Julia's Food Booth: Decision Modelling and Optimization

1
DECISION MODELLING AND OPTIMIZATION
Julias Food Booth

Case Study Analysis
Submitted To: Dr. R. Jagadeesh
Date of Submission: 13-02-2015
Check list
Included
Submitted
By: Section A / Group 3
1.Title page
2. Executive Summary
Name
3. Statement of the problem

Aishwarya B
4. Causes of the problem

Bishal Guha
5. Decision criteria &
Dileep Reddy
alternative solution
Ravikiran R
6. Recommended solution
SIrsha Mondal
7. End of case questions

Venkatesh Kamath
8. References
PGDM No.:
14008
14036
14090
14118
14155
14175
Executive Summary
Julia is a senior at Tech, and shes investigating different ways to finance her final year at
school. She is considering leasing a food booth outside the Tech stadium at home football
games. She is thinking to sell items such as:
1) cheese pizza
2) hot dogs
3) barbecue sandwiches
If Julia clears at least $1,000 in profit for each game after paying all her expenses, she
believes it will be worth leasing the booth. She wants to formulate a linear programming
model that will help her in decision of leasing the booth for the first home game. Her
objective is to derive the profit function.
Decision Modelling & Optimization
SDMIMD
Statement of the problem

The main Dilemma in the case is to find out in which way she will get the maximum profit by
selling the items. Whether it will be a single item, a combination of two items or all three
products together.
She has $1,500 in cash available to purchase and prepare the food items for the first home
game and for the remaining five games she will purchase her ingredients with money she has
made from the previous game. From this she has discovered that she can expect to sell at least
as many slices of pizza as hot dogs and barbecue sandwiches combined. She also anticipates
that she will probably sell at least twice as many hot dogs as barbecue sandwiches. If Julia
clears at least $1,000 in profit for each game after paying all her expenses, she believes it will
be worth leasing the booth.
Cause of the Problem

The main condition she has to consider is that she has to fetch her total revenue over $2100 as
she has a Fixed cost of 1100 and her profit have to be more than $1000. According to this
condition she has to decide whether she should go for the lease or not.
Decision criteria and alternative solution

Based on the constraints and formation of the question she is going to decide to lease the
booth or not.
Total area: 36*48 = 1728 Sq. inches
Let P = Number of Pizza Slices
H = Number of Hot Dogs
B = Number of Barbecue Sandwiches
Individual Area:
Pizza = 196 Sq. inches; Hot dog = 16 Sq. inches
Barbecue Sandwich - 25 Sq. inches
Formulation:
To find area of Pizza slice:
SDMIMD
Total area: 14*14 = 196 inches square

For each slice: 196/8 = 24 inches per slice
Similarly the given areas for
1. Hot dogs: 16 square inches
2. Barbecue Sandwiches = 25 square inches
H= No. of Hot dogs; P= No. of Pizza slices; B= No. of barbeque sandwiches.
Objective Function:
Maximise Z = $0.75P +$ 1.05 H +$1.35 B
Constraints:
24P + 16H + 25B <= 55,296 square inches

P >= H+B
H >= 2B
and Non- negative constraints : P, B & H >= 0
Recommended solution, Implementation and Justification

Model used: Solver method
Decision variables:
Let P = Number of Pizza Slices
H = Number of Hot Dogs
B = Number of Barbecue Sandwiches
Objective Function:
Maximise Z = $0.75P +$ 1.05 H +$1.35 B
Constraints:

P >= H+B
H >= 2B
H
LHS
CONSTRAIN
SDMIMD
RHS
24
0.75
1
0
16
0.45
-1
1
25
0.9
-1
-2
50000
1500
0
1250
T
<=
<=
>=
>=
55296
1500
0
0
The optimum variables: No. of pizza slice = 1250 and No. of Hot dogs= 1250 and Barbeque
Sandwiches = 0. The profit she is earning 2250.
Answer report:
Objective Cell (Max)
Original
Cell
$E$5
Name
profit
Value
2250
Final Value
2250
Variable Cells
Original
Cell
Name
variabl
Value
Final Value
Integer
$E$4
e
variabl
1250
1250
Contin
$F$4
e
variabl
1250
1250
Contin
$G$4
Contin
Constraints
Slac
Cell
$G$1
Name
Cell Value
Formula
$G$11>=$I$
Status
1
$G$1
LHS
11
$G$12>=$I$
Binding
Not
LHS
1250
12
Binding
Not
1250
$G$9
$G$1
LHS
50000
$G$9<=$I$9
$G$10<=$I$
Binding
5296
LHS
1500
10
Binding
Sensitivity Analysis:
Variable Cells
Fina
Reduce
Objectiv
Allowab
Allowable
SDMIMD
5
l
Valu
e
Coefficie
le
Cell
Name
variabl
Cost
nt
Increase
Decrease
$E$4
e
variabl
1250
0.75
1
0.2727272
$F$4
e
variabl
1250
1.05
1E+30
73
$G$4
-0.375
1.35
0.375
1E+30
Fina
Shado
Constrai
Allowab
l
Valu
nt
le
Constraints
Allowable
Cell
$G$1
Name
Price
R.H. Side Increase
Decrease
3333.3333
1
$G$1
LHS
-0.375
2000
33
LHS
1250
5000
1250
1E+30
$G$9
$G$1
LHS
55296
1E+30
5296
LHS
1500
1.5
1500
158.88
1500
Limits Report:
Objecti
ve
Valu
Cell
$E$
Name
profit
2250
Variabl
Low
Objecti
Upp
Objecti
er
Limi
ve
er
Limi
ve
Valu
e
Cell
$E$
Name
Result
Result
4
$F$
variable
variable
1250
1250
1250
0
2250
937.5
1250
1250
2250
2250
SDMIMD
6
4
$G$
4
variable
2250
2250
End-of-case question
Question A: Formulate and solve a linear programming model for Julia that will help
you
advise her if she should lease the booth.
Solution:
Objective Function
Maximise Z = $0.75P +$ 1.05 H +$1.35 B
Constraints:

P >= H+B
H >= 2B
She makes a profit of $2250. She makes use of: 1000 + 100 = $1100. Therefore: $2250 $1100 = $1150. Therefore, we advise her to lease the booth.
Question B: If Julia were to borrow some more money from a friend before the first
game to purchase more ingredients, could she increase her profit? If so, how much
should she borrow and how much additional profit would she make? What factor
constrains her from borrowing even more money than this amount (indicated in your
answer to the previous question)?
SDMIMD
Solution From the report it can be seen that, the Shadow price for the budget constraint is 1.5
and the allowable increase is 158.88. This means that each dollar added to the budget can
increase a profit of $1.5 and the maximum allowable increase is 158.88. So maximum
amount that Julia can borrow from her friend to make profit is $158.88 and it will make an
additional profit of 158.88 x 1.5 = 238.32.
Question C: When Julia looked at the solution in (A), she realized that it would be
physically difficult for her to prepare all the hot dogs and barbecue sandwiches
indicated in this solution. She believes she can hire a friend of hers to help her for $100
per game. Based on the results in (A) and (B), is this something you think she could
reasonably do and should do?
Solution: If Julia hires a friend to help her for $100 per game, her net profit per game will be
1150-100 = $1050. Still, as per her strategy, it is worth leasing the booth. Hence, she should
hire her friend if it is physically difficult for her to prepare the required quantity of hot dogs.
Question D: Julia seems to be basing her analysis on the assumption that everything will
go as she plans. What are some of the uncertain factors in the model that could go
wrong and adversely affect Julia's analysis? Given these uncertainties and the results in
(A), (B), and (C), what do you recommend that Julia do?
Solution: The main uncertain factor is demand. She believes that she will sell everything she
can stock and develop a customer base for the season. If this is violated, then nothing would
work.
As per result in (A), the net profit she can earn is $1150. It is above her target $1000.
Hence, she can earn a profit of $150/- within her target.
SDMIMD
As per result in (B), if she borrows money from her friend of $158.88, she will earn a
profit of $1387 ( $2487 - $1100) where she will be selling 1381 pizza slices and 1381
hot dogs.
Now, as per the result in (C), if she hires a friend to help her $100 per game, she will
be earning a profit of $1050 as shown above and the threshold limit for her
preparation of hot dogs is 1108, which is the breakeven. (if she prepares less than
1108, she will be under loss) and we arent sure whether she will be able to prepare
1108 hot dogs by herself. So, its better to hire a friend which will help her to make
profit.
References
Balakrishnana, N., Render, B., & Stair, R. M. (2013). Managerial Decision Modeling with
Spreadsheets. Pearson.
Render, B., Stair, R. M., & Hanna, M. E. (n.d.). Quantitative analysis for management.
Taha, H. A. (2006). Operations research: An Introduction.
SDMIMD
SDMIMD

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1

DECISION MODELLING AND OPTIMIZATION

Julias Food Booth

Submitted To: Dr. R. Jagadeesh

Date of Submission: 13-02-2015

3. Statement of the problem

4. Causes of the problem

7. End of case questions

Decision Modelling & Optimization

Statement of the problem

Cause of the Problem

Decision criteria and alternative solution

Total area: 14*14 = 196 inches square

24P + 16H + 25B <= 55,296 square inches

Recommended solution, Implementation and Justification

24P + 16H + 25B <= 55,296 square inches

Decision Modelling & Optimization

Decision Modelling & Optimization

R.H. Side Increase

Decision Modelling & Optimization

advise her if she should lease the booth.

24P + 16H + 25B <= 55,296 square inches

Decision Modelling & Optimization

Decision Modelling & Optimization

Decision Modelling & Optimization

Decision Modelling & Optimization

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