PGDM (2023-24)

Problem Set B (Sensitivity Analysis)

Note: Dual price and shadow prices are same.

Problem 1
Consider the following linear program:

Max 3A + 2B
s.t.
A + B <= 10
3A + B <= 24
A + 2B <= 16
A, B >= 0
a. Use the graphical solution procedure to find the optimal solution. [(7, 3), 27]
b. Assume that the objective function coefficient for A changes from 3 to 5. Does the
optimal solution change? Use the graphical solution procedure to find the new optimal
solution. [No, 41]
c. Assume that the objective function coefficient for A remains 3, but the objective
function coefficient for B changes from 2 to 4. Does the optimal solution change? Use
the graphical solution procedure to find the new optimal solution. [Yes, (4,6), 36]
d. The Management Scientist computer solution for the linear program in part (a)
provides the following objective coefficient range information:

Variable Objective Allowable Allowable

coefficients increase decrease
A 3.00000 3.00000 1.00000
B 2.00000 1.00000 1.00000

Use this objective coefficient range information to answer parts (b) and(c).

Problem 2
Consider the linear program in Problem 1. The value of the optimal solution is 27. Suppose
that the right-hand side for constraint 1 is increased from 10 to 11.
a. Use the graphical solution procedure to find the new optimal solution. [(6.5, 4.5), 28.5]
b. Use the solution to part (a) to determine the shadow price (dual value) for constraint 1.
[1.5]
c. The sensitivity report for the linear program in Problem 1 provides the following right-
hand-side range information:

Constraint RHS Value Allowable Increase Allowable Decrease

1 10.000 1.20000 2.00000
2 24.000 6.00000 6.00000
3 16.000 Infinite 3.00000

What does the right-hand-side range information for constraint 1 tell you about the
shadow price for constraint 1?
d. The shadow price for constraint 2 is 0.5. Using this shadow price and the right-hand-
side range information in part (c), what conclusion can you draw about the effect of
changes to the right-hand side of constraint 2?
 Problem 3

Quality Air Conditioning manufactures three home air conditioners: an economy model, a
standard model, and a deluxe model. The profits per unit are $63, $95, and $135,
respectively. The production requirements per unit are as follows:
Number of Number of Manufacturing
Fan motors Cooling Coils time (Hours)
Economy o
1 1 8
Standard 1 2 12
Deluxe 1 4 14

For the coming production period, the company has 200 fan motors, 320 cooling coils, and
2400 hours of manufacturing time available. How many economy models (E), standard
models (S), and deluxe models (D) should the company produce in order to maximize profit?
a. What is the optimal solution, and what is the value of the objective
function? [(80,120,0), 16440]
b. Which constraints are binding? [constraints 1 & 2]
c. Which constraint shows extra capacity? How much? [constraint 3, 320]
d. If the profit for the deluxe model were increased to $150 per unit, would the optimal
solution change? [no]
e. Identify the range of optimality for each objective function coefficient. [47.5-75, 87-
126, -1E+30 - 159],
f. Suppose the profit of the economy model is increased by $6 per unit, and the profit
for the standard model is decreased by $2 per unit, and the profit for the deluxe model
is increased by $4 per unit. What will the new optimal solution be? [(80,120,0),
16680]
g. Identify the range of feasibility for the right-hand-side values. [160-280, 200-400,
2080- 1E+30]
h. If the number of fan motors available for production is increased by 100, will the dual
value for that constraint change? Explain. [yes]

Problem 4

Round Tree Manor is a hotel that provides two types of rooms with three rental classes: Super
Saver, Deluxe, and Business. The profit per night for each type of room and rental class is as
follows:
Rental Class
Super Deluxe Business
saver
Type I $30 $35 -
Room
Type II $20 $30 $40
Ty
pe I rooms do not have Internet access and are not available for the Business rental class.
Round Tree’s management makes a forecast of the demand by rental class for each night in
the future. A linear programming model developed to maximize profit is used to determine
how many reservations to accept for each rental class. The demand forecast for a particular
night is 130 rentals in the Super Saver class, 60 rentals in the Deluxe class, and 50 rentals in
the Business class. Round Tree has 100 Type I rooms and 120 Type II rooms.
a. Use linear programming to determine how many reservations to accept in each rental
class and how the reservations should be allocated to room types. Is the demand by
any rental class not satisfied? Explain.
b. How many reservations can be accommodated in each rental class? [Super Saver
110; Deluxe: 60; Business:v50]
c. Management is considering offering a free breakfast to anyone upgrading from a
Super Saver reservation to deluxe class. If the cost of the breakfast to Round Tree is
$5, should this incentive be offered? [yes]
d. With a little work, an unused office area could be converted to a rental room. If the
conversion cost is the same for both types of rooms, would you recommend
converting the office to a Type I or a Type II room? Why? [Type 1]
e. Could the linear programming model be modified to plan for the allocation of rental
demand for the next night? What information would be needed and how would the
model change? [yes]