Exam Review - Module 2

Manufacturing Problem
The company Steel has received an order for 500 tons of steel to be used in shipbuilding. This steel must
have the following characteristics (‘grades’).

Element Minimum Grade Maximum Grade

Carbon (C) 2% 3%
Copper (Cu) 0.4% 0.6%
Manganese (Mn) 1.2% 1.65%

The company has seven different raw materials in stock that may be used for the production of this steel.
Table below lists the grades, available amounts and prices for all raw materials.

Raw Material C% Cu% Mn% Availability in T Cost in $/t

Iron alloy 1 2.5 0 1.3 400 200
Iron alloy 2 3 0 0.8 300 250
Iron alloy 3 0 0.3 0 600 150
Copper alloy 1 0 90 0 500 220
Copper alloy 2 0 96 4 200 240
Aluminum alloy 1 0 0.4 1.2 300 200
Aluminum alloy 2 0 0.6 0 250 165

The objective is to determine the composition of the steel that minimizes the production cost.

Let Xi represent the weight of raw material i to be used in the production of the 500 tons of steel where i is from 1 to
7 and are:
1. Iron alloy 1 2. Iron alloy 2 3. Iron alloy 3 4. Copper alloy 1 5. Copper alloy 2 6. Aluminum alloy 1
7. Aluminum alloy 2

Minimize (cost) Z = 200X1 + 250X2 + 150X3 + 220X4 + 240X5 + 200X6 + 165X7

Subjected to:
(to many to show - waste of space)

Marketing Research Problem

Management Science Association (MSA) is a marketing research firm based in Washington, DC, that
handles consumer surveys. One of its clients is the National Press Service that periodically conducts
political polls on issues of widespread interest. Ina survey for the Press Service, MSA determines that it
must fulfill several requirements in order to draw statistically valid conclusions on the sensitive issue of
new US immigration laws:
● Survey at least 2,300 people in total in the United States
● Survey at least 1,000 people who are 30 years of age or younger
● Survey at least 600 people who are between 31 and 50 years of age
● Ensure that at least 15% of those survey live in a state that borders Mexico
● Ensure that a t least 50% of those surveyed who are 30 years of age or younger live in a state
that does not border Mexico
● Ensure that no more than 20% of those surveyed who are 51 years of age or over live in a state
that borders Mexico

MSA decides that all surveys should be conducted in person. It estimates that the cost of researching
people in each age and region category are shown in the table below. MSA’s goal is to meet the six
sampling requirements at the least possible cost.
 Cost per Person Surveyed
Region Age < 30 Age 31-50 Age > 51
State bordering Mexico $7.50 $6.80 $5.50
State not bordering Mexico $6.90 $7.25 $6.10

Let Xij represent the number of people surveyed in age group i and region j
Where i = 1 is people aged < 30
i = 2 is people aged between 31 and 50
i = 3 is people aged > 51
j = M is a state that borders Mexico
j = N is a state that does not border Mexico

Min Z = 7.5X1M + 6.8X2M + 5.5X3M + 6.9X1N + 7.25X2N + 6.1X3N

Subject to:
(to many to show - waste of space)

Portfolio Selection Problem

An international city trust (CT) invests in trade credits, corporate bonds, precious metal stocks, mortgage-
backed securities, and construction loans. ICT has $5 million available for immediate investment and
wishes to maximize the interest earned on its investments over the next year. The specific investment
possibilities are shown in the table below. For each type of investment, the table shows the expected
return over the next year as well as a score that indicates the risk associated with the investment. (A
lower score implies less risk)

Investment Interest Earned Risk Score

Trade credits 7% 1.7
Corporate bonds 10% 1.2
Gold stocks 19% 3.7
Platinum stocks 12% 2.4
Mortgage securities 8% 2.0
Construction loans 14% 2.9

To encourage a diversified portfolio, the bard of directors has placed several limits on the amount that can
be committed to any one type of investment:
1. No more than 25% of the total amount invested may be in any single type of investment
2. At least 30% of the funds invested must be precious metals
3. At least 45% must be invested in trade credits and corporate bonds
4. The average risk score of the total investment must be 2 or less

Let Xi represent the amount invested in investment type i

Where i = 1 is trade credits
i = 2 is corporate bonds
i = 3 is gold stocks
i = 4 is platinum stocks
i = 5 is mortgage securities
i = 6 is construction loans
Financial Planning
First American Bank issues five types of loans. In addition, to diversify its portfolio, and minimize risk, the
bank invests in risk-free securities. The loans and the risk-free securities with their annual rate of return
are given in Table below:
Rates of Return for Financial Planning Problem
Type of Loan or Security Annual Rate of Return (%)
Home mortgage (first) 6
Home mortgage (second) 8
Commercial loan 11
Automobile loan 9
Home improvement loan 10
Risk-free securities 4

The bank’s objective is to maximize the annual rate of return on investments subject to the following
policies, restrictions, and regulations:
1. The bank has $90 million in available funds
2. Risk-free securities must contain at least 10% of the total funds available for investments
3. Home improvement loans cannot exceed $8,000,000
4. The investment in mortgage loans must be at least 60% of all the funds invested in loans
5. The investment in first mortgage loans must be at least twice as much as the investment in
second mortgage loans
6. Home improvement loans cannot exceed 40% of the funds invested in first mortgage loans
7. Automobile loans and home improvement loans together may not exceed the commercial loans
8. Commercial loans cannot exceed 50% of the total funds invested in mortgage loans

Let:
X1 = dollars invested in first home mortgage loans
X2 = dollars invested in second home mortgage loans
X3 = dollars invested in commercial pans
X4 = dollars invested in automobile loans
X5 = dollars invested in home improvement loans
X6 = dollars invested in risk free securities

Max Z = 0.06X1 + 0.08X2 + 0.11X3 + 0.09X4 + 0.10X5 + 0.04X6

Subject to:
X1 + X2 + X3 + X4 + X5 + X6 = 90,000,000
X6 > 9,000,000
X5 < 8,000,000
0.40X1 + 0.40X2 - 0.60X3 - 0.60X4 - 0.60X5 > 0
X1 - X2 > 0
-0.40X1 + X5 < 0
-X3 + X4 + X5 < 0
-0.50X1 - 0.50X2 + X3 < 0
X1, X2, X3, X4, X5, X6 > 0
Labour Scheduling
TD bank branch in Laurier street, Ottawa, is a busy bank that has requirements for between 10 and 18
tellers, depending on the time of the day. The table on the next slide indicates the workers needed at
various hours that the bank is open.
The bank now employs 12 full time tellers but also has several people available on its roster of part-time
employees. A part time employee must put in exactly 4 hours per day but can start anytime between 9am
and 1pm. No lunch time is considered for part timers.
On the other hand full-timers work from 9am to 5pm and are allowed one hour for lunch. (half of the full
timers eat at 11am and the other half at noon). Each full-timer thus provides 35 hours per week of
productive labour time.

Time Period Number Required

9am - 10am 10
10am - 11am 12
11am - Noon 14
Noon - 1pm 16
1pm - 2pm 18
2pm - 3pm 17
3pm - 4pm 15
4pm - 5pm 10

The bank’s corporate policy limits part time hours to a maximum of 50% of the day’s total requirement.
Part timers earn $7 per hour (or $28 per day) on average, and full-timers earn $90 per day in salary and
benefits, on average. The bank would like to set a schedule that would minimize its total personnel costs.
It is willing to release one or two of its full time tellers if it is cost effective to do so.

F1 = number of full-time employees

P1 = number of part-time employ starting to work at 9am
P2 = number of part-time starting to work at 10am
P3 = number of part-time at 11am
P4 = number of part-time at noon
P5 = number of part-time at 1pm

Minimize the total personnel cost = cost (full-time) + cost (part-time)

Min Z = 90(F1) + 28(P1 + P2 + P3 + P4 + P5)

Subject to:
F1 + P1 > 10 (9am - 10am)
F1 + P1 + P2 > 12 (10am - 11am)
0.5(F1) + P1 + P2 + P3 > 14 (11am - noon)
F1 + P2 + P3 + P4 + P5 > 18 (1pm - 2pm)
F1 + P3 + P4 + P5 > 17 (2pm - 3pm)
F1 + P4 + P5 > 15 (3pm - 4pm)
F1 + P5 > 10 (4pm - 5pm)

(total part time hours) / (total hours a day) < 0.50

4(P1 + P2 + P3 + P4 + P5) / 8(F1 + 4(P1 + P2 + P3 + P4 + P5)) < 0.50

At most 2 full-time to let go

F1 > 10
F1, P1, P2, P3, P4, P5 > 0
Nurse Scheduling
The hospital administrator has a task to schedule a shift work of emergency room nurses. According to
the work contract a nurse is paid $12/hour for normal day work of 6 hours. A nurse can work 3 hours
overtime at 1.5 of the normal work pay rate. WOrking day in the emergency room is divided into eight
three-hour shifts, with the following staffing requirements:

Shift Minimal # of Nurses Required

12am - 3am 30 (1)
3am - 6am 20 (2)
6am - 9am 40 (3)
9am - 12pm 50 (4)
12pm - 3pm 60 (5)
3pm - 6pm 50 (6)
6pm - 9pm 40 (7)
9pm - 12pm 40 (8)

Let Rj represent the number of nurses working the j shift at normal pay for j = 1, 2, …, 8
Let Ek represent the number of nurses working the k shift at overtime pay for k = 1, 2, ..., 8

Multi-Period Applications - Investment Planning

An investment firm has $1,000,000 to invest over a period of six years. The money can be invested in the
following: stocks, bonds, certificates and real estate. Stocks are available every year for the six years but
must be held for two years. Stocks yield $1.20 for each $1.00 invested, after the two years. Bonds are
available each year for the six years but must be held for three years. Bonds yield $1.40 for every $1.00
invested, after the three years. Certificates are only available at the start of the second year and must be
held for four years. Certificates yield $1.80 for every $1.00 invested, after the four years. Real estate is
available only at the beginning of the fifth and sixth years and must be held for one year. Each $1.000
invested yields $1.10 one year later. Find the optimum investment mix to maximize returns at the end of
the sixth year.

S1 = Amount invested in stocks at the beginning of month 1

S2 = Amount invested in stocks at the beginning of month 2
S3 = Amount invested in stocks at the beginning of month 3
S4 = Amount invested in stocks at the beginning of month 4
S5 = Amount invested in stocks at the beginning of month 5
S6 = Amount invested in stocks at the beginning of month 6

B1 = Amount invested in bonds at the beginning of month 1

B2 = Amount invested in bonds at the beginning of month 2
B3 = Amount invested in bonds at the beginning of month 3
B4 = Amount invested in bonds at the beginning of month 4

CD2 = Amount invested in CD’s at the beginning of month 2

R5 = Amount invested in real estate at the beginning of month 5
R6 = Amount invested in real estate at the beginning of month 6

N1 = Amount of cash left after investment at the beginning of month 1

N2 = Amount of cash left after investment at the beginning of month 2
N3 = Amount of cash left after investment at the beginning of month 3
N4 = Amount of cash left after investment at the beginning of month 4
N5 = Amount of cash left after investment at the beginning of month 5
N6 = Amount of cash left after investment at the beginning of month 6

Max Z = N6 + 1.2(S5) + 1.4(B4) + 1.1(R6)

Problem X
CSL is a chain of computer service stores. The number of hours of skilled repair time that CSL requires
during next five month is as follows:
Month 1 (January): 6,000 hours
Month 2 (February): 7,000 hours
Month 3 (March): 8,000 hours
Month 4 (April): 9,500 hours
Month 5 (May): 11,000 hours

At the beginning of January, 50 skilled technicians work for CSL. Each skilled technician can work up to
160 hour per month.
In order to meet future demands, new technicians must be trained. It takes one month to train a new
technician. During the month of training a trainee must be supervised for 50 hours by an experienced
technician.
Each experienced technician is paid $2,000 a month (even if he or she does not work the full 160 hours).
During the month of training, a trainee is paid $1,000 a month. At the end of each month, 5% of CSL’s
experienced technicians quit to join Plum Computers.
Formulate the corresponding linear programming model, whose solution will enable CSL to minimize the
total labour cost incurred in meeting the service requirements for the next five month.

Total labour cost = cost of paying the experienced technician + cost of paying the trainees

Xi = the number of experienced technician working for CSL at the beginning of month i
Yi = the number of trainee (new technician) hired at the beginning of month i
Where i = 1, 2, 3, 4, 5

Min Z = 2,000X1 + 2,000X2 + 2,000X3 + 2,000X4 + 2,000X5 + 1,000Y1 + 1,000Y2 + 1,000Y3 + 1,000Y4 +
1,000Y5

Subject to:
160X1 - 50Y1 > 6,000
160X2 - 50Y2 > 7,000
160X3 - 50Y3 > 8,000
160X4 - 50Y4 > 9,500
160X5 - 50Y5 > 11,000
X1 = 50
X2 = 0.85X1 + Y1
X3 = 0.95X2 + Y2
X4 = 0.95X3 + Y3
X5 = 0.95X4 + Y4
Xi, Yi > 0
Problem X
You have been hired to survey cable television customers to determine their attitudes toward a
restructuring of the basic cable service and rate schedule. The cable company wants to classify
participants according to whether or not they have children under the age of 16 in the household and as
to whether or not the household subscribe to any premium channels.
The basic cost of conducting an interview is $5. Those households with children under 16 are asked a
second series of questions which adds an additional cost of $4 to their interviews. Households with
premium channels are questioned about their viewing habits, and this adds an additional $3 to the costs
of their interviews. Cost is to be minimized.
The cable company wants responses from at least 50 customers. Premium subscribers should constitute
at least half of the customers surveyed. At least 60% of households surveyed should have children under
16. Of those households with children under 16, no more than half should be premium subscribers.
Formulate the corresponding linear programming model.

X1 = the number of households with children < 16 and are premium subscribers
X2 = the number of households with children < 16 and are not premium subscribers
X3 = the number of households without children and are premium subscribers
X4 = the number of households without children and are not premium subscribers

Min Z = 12X1 + 9X2 + 8X3 + 5X4

Subject to:
X1 + X2 + X3 + X4 > 50
X1 + X3 > 0.5(X1 + X2 + X3 + X4)
X1 + X2 > 0.6(X1 + X2 + X3 + X4)
X1 < 0.5(X1 + X2)
X1, X2, X3, X4 > 0

Linear Programming Formulation

Niteton Power and Light Company (NPLC) wants to develop an efficient work schedule for its full- and
part-time customer service clerks. The number of clerks needed to provide adequate service during each
hour the office is open on a weekday is given below:
Hour: 8-9am 9-10 10-11 11-12pm 12-1 1-2 2-3 3-4
Clerks: 5 4 6 8 10 9 7 4

A full time clerk works 3 hours, has a 1-hour break, and then works another 3 hours. Part-time clerks work
for 4 consecutive hours. Full-timers get paid for their break. All clerks start work on the hour. NPLC’s
office manager insists that at least one full time clerk be on duty during all open hours and that at least
40% of the clerks should be full-time clerks on payroll. A full-time clerk costs NPLC $20 per hour, and a
part-timer costs $15 per hour.
Formulate a linear programming model that will provide a schedule that will meet NPLC’s customer
service needs at a minimum labor cost. (Define the decision variables, objective function, and
constraints). DO NOT SOLVE.

F1: number of full time clerk starting at 8:00am

F2: number of full time clerk starting at 9:00am
P1: number of part time clerk starting at 8:00am
P2: number of part time clerk starting at 9:00am
P3: number of part time clerk starting at 10:00am
P4: number of part time clerk starting at 11:00am
P5: number of part time clerk starting at 12:00pm

Min Z = (7*$20)F1 + $140F2 + (4*$15)P1 + $60P2 + $60P3 + $60P4 + $60P5

Subject to:
F1 > 1
F2 > 1
(F1 + F2) > 0.4(F1 + F2 + P1 + P2 + P3 + P4 + P5)
F1 + P1 > 5
F1 + F2 + P1 + P2 > 4
F1 + F2 + P1 + P2 + P3 > 6
F2 + P1 + P2 + P3 + P3 > 8
F1 + P2 + P3 + P4 + P5 > 10
F1 + F2 + P3 + P4 + P5 > 9
F1 + F2 + P4 + P5 > 7
F2 + P5 > 4
F1, F2, P1, P2, P3, P4, P5 > 0

Linear Programming Formulation

Tommy & Lefebvre is Ottawa's full-line authorized dealer for Atomic snowboards for the 2020-2021 winter
season. T&L’s sales projections for November, December and January are 550, 800, and 300
snowboards for each of these next three months. Atomic has agreed to provide T&L with up to 650
boards each month at a unit cost of $82. Using “rush orders”, Atomic can also provide T&L with up to 50
additional boards per month at an increased unit cost of $97 each. Boards not sold at the end of the
month in which they are in stock are stored in the T&L store at a cost of $20 per board per month. It takes
the store clerks 0.5 hours per board to set up, sticker, and display the snowboards and clerk capacity is
limited to 500, 600, and 400 hours in each of the 3 months respectively. Finally, T&L have 50 Atomic
snowboards from last season (2020 model) that they can sell this year and they want to have at least
another 75 snowboards (2021 model) left at the end of January. Write down the algebraic/mathematical
formulation of this problem as a linear programming problem to minimize the total cost to T&L of
purchasing and stocking the snowboards. (Define the decision variables, objective function, and
constraints). DO NOT SOLVE.

Let Xi be the number of snowboards procured using normal orders.

Let Yi be the number of snowboards procured using rush orders.
Let Si be the number of snowboards, stored in a T2L store.

Min Z = 82X1 + 82X2 + 32X3 + 97Y1 + 97Y2 + 93Y3 + 20S1 + 20S2 + 20S3

Subjected to:
X1 + Y1 - S1 = 500 (net requirement of November)
X2 + Y2 - S2 + S1 = 800 (net requirement of December)
X3 + Y3 - S3 + S2 = 300 (net requirement of January)
0.5X1 < 500 (clerk capacity in November)
0.5X2 < 600 (clerk capacity in December)
0.5X3 < 400 (clerk capacity in January)
S3 > 75 (at least 75 snowboards required at end of January)
X1, X2, X3 < 650 (maximum production using regular time)
Y1, Y2, Y3 < 50 (maximum production using rush orders)
X1, Y1, S1 > 0 (non-negativity)