IQDM

Session 7
 Quiz#1 Syllabus
and
Doubt-Clearing Session
Questions?
 Red Brand Canners Case

• Case context?
 Decision Questions

• How to apportion crop of tomatoes?

• Should we purchase additional Grade A

tomatoes?
LP Formulation
DVs already identified
• x1 = Amount of Grade A tomatoes
in whole canned tomatoes
• x2 = Amount of Grade B tomatoes
in whole canned tomatoes
• x3 = Amount of Grade A tomatoes
in tomato juice
• x4 = Amount of Grade B tomatoes
in tomato juice
• x5 = Amount of Grade A tomatoes
in tomato paste
• x6 = Amount of Grade B tomatoes
in tomato paste
 Objective

• Maximize the total contribution

• Should we use Exhibit 2 for our formulation?

• Should we use Exhibit 3 for our formulation?

• Both?

• Neither?

• Any combination of the exhibits?

 Fixed costs?

• Allocated Overhead

• …anything else?
• Exhibit 2:
– Where do the values corresponding to “Fruit”
come from?

• Exhibit 3:
– Values of Z and Y?
– Tomato cost?
– Marginal Profit?
Therefore?
Objective Function?
Case Context?
Objective Function
Constraints
Excel Solver
 Decision Questions

• How to apportion crop of tomatoes?

• Should we purchase additional Grade A

tomatoes?
Excel Solver
Discussion/ Remarks/ Questions
 Exercise Q1
• A company owns two flour mills viz. A and B, which have
different production capacities for high, medium and low
quality flour.

• The company has entered a contract to supply flour to a firm

every day with at least 8, 12 and 24 quintals of high, medium
and low quality respectively.

• It costs the company Rs.2000 and Rs.1500 per hour to run mill A
and B respectively.

• In one hour, Mill A produces 6, 2 and 4 quintals of high, medium

and low quality flour,
Mill B produces 2, 4 and 12 quintals of H, M & L .

Formulate as a linear program.

 LP Formulation of Q1
• DVs: x & y = number of hours (per day) mills A and B are run

• Objective Function:

min z = 2000x + 1500y

• Subject to the constraints:

6x + 2y ≥ 8

2x + 4y ≥ 12

4x + 12y ≥ 24

x ≤ 24, y ≤ 24

x, y ≥ 0
 Exercise Q2
Consider the following LP.

Maximize z = 600x + 500y

Subject to:

6x + 10y ≤ 300 --- (Constraint C1)

5x + 3y ≤ 300 --- (Constraint C2)

x, y ≥ 0
 Solve Graphically
Max z = 600x + 500y
Feasible region has corner points
Subject to: (0, 0), (50, 0) and (0, 30).
6x + 10y ≤ 300
5x + 3y ≤ 300 100 Slope of iso-contribution line = -6/5.
x, y ≥ 0 Dotted line is an iso-contribution line.

C2
Optimal point: (50, 0)

Optimal value = 30000

30 C1

0 50 60
Feasible
Region
Fill all entries, Show all computations,
and Interpret Entries
Variable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$C$4 x 50 0 600 Infinity 300
$D$4 y 0 -500 500 500 Infinity

Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$E$7 Constraint C1 300 100 300 60 300
$E$8 Constraint C2 250 0 300 Infinity 50
• “Reduced cost” of x is 0 (as optimal value of x is nonzero).

• “Reduced cost” of y:
If y = 1, value of x at new optimal = (300 – 10)/6,
as C1 continues to be tight.

New optimal value = 600*(300 – 10)/6 + 500*1 = 29500

Reduced cost = Change in objective function value = -500

• C2 is slack. Therefore, shadow price = 0.

• This continues to hold if we keep increasing the constraint-RHS.

Therefore, allowable increase = infinity.

• Allowable decrease:
C2 becomes tight (at (50, 0)) when the RHS reduces by 50.
For any further decrease in the RHS, shadow price is not 0.
 Shadow price of C1:

Increasing RHS of C1 by 1 gives us the new optimal point (301/6, 0).

New optimal value = 600*301/6 + 500*0 = 30100.

Shadow price
= Change in objective function value = 30100 – 30000 = 100.

This shadow price holds till RHS of C1 becomes 360

(when the new optimal is (60, 0) after which C2 becomes tight).
Therefore, allowable increase = 60.
Allowable decrease = 300 (till x = 0 becomes tight).
Questions?
Thank You