Linear Programming

(LP) Model

Dr. K. Anbumani
1 Associate
Professor
“Linear Programming is a mathematical
technique useful for the allocation of
‘SCARCE’ or ‘LIMITED’ resources, to
several competing activities on the basis
of a given criterion of optimality”

2
 General Structure of an LP Model
The general structure of an LP model consists of 3 basic elements as
shown below;
1. Decision variables: We need to evaluate various alternatives
(courses of action) for arriving optimal decision. If there is no
alternative, there is no need for LP. Decision variables are usually
denoted by X1, X2,X3...Xn. In an LP model all decision variables are
continuous, controllable and non negative.

2. Objective function: The objective function is expressed in terms of

decision variables to optimize the criterion of optimality such as profit,
cost, revenue, etc. Usually it is represented as follows; Optimize
(Maximize or Minimize) Z = C1X1 +C2X2+…+CnXn
3
 General Structure of an LP Model
3. Constraints: There are always certain limitations or constraints on
the use of resources that limit the degree to which an objective can be
achieved. Such constraints must be expressed as linear equalities or
inequalities in terms of decision variables. The solution of an LP
model must satisfy these constraints.

4
 LP Model Formulation – Example 1
A manufacturing firm is engaged in producing 3 types of product A, B and C. The
production department produces each day, components sufficient to make 50 units of A,
25 units of B and 30 units of C. The management is confronted with the problem of
optimizing the daily production of the products in the assembly department, where only
100 man hours are available daily for assembling the products. The following additional
information is available;
Product Type Profit Contribution Per unit Assembly Time per Product
A 12 0.8
B 20 1.7
C 45 2.5

The company has a daily order commitment for 20 units of product A and a total of 15
units of B and C. Formulate LP model that can maximize their total profit.
5
 LP Model Formulation
The data of the problem is summarized as follows;

Product Type
Resources / Constraints Total
A B C

Production Capacity in Units 50 25 30  

Man hours per unit 0.8 1.7 2.5 100

Order Commitment in Units 20 15 (Both B &C)  

Profit Contribution (Rs/ Unit) 12 20 45  

6
 LP Model Formulation
Decision Variable: Let X1, X2, and X3 = number of units of products
A,B, and C to be produced, respectively.
LP Model
Maximize (Total Profit) Z = 12x1 + 20x2 + 45x3 Subject to Constraints

(i) Labour and materials

(a) 0.8x1 +1.7x2+2.5x3 ≤ 100 (b) x1 ≤ 50 (c) x2 ≤ 25 (d) x3 ≤ 30

(ii) Order commitment

(a) x1 ≥ 20 (b) x2 + x3 ≥ 15

and x1, x2, x3 ≥ 0

7
 LP Model Formulation – Example 2
A company has two plants, each of which produces and supplies two products: A and B.
The plants can each work upto 16 hours a day.
In plant 1, it takes three hours to prepare and pack 1000 gallons of A and one hour to
prepare and pack one quintal of B.
In plant 2, it takes two hours to prepare and pack 1000 gallons of A and 1.5 hours to
prepare and pack a quintal of B.
In plant 1, it costs Rs.15000 to prapare and pack 1000 gallons of A and Rs. 28000 to
prepare and pack a quintal of B, whereas in plant 2 these costs are RS.18000 and Rs
26000 respectively.
The company is obliged to produce daily at least 10000 gallons of A and 8 quintals of B.
Formulate LP model to minimize the cost.
8
 LP Model Formulation
The data of the problem is summarized as follows;
Product
Resources / Constraints Hours
A B Available
Preparation time in hrs Plant 1 3 hrs / 1000 gallons 1 hr / quintal  16
Plant 2 2 hrs / 1000 gallons 1.5 hr / quintal 16
Minimum daily production 10000 gallons 8 quintals
Cost of production in Rs. Plant 1 15000 / 1000 gallons 28000 / quintal
Plant 2 18000 / 1000 gallons 26000 / quintal  

Decision variable: Let X1, X2 = quantity of product A (in ‘000 gallons) to be produced in
plant 1 and 2 respectively.

X3, X4 = quantity of product B (in quintals) to be produced in plant 1 and 2 respectively.

9
 LP Model Formulation
Minimize (Total Cost) Z = 15000x1 + 18000x2 + 28000x3 + 26000x4

Subject to Constraints

(i) Preparation Time

(a) 3x1 + x2 ≤ 16 (b) 2x3 + 1.5x4 ≤ 16

(ii) Minimum daily production requirement

(a) x1 + x2 ≥ 10 (b) x3 + x4 ≥ 8

and x1, x2, x3,x4 ≥ 0

10
 LP Model For Marketing – Example 3
A marketing company dealing with laminated sheets ‘Gloss’ in the western zone covering
Maharashtra, Gujarat and Madhyapradesh is considering to launch an advertisement
compaign within a budget of Rs. 2.5 lakh.

On the basis of advertisment testing of the previous year the company’s research
department has found that magazines and films are the ideal media for advertising
laminated sheets. The company is not in a position to use the audio visual medium due
to limitation of funds.

The magazines enjoying good recall in last year’s campaign are Stardust, Filmfare,
Redaer’s Digest and Madhuri. This is attributed to the effective visual impact made by
the good reproduction of the advertisments both in colour and black and white.

11
 LP Model For Marketing – Example 3
The characteristics of target audience for ‘Gloss’ and weightage for each characteristic
are as follows;
Product Type Characteristics Weightage (%)
Age 15 – 34 Years 20
Monthly Income Over Rs. 5000 70
Education Above SSC 10

The audience characteristics for the 4 magazines selected are as given below;
Characteristics Stardust (%) Filmfare (%) Reader’s Digest (%) Madhuri (%)
Age: 15 – 34 Years 75 45 56 80
Monthly Income: Over Rs. 5000 52 43 47 25
Education: Above SSC 83 53 72 34

12
 LP Model For Marketing – Example 3
The eeficay index for a black and white advertisment maybe taken as 0.15 and that for a
colour advertisement as 0.20. The cost per insertion of a black and white, and a colour
advertisment and the readership for the 4 magazines are as follows;
Cost per Insertion (Rs)
Magazines Readership (in ‘000 Rs)
Black & White Colour
Stardust (Monthly) 4500 8400 189
Filmfare (Fortnightly) 4200 8400 256
Reader’s Digest (Monthly) 6400 9600 136
Madhuri (Fortnightly) 3300 6600 205

It has also been found that for creating an impact at least 3 insertions are necessary in
Stardust and Reader’s Digest, while a minimum of four insertions will be required in the
case of Filmfare. Formulate LP model to maximize the effectiveness of the exposure.

13
 Decision Variable
Let Xi = No. of black & white insertions in the i th magazine (i= 1,2,3,4)
Yi = No. of colour insertions in the i th magazine (i= 1,2,3,4)
While i= 1(Stardust), 2(Filmfare), 3(Reader’s Digest), 4(Madhuri)

LP Model: Maximize (Total effective exposure) Z = 16925x1 + 22567y1 +

17050x2 + 22733y2 + 10465x3 + 13954y3 + 11347x4 + 15129y4

Subject to budget constraint: (i). 4500x1 + 8400y1 + 4200x2 + 8400y2 +

6400x3 + 9600y3 + 3300x4 + 6600y4 ≤ 250000
(ii). x1 + y1 ≤ 12 (iii). x2 + y2 ≤ 24 (iv). x3 + y3 ≤ 12 (v). x4 + y4 ≤ 24
(vi). x1 + y1 ≥ 3 (vii). x2 + y2 ≥ 4 (viii). x3 + y3 ≥ 3
and xi + yi ≥ 0 for all i
14
 LP Model For Finance – Example 4
XYZ is an investment company. To aid in its investment decision, the company has
developed the investment alternatives for a 10 year period as shown below. The return
on investment is expressed as an annual rate of return on the invested capital. The risk
coefficient and growth potential are subjective estimates made by the portfolio manager
of the company. The terms of investment is the average length of time period required to
realize the return on investment as indicated below;
Investment Period of Rate of Return Risk Growth
Choices Investment per Year Co-efficient Potential Return
A 4 3 1 0
B 7 12 5 18
C 8 9 4 10
D 6 20 8 32
E 10 15 6 20
F 3 6 3 7
Cash 0 0 0 0
15
 LP Model For Finance – Example 4
The objective of the company is to maximize the return on its investments. The
guidelines for selecting the portfolio are;

1. The average length of investment for the portfolio should not exceed 7 years.
2. The average risk for the portfolio should not exceed 5
3. The average growth potential for the portfolio should be at least 10 %
4. At least 10 % of all available funds must be retained in the form of cash, at all times.

Formulate LP Model to Maximize total return

16
 Decision Variable
Let Xj = Proportion of funds to be invested in the jth investment
alternative ( j = 1,2,3,4,5,6,7)
LP Model: Maximize (Total return) Z = 0.03x1 + 0.12x2 + 0.09x3 + 0.20x4 +
0.15x5 + 0.06x6 + 0.07x7

Subject to Constraints
(i). Length of investment: 4x1 + 7x2 + 8x3 + 6x4 + 10x5 + 3x6 + 0x7 ≤ 7
(ii). Risk level: x1 + 5x2 + 4x3 + 8x4 + 6x5 + 3x6 + 0x7 ≤ 5
(iii). Gr. potential: 0x1+ 0.18x2+ 0.10x3 +0.32x4 + 0.20x5 + 0.07x6+ 0x7 ≤ 0.10
(iv). Cash requirement: x7 ≥ 0.10
(v). Proportion of funds: x1 + x2 + x3 + x4 + x5 + x6 + x7 = 1
and x1 , x2 , x3 , x4 , x5 , x6 , x7 ≥ 0 17
Thank
you!
18