ROYAL UNIVERSITY OF་BHUTAN འབྲུག་རྒྱལ་འཛིན་གཙུག་ལག་སློབ་སློབ་སྡེ

GEDU COLLEGE OF BUSINESS

དགེ་་འདུ་ཚོང་རིག་མཐོ་རིམ་སླབ་གྲཱ
STUDIES
དགེ་འདུ་ ཆུ་ཁ།
GEDU: CHUKHA

BMS 101:

Group Assignment

Submitted By:

Rajesh Monger (03200262)

Robin Rai (03200276)

Rinzin Dolkar (03200273)

Prabin Acharya (03200259)

 འབྲུག་རྒྱལ་འཛིན་གཙུག་ལག་སློབ་སློབ་སྡེ
ROYAL UNIVERSITY OF་BHUTAN
དགེ་་འདུ་ཚོང་རིག་མཐོ་རིམ་སླབ་གྲཱ
GEDU COLLEGE OF BUSINESS
དགེ་འདུ་ ཆུ་ཁ།
STUDIES
DECLARATION FORM
GEDU: CHUKHA

Module Code: BMS 101 Module: Business Mathematics

Module Tutor: Kesar Nath Dhakal Type of Course Work: Group Assignment

Date of Submission: 28/5/2021

We hereby declare that this academic work is our own and those derived from other sources have
been appropriately acknowledged. We understand that if found otherwise, our academic work will be
cancelled and no mark will be awarded besides the legal consequences.

For Module Tutor

Marking Criteria/ Q. No. Marks Assigned Marks Secured

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Total Marks

Comments: ……………………………………………………….

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Signature of Module Tutor

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Contents
Formulation of question statement............................................................................3

Formulation of a Linear Programming Problem (LPP).............................................3

Optimal solution to the LPP formulated using..........................................................5

a) Simplex Method...............................................................................................5

b) Excel Solver...................................................................................................10

Shadow prices of the resources...............................................................................16

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Formulation of question statement

Mr. Sonam has started a new drive-through restaurant "Grab and Go" in Thimphu city close to
clock tower. To draw in new customers, he has thought of a plan to sell three distinct kinds of
combo packs A, B and C. As he saw that a more prominent number of customers favored combo
A to C, he began to deliver a greater number of combo A. In a week he can produce at least 300
units of combo A, 100 units of combo C and his combo B is only for the armed forces or the
needy people whereby he only produces up to 250 units per week. Combo A comprises of 3 ham
burgers, a coca cola drink, and a chicken barbeque. Combo B comprises of 2 ham burgers, a coca
cola drink and 3 chicken barbeques. Combo C comprises of a ham burger, a coca cola drink and
a piece of chicken barbeque. If the cost of ham burger, coca cola and chicken barbeque are;
Nu.15, Nu.25 and Nu.30 per unit respectively. Find out the maximum profit that he will acquire
by selling his principle combos.

Solution:

Formulation of a Linear Programming Problem (LPP)

i. Identify and define the decision variable.

Let x denote the units of ham burger sold.

Let y denote the units of coca cola drink sold.

Let z denote the units of chicken barbeque sold.

ii. Define the objective function.

The revenue earned by selling x (Ham burger) = 15x

The revenue earned by selling y (Coca cola drink) = 25y

The revenue earned by selling z (Chicken barbeque) = 30z

Therefore, Z=15 x+25 y +30 z

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 iii. Identify the set of linear constraints

Combo packs Ham burger Coca cola drink Chicken Total units produced
barbeque
Combo A 3 1 1 300

Combo B 2 1 3 250

Combo C 1 1 1 100

3 x+ y+ z ≥ 300

2 x+ y +3 z ≤250

x + y + z ≥ 100

iv. Identify the non-negative restrictions.

x , y , z≥0
Maximize: Z=15 x+25 y +30 z
Subjected to: 3 x+ y+ z ≥ 300

2 x+ y +3 z ≤250

x + y + z ≥ 100

x , y , z≥0

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Optimal solution to the LPP formulated using

a) Simplex Method
The problem is:

Maximize Z = 15 x 1+25 x 2 +30 x 3

Subjected to the constraints: 3 x 1+ x 2 + x 3 ≥ 300

2 x1 + x 2 +3 x3 ≤ 250

x 1+ x2 + x 3 ≥ 100

And, x1 , x2 , x3 ≥ 0

The problem is converted to standard form by adding slack, surplus and artificial variables as
appropriate.

1. As the “constraint-1” is of type '≥' we should subtract surplus variable S1 and add artificial
variable ‘A1’.

2. As the “constraint-2” is of type '≤' we should add slack variable ‘S2’.

3. As the “constraint-3” is of type '≥' we should subtract surplus variable S3 and add artificial
variable ‘A2’.

After introducing slack, surplus and artificial variables we get,

Maximize Z = 15 x 1+25 x 2 +30 x 3 +0 s1 +0 s2 +0 s3−M A 1−M A 2

Subjected to the constraints: 3 x 1+ x 2 + x 3−S1 + A1=300

2 x1 + x 2 +3 x3 + S2 =250

x 1+ x2 + x 3−S3 + A1 =100

And, x 1 , x 2 , x 3 , S1 , S 2 , S3 , A 1 , A 2 ≥ 0

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 Where M is the large positive number, the simplex tableaux appear below.

Simplex Tableaux 1

Basic 15 25 30 0 0 0 -M -M
Solutio
Cj Variabl Ratio
n
e X1 X2 X3 S1 S2 S3 A1 A2
-M A1 300 3 1 1 -1 0 0 1 0 100
0 S2 250 2 1 3 0 1 0 0 0 125
-M A2 100 1 1 1 0 0 -1 0 1 100
Zj -400M -4M -2M -2M M 0 M -M -M _
15+4M 25+2 30+2
_
Cj- Zj M M -M 0 -M 0 0

The maximum Cj-Zj value is 15+4M. So, the entering variable is x 1.

Minimum ratio is 100. So, the leaving basis variable is A2.

∴ The key number is 1.

Entering =x1,

Departing =A2

old key row

New key row =
key number

1 1 1 0 0 −1 0 1
New key row for X1= =1, =1 , =1 , =0 , =0 , =1 , =0 , =1
1 1 1 1 1 1 1 1

New key row = Old non-key row – (key column number x New key row)

New key row for A1 = 300−( 3∗100 ) =0 , 3−( 3∗1 )=0 , … … … .

New key row for S2= 250−( 2∗100 ) =50 ,2−( 2∗1 )−0 , … … …

This leads us to simplex tableau II

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 Simplex Tableau II

15 25 30 0 0 0 -M -M
Cj Basic Solution Ratio
Variable X1 X2 X3 S1 S2 S3 A1 A2
-M 0
A1 0 0 -2 -2 -1 0 3 1 0
0 S2 50 0 -1 1 0 1 2 0 0 25

15 X1 100 1 1 1 0 0 -1 0 1 _
2M+1
Zj 1500 15 5 2M+15 M 0 -3M-15 -M 15
15+3M
Cj-Zj 0 10-2M 15-60M M 0 0 -M-15

The maximum Cj-Zj value is 15+3M. So, the entering variable is S3.

Minimum ratio is 0. So, the leaving basis variable is A1.

∴ The key number is 3.

Entering =S3,

Departing = A1

old key row

New key row =
key number

New key row for S3=

0 0 −2 −2 −1 0 3 1 0
=0 , =0 , =−0.667 , =−0.667 , =−0.333 , =0 , =1 , =0.333 , =0
3 3 3 3 3 3 3 3 3

New key row = Old non-key row – (key column number x New key row)

New key row for S2= 50−( 2∗0 )=50 , 0−( 2∗0 )=0 , … … ….

New key row for X1 = 100− (−1∗0 )=100 ,1−(−1∗0 )=1 , … … …

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 Simplex Tableau III

Basic Solutio 15 25 30 0 0 0 -M -M
Cj Variabl Ratio
n
e X1 X2 X3 S1 S2 S3 A1 A2
 
0
S3 0 0 -0.667 -0.667 -0.333 0 1 0.333 -1 _
21.428
0
S2 50 0 0.333 2.333 0.667 1 0 -0.667 0 6

15 X1 100 1 0.333 0.333 -0.333 0 0 0.333 0 300

Zj 1500 15 5 5 -5 0 0 5 0
25
Cj-Zj 0 20 5 0 0 -M-5 -M

The maximum Cj-Zj value is 25. So, the entering variable is x 3.

Minimum ratio is 21.4286. So, the leaving basis variable is S2.

∴ The key number is 2.3333.

Entering =x3,

Departing = S2

old key row

New key row =
key number

New key row for X3 =

50 0 0.333 2.333 0.667 1 0 −0.6667
=21.4286 , =0 , =0.1429 , =1 , =0.2857 , =0.4286 , =0 , =0.2
2.333 2.333 2.333 2.333 2.333 2.333 2.333 2.3333

New key row = Old non-key row – (key column number x New key row)

New key row for S3= 0−(−0.667∗21.4286 )=14.2857 ,0−(−0.667∗0 ) =0 , … … … .

New key row for X1 = 100− ( 0.333∗21.4286 )=92.8571 ,1−( 0.333∗0 )=1 , … … …

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 Simplex Tableau IV

Basic 15 25 30 0 0 0 -M -M
Cj Variabl Solution Ratio
e X1 X2 X3 S1 S2 S3 A1 A2
0 S3 14.2857 0 -0.5714 0 0.1429 0.2857 1 0.428 -1 _
30 150
X3 21.4286 0 0.1429 1 0.2857 0.4286 0 0.286 0

15 X1 92.8571 1 0.2857 0 -0.4286 -0.1429 0 0.428 0 325

Zj 1500 15 8.5714 30 2.149 10.714 0 15 0

16. 428
Cj-Zj 0 0 -2.1429 -10.7143 0 -15-M 0

The maximum Cj-Zj value is 16.428. So, the entering variable is x 2.

Minimum ratio is 150. So, the leaving basis variable is X3.

∴ The key number is 0.1429.

Entering =x2,

Departing = x3

old key row

New key row =
key number

New key row for X2 =

21.4286 0 0.1429 1 0.2875 0.4286 0 0.286 0
=150 , =0 , =1 , =7 , =2 , =3 , =0 , =2 , =0
0.1429 0.1429 0.1429 0.1429 0.1429 0.1429 0.1429 0.1429 0.1429

New key row = Old non-key row – (key column number x New key row)

New key row for S3 = 14.2857−(−0.5714∗150 )=100 , 0−(−0.5714∗0 ) =0 , … … … .

New key row for X1 = 92.8571− ( 0.2857∗150 )=50 , 1−( 0.2857∗0 )=1 , … … …

Simplex Tableau V

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 Basic Solutio 15 25 30 0 0 0 -M -M
Cj Variabl Ratio
n
e X1 X2 X3 S1 S2 S3 A1 A2
0 S3 100 0 0 4 1 2 1 1057 -1
25 X2 150 0 1 7 2 3 0 2 0
15 X1 50 1 0 -2 -1 -1 0 -0.143 0
Zj 4500 15 25 145 35 60 0 47.8 0
-M-
Cj-Zj 0 0 -115 -36 -60 0 47.8 -M

Since all the enteries in Cj-Zj row are negative or zero, we have reaches the optimality.

Therefore, the solution occurs at x 1=50 , x2 =150 , x 3=0 , and the maximum value of Z is 4500.

b) Excel Solver
Let, decision variable be X1, X2 and X3
The optimum value to be obtained can be set as 0 initially.
The coefficient of Z as X1 = 15, X2 =25 and X3 =30

Then, initially set the objective value as the sum product of the values and the coefficient.

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Coefficient of the given constraints can be shown by:

The value of the left hand side (LHS) can be portrayed as the sum product of the values and the
coefficients.

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Therefore the entire LPP can be written in excel as

Thus, use the excel solver to solve the LPP

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Select the solver in the Data tab in excel

The objective value is to be selected for the “Set Objective” section

The Value cells are to be selected for the “By Changing Variable Cells” section

Selecting the add button will give us the access to add the constraints.

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15
Thereby we need to select the solve button to get the answer.

Therefore, by using the excel solver as well:

The optimal solution occurs when x 1=50 , x2 =150 , x 3=0 , and the maximum value of Z is 4500.

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Shadow prices of the resources
Maximize Z = 15 x 1+25 x 2 +30 x 3

Subjected to the constraints: 3 x 1+ x 2 + x 3 ≥ 300

2 x1 + x 2 +3 x3 ≤ 250

x 1+ x2 + x 3 ≥ 100

Given that the optimal solution at the intersection of the above constraints is
x 1=50 , x2 =150 , x 3=0 . Therefore the original contribution was Nu.45000.

1. We will calculate the shadow price of A, we need to add one extra unit of resources to A.
Hence, the constraints are:

3 x 1+ x 2 + x 3 ≥ 301

2 x1 + x 2 +3 x3 ≤ 250

x 1+ x2 + x 3 ≥ 100

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The solution of the system is, x 1=51 , x 2=148 , x 3=0

Substituting the Values in the objective function,

15∗51+ 25∗148+30∗0 = 4465

Hence the shadow price for A is (Nu.4465-Nu.4500) = (-35), Nu. 35 decrease.

Thus, a negative shadow price indicates that with every 1 unit increase in A, the objective or
optimal solution will decrease by Nu. 35.

2. We will calculate the shadow price of B; we need to add one extra unit of resources to B.
Hence, the constraints are:

3 x 1+ x 2 + x 3 ≥ 300

2 x1 + x 2 +3 x3 ≤ 251

x 1+ x2 + x 3 ≥ 100

The solution of the system is, x 1=49 , x 2=153 , x3 =0

Substituting the Values in the objective function,

15∗49+25∗153+30∗0 = 4560

Hence the shadow price for A is (Nu.4560-Nu.4500) = (60), Nu. 60 increase.

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Thus, a positive shadow price indicates that with every 1 unit increase in B, the objective or
optimal solution will increase by Nu. 60

3. We will calculate the shadow price of C; we need to add one extra unit of resources to C.
Hence, the constraints are:

3 x 1+ x 2 + x 3 ≥ 300

2 x1 + x 2 +3 x3 ≤ 251

x 1+ x2 + x 3 ≥ 101

The solution of the system is, x 1=50 , x2 =150 , x 3=0

Substituting the Values in the objective function,

15∗50+25∗150+ 30∗0 = 4500

Hence the shadow price for A is (Nu.4500-Nu.4500) = 0.

Thus, a Zero shadow price indicates that with every 1 unit increase in B, the objective or optimal
solution will have no effect (will neither increase nor decrease).

Thank you!!!!!!!

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