B, and C—and the objective function line.
As the objective function edges toward the origin, the last point it touches in the
feasible solution area is A. In other words, point A is the closest the objective function can

get to the origin without encompassing infeasible points. Thus, it corresponds to the lowest
cost that can be attained.
Figure 18
The optimum solution point

Edition
The final step in the graphical solution approach is to solve for the values of x1
and x2 at point A. Because point A is on the axis, x1 = 0; thus,
8(0) + 6x2 = 48
x2 = 8
Given that the optimal solution is x1 = 0, x2 = 8, the minimum cost, Z, is
Z = P30x1 + P15x2
Z = 30(0) + 15(8)
Z = P120
This means the farmer should not purchase any Super-crop but, instead, should
purchase eight bags of Flash-crop, at a total cost of P120.
The previous topic demonstrated how a linear programming model is

formulated and how a solution can be derived from a graph of the model.
Graphing can provide valuable insight into linear programming and
linear programming solutions in general. However, the fact that this
solution method is limited to problems with only two decision variables
restricts its usefulness as a general solution technique.
In lieu, let’s celebrate for making this far! The next topic is the linear
programming using the simplex method. However, simplex method is
now improved and developed using technological advancement. The
process is easier and more accessible for all decision-makers.

Computer Solution
When linear programming was first developed in the 1940s, virtually the only way
to solve a problem was by using a lengthy manual mathematical solution procedure called
the simplex method. However, during the next six decades, as computer technology
evolved, the computer was used more and more to solve linear programming models. The
mathematical steps of the simplex method were simply programmed in prewritten software
packages designed for the solution of linear programming problems. The ability to solve
linear programming problems quickly and cheaply on the computer, regardless of the size
of the problem, popularized linear programming and expanded its use by businesses.
There are currently dozens of software packages with linear programming capabilities.
Many of these are general-purpose management science or quantitative methods
packages with linear programming modules, among many other modules for other
techniques. There are also numerous software packages that are devoted exclusively to
linear programming and its derivatives. These packages are generally cheap, efficient,
and easy to use (Taylor, 2013).
As a result of the easy and low-cost availability of personal computers and linear
programming software, the simplex method has become less of a focus in the teaching of
linear programming. Thus, at this point in our presentation of linear programming, we focus
exclusively on computer solution. However, knowledge of the simplex method is useful in
gaining an overall, in-depth understanding of linear programming for those who are
interested in this degree of understanding. As noted, computer solution itself is based on
the simplex method. Thus, while we present linear programming in the text in a manner
that does not require use of the simplex method, we also provide in-depth coverage of this
topic on the companion Web site for this text.
In the next few sections, we demonstrate how to solve linear programming

problems by using Excel spreadsheets, a typical general-purpose quantitative methods
software package. The procedure, steps and process were adopted from Taylor (2013).
Excel Spreadsheets
Excel can be used to solve linear programming problems, although the data input
requirements can be more time-consuming and tedious than with a software package like
QM for Windows that is specifically designed for the purpose. A spreadsheet requires that
column and row headings for the specific model be set up and that constraint and objective
function formulas be input in their entirety, as opposed to just the model parameters, as
with QM for Windows. However, this is also an advantage of spreadsheets, in that it
enables the problem to be set up in an attractive format for reporting and presentation
purposes. In addition, once a spreadsheet is set up for one problem, it can often be used
as a template for others. Figure 19 shows an Excel spreadsheet set up for our Corona
Stoneware Enterprises example introduced in Linear Programming: Graphical Method.
The values for bowls and mugs and for profit are contained in cells B10, B11, and
B12, respectively. These cells are currently empty or zero because the model has not yet
been solved. The objective function for profit, =C4*B10+D4*B11, is embedded in cell B12
shown in bar. This formula is essentially the same as Z = 40x1 + 50x2 , where B10 and
B11 represent x1 and x2, and B12 equals Z. The objective function coefficients, 40 and 50,
are in cells C4 and D4. Similar formulas for the constraints for labor and clay are

embedded in cells E6 and E7. For example, in cell E6 we input the formula
=C6*B10+D6*B11. The ≤ signs in cells F6 and F7 are for cosmetic purposes only; they
have no real effect.
Figure 19
Solutions in a computer software application
Click on “Data“ tab

to invoke “Solver.“
=C6*B10+D6*B11
=G6–E6
Maximize Z = 200x1 + 250x2

subject to:
2x1 + 4x2 = 80
8x1 + 6x2 = 240
Decision variables—
bowls (x1) = B10;
=G7–E7
mugs (x2) = B11
Objective function =C7*B10+D7*B11

=C4*B10 + D4*B11
To solve this problem, first click on the “Data” tab on the toolbar at the top of the
screen and then click on “Solver” on the far-right side of the Data toolbar. The window
Solver Parameters will appear, as shown in Figure 19. Initially all the windows on this
screen are blank, and we must input the objective function cell, the cells representing the
decision variables, and the cells that make up the model constraints.
When inputting the Solver parameters as shown in Figure 19, we first “Set
Objective:” which is B12 for our example. (Excel automatically inserts the $ sign next to
cell addresses; you should not type it in.) Next we indicate that we want to maximize the
objective by clicking on “Max.” We achieve our objective by changing cells B10 and B11,
which represent our model decision variables. The designation “B10:B11” means all the
cells between B10 and B11, inclusive. We next input our model constraints by clicking on
“Add,” which will access the screen shown in Figure 20.
Exhibit 3.3 shows our labor constraint. Cell E6 contains the constraint formula for
labor (=C6*B10+D6*B11), whereas cell G6 contains the labor hours available. We
continue to add constraints until the model is complete. Note that we could have input our
constraints by adding a single constraint formula, E6:E76=G6:G7, which means that the
constraints in cells E6 and E7 are less than or equal to the values in cells G6 and G7,
respectively. It is also not necessary to input the nonnegativity constraints for our decision
variables, B10:B117=0. This can be done in the Solver Parameters screen (Figure 19).

Click on “OK” on the Add Constraint window after all constraints have been
added. This will return us to the Solver Parameters screen. There are two more necessary
steps before proceeding to solve the problem. On the Solver Parameters screen, check
where it says, “Make Unconstrained Variables Non-Negative,” and where it says “Select
a Solving Method,” select “Simplex LP.” This will ensure that Solver uses the simplex
procedure to solve the model and not some other numeric method (which Excel has
available). This is not too important for now, but later it will ensure that we get the right
reports for sensitivity analysis, a topic we will take up next.
Figure 20
Solutions showed in a solver parameter
Objective Function
Decision Variables
==C6*B10+D6*B11≤80
=C7*B10+D7*B11≤120
x1, x2 ≤ 0
Select “Simplex
LP” method
Figure 21
Solutions showed in a constraint format

Once the complete model is input, click on “Solve” at the bottom of the Solver
Parameters screen (Figure 19). First, a screen will appear, titled Solver Results, which will
provide you with the opportunity to select the reports you want and then when you click
on “OK,” the solution screen shown in Figure 21 will appear.
If there had been any extra, or slack, left over for labor or clay, it would have
appeared in column H on our spreadsheet, under the heading “Left Over.” In this case,
there are no slack resources left over.
Figure 22
Corona Stoneware Enterprise using computer software application
Slack—S1 = 0
and S2 = 0
Hey! Unit 1 is almost done! Please click the link below for your
reference. If you read the above topics, please apply the steps
mentioned in graphical method and in computer software application
(excel or spreadsheet). If you have questions and queries on the topics
please contact me anytime soon. Take care!
Now that you had learned about the characteristics and concepts of management science,
please answer the following learning activities. If you have questions regarding the activity,
you may ask at our google classroom.

Write your thoughts!
References

References
Anderson, D. R., Sweeney, D., Williams, T. A., Camm, J. D., & Kipp, R. K. (2013).
Quantitative Methods for Business 12th Edition. Cengage Learning
Chron (2020), Explain the Management Science Approach. Retrieved from

https://smallbusiness.chron.com/explain-management-science-approach-
61651.html
Fábry, J. (2003). Management Science.
Hassan, E. E. H., & Zaazou, Z. A. (2018). Quantitative Decision Making; Mathematical

and Managerial Perspectives Comparative Case Study (MSA Versus Cairo
University). International Journal of Service Science, Management and Engineering.
Vol. 5, No. 4, pp. 163-167.
Hopp, W. J. (2004). Fifty Years of Management Science.Informs. V 50, pp 1-7
Levin, R. I., Rubine, D. S., Stinson, J. P. & Gardner, Jr. E. S. (2001) Quantitative
Approaches to Management, 8th Edition. Mc Graw Hill
Penacilla, I. C, & Dacillo, G. P. (2016). Quantitative Business Management Techniques.

Operations Reseacrh for College Students in Management Service. C & E Publishing,
Inc.
Schoemaker, P. J. H. & Russo, J. E. (2017). Decision-making. Palgrave Publishers Ltd

https://doi.org/10.1057/9781137294678.0160
Taylor, B. T. (2013). Introduction to Management Science 11th Edition. Pearson

GLOSSARY
Assignment Problem – A linear programming problem having a special structure, in

which each of n resources must be assigned to each of n activities, on a one-to-one basis.
Binary Integer Linear Programming - Special case of linear programming in which all
the decision variables are binary.
Constraints – Restrictions on the problem solution arising from limited resources, policy
requirements, etc. An equation or inequality that rules out certain combinations of values
for the variables involved.
Decision Making – A process of choosing between two or more available alternative

courses of action for the purpose of attaining a specific goal.
Decision Variable – Variable that represents managerial decision or component of

decision that must be made in a problem-solving situation.
Deterministic Model – A model in which the functional relationships and parameters are
known with certainty.
Feasible Area (Region) – The solution space or region that satisfies all the constraints
simultaneously.
Feasible Solution – A solution that respects all the constraints.
Goal Programming – A problem approach when several objective functions are

considered simultaneously. The objective is to minimize the undesirable deviations from
the goals.
Inequality Constraint – A restriction on some combination of the variables that must be

greater than or equal to (≥), or less than or equal to (≤) a particular value.
Infeasible Solution – A solution that violates at least one constraint.
Integer Programming – A programming approach that assumes the indivisibility of all the
decision variables (e.g. products, people, etc.). The values of the variables must be
integers.
Linear Function – A mathematical expression in which all the variables appear in

separate terms and raise to the first power.
Linear Programming – A mathematical procedure for optimizing the linear objective

function, respecting the set of linear constraints.
Linear Programming Model –A mathematical model with a linear objective function, a

set of linear constraints, and nonnegative variables.
Mathematical Model – A system of symbols and expressions aimed at representing a

real situation.

Maximization –Optimization of objective function, which looks for the highest objective
value (e.g. profit, revenue).
Minimization – Optimization of objective function, which looks for the lowest objective
value (e.g. cost, loss).
Mixed Integer Linear Programming – Special case of integer linear programming in

which some but not all of the decision variables are integer.
Model – An abstraction of reality.
Multiple (Alternative) Optimal Solutions – The existence of more than one optimal
solution. The infinite number of optimal solutions.
Nonlinear Programming – A problem approach used when the objective function and/or
one or more constraints are nonlinear.
Nonnegativity Constraints – The restriction specifying that decision variables in the

model must be positive or zero.
Objective Function – A mathematical function expressed in terms of decision variables,

which is to be optimized (maximized or minimized).
Operations Research – The application of the scientific method to the study and analysis
of problems involving large and complex systems, organizations or activities.
Optimal (Optimum) Solution – A feasible solution that maximizes or minimizes the

objective function. The best of all feasible solutions.
Probabilistic Model – A model that incorporates uncertainty in its functional relations and
uncontrollable variables.
Sensitivity Analysis – Measuring the effect of a change in one input parameter on a

proposed solution.
Simplex Method – An iterative algorithm for solving linear programming problems that
only investigates corner points of the feasible area.
Slack Variable – A nonnegative variable added to the left-hand side of “≤” constraint that
converts it to equation.
Surplus Variable – A nonnegative variable subtracted from the left-hand side of “≥”
constraint that converts it to equation.

RUBRIC
Linear Programming
10 The student:
• shows complete understanding of the problem
• identifies, relates, and uses all important components of the problem
• performs computations completely and correctly but may make one minor error
(computation, transposition1, or transcription2)
• uses an appropriate strategy that should lead to a correct solution
 formulates accurate decision statement based on the question being asked.
7 The student:
• shows understanding of the problem
• identifies, relates, and uses most of the important components of the problem
• performs computations that are generally correct but may make some minor
errors (computation, transposition1, or transcription2)
• uses an appropriate strategy that should lead to a reasonable solution
• formulates decision statement but may make one lacking necessary word or
group of words.
5 The student:
• shows some understanding of the problem
• identifies, relates, and uses some important components of the problem
• performs computations that contain minor computational errors
• shows some evidence of a strategy to solve the problem
• formulates decision statement but may make some lacking necessary words.
3 The student:
• shows limited to no understanding of the problem
• fails to identify, relate, or use important components of the problem
• uses an inappropriate strategy for solving the problem
• places too much emphasis on unrelated components of the problem
• attempts an answer
B • Blank (no attempt or completely erased answer)
A • Correct answer only (no work shown)
I • Incorrect answer only (no work shown)
1 Transposition: change the usual order of letters, words, or numbers.

2 Transcription: copying from one form of recorded documentation to another.

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112

John Philip S. Racaza

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Quantitative Techniques: Guide for decision making

John Philip S. Racaza

Jose Rizal Memorial State University

Page and Cover Designed by: John Philip S. Racaza

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Flexible Learning Module 14

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Classroom Rules and Conduct

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Week Unit Title Activities

September 14 - Linear Programming Graphical

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Feedback Modality and Communication Mechanisms

The term grade is computed using the formula:

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John Philip S. Racaza

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Quantitative Techniques: Guide for decision making

John Philip S. Racaza

Jose Rizal Memorial State University

Page and Cover Designed by: John Philip S. Racaza

First Edition ________

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Management science plays a significant role specially in making financial

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Unit 1 Managerial Decision using Linear Programming 21

Unit 2 Assignment and Transportation Model

Unit 3 Decision Theory

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Unit 1- Managerial Decision using Linear Programming