UNIVERSITY OF BOHOL

PROFESSIONAL STUDIES

INTEGER, GOAL, AND NON-LINEAR PROGRAMMING

December 25, 2022

Report submitted to:

Dr. AMMON DENIS R. TIROL, DM, CPA
as partial fulfillment of the requirements in
BA201 – QUANTITATIVE ANALYSIS AND STATISTICS
First Semester AY 2022-2023

KEZIAH REVE B. RODRIGUEZ

MASTER OF SCIENCE IN BUSINESS ADMINISTRATION
Integer, Goal, and Non-Linear Programming
BA201 Quantitative Analysis and Statistics
University of Bohol Graduate School and Professional Studies

Table of Contents
Learning Objectives 3
Introduction 3
Integer Programming 3
Using Software to Solve Integer Programming Problem 5
Mixed-Integer Programming Problem 6
Using Software for Mixed-Integer Programming Problem Example 7
Modeling with 0-1 (Binary) Variables 8
Capital Budgeting 8
Limiting the Number of Alternatives Selected 9
Dependent Selections 10
Fixed-Charge Problems 10
Financial Investment 11
Goal Programming 12
Extension to Equally Important Multiple Goals 13
Ranking Goals with Priority Levels 14
Goal Programming with Weighted Goals 14
Using QM for Windows to Solve Goal Programming Problem 15
Nonlinear Programming 15
Nonlinear Objective Function and Linear Constraints 16
Linear Objective Function and Nonlinear Constraints 17
References 19

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Integer, Goal, and Non-Linear Programming
BA201 Quantitative Analysis and Statistics
University of Bohol Graduate School and Professional Studies

Learning Objectives

1. Understand the difference between LP and Integer Programming

2. Understand and solve the three types of integer programming problems
3. Formulate and solve goal programming problems using Excel and QM for
Windows
4. Formulate nonlinear programming problems and solve using Excel

Introduction

• Not every problem faced by businesses can easily fit into a neat linear programming
context.
• Many business problems can be solved only if variables have integer values.
• Many business problems have multiple objectives, and goal programming is an
extension to LP that can permit multiple objectives
• Linear programming requires linear models, and nonlinear programming allows
objectives and constraints to be nonlinear.

Integer Programming

• An integer programming model is one where one or more of the decision variables
has to take on an integer value in the final solution.
• There are three types of integer programming problems:
1. Pure integer programming where all variables have integer values.
2. Mixed-integer programming where some but not all the variables will have
integer values.
3. Zero-one integer programming are special cases in which all the decision
variables must have integer solution values of 0 or 1.
Illustrative Example
• The Company produces two products popular with home renovators, old-fashioned
chandeliers, and ceiling fans.
• Both the chandeliers and fans require a two-step production process involving wiring
and assembly.
• It takes about 2 hours to wire each chandelier and 3 hours to wire a ceiling fan.
• Final assembly of the chandeliers and fans requires 6 and 5 hours, respectively.
• The production capability is such that only 12 hours of wiring time and 30 hours of
assembly time are available.
• Each chandelier produced nets the firm $7 and each fan $6.
• Harrison’s production mix decision can be formulated using LP as follows:
Maximize profit = $7X1 + $6X2
subject to 2X1 + 3X2 ≤ 12 (wiring hours)
6X1 + 5X2 ≤ 30 (assembly hours)
X1, X2 ≥ 0 (nonnegativity)

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Integer, Goal, and Non-Linear Programming
BA201 Quantitative Analysis and Statistics
University of Bohol Graduate School and Professional Studies

Where:
X1 = number of chandeliers produced
X2 = number of ceiling fans produced

• The production planner recognizes this is an integer problem.

• His first attempt at solving it is to round the values to X1 = 4 and X2 = 2.
• However, this is not feasible.
• Rounding X2 down to 1 gives a feasible solution, but it may not be optimal.
• This could be solved using the enumeration method, but enumeration is generally
not possible for large problems.

CHANDELIERS CEILING PROFIT ($7X1 +

(X1) FANS (X2) $6X2)
0 0 $0
1 0 7
2 0 14
3 0 21
4 0 28
5 0 35
0 1 6
1 1 13

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Integer, Goal, and Non-Linear Programming
BA201 Quantitative Analysis and Statistics
University of Bohol Graduate School and Professional Studies

2 1 20
3 1 27
4 1 34
0 2 12
1 2 19
2 2 26
3 2 33
0 3 18
1 3 25
0 4 24

• The rounding solution of X1 = 4, X2 = 1 gives a profit of $34.

• The optimal solution of X1 = 5, X2 = 0 gives a profit of $35.
• The optimal integer solution is less than the optimal LP solution.
• An integer solution can never be better than the LP solution and is usually a lesser
solution.

Using Software to Solve Integer Programming Problem

Below is the QM for Windows Input Screen for Harrison Electronic Problem

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Integer, Goal, and Non-Linear Programming
BA201 Quantitative Analysis and Statistics
University of Bohol Graduate School and Professional Studies

Excel Solver Solution for Harrison Electric Problem

Mixed-Integer Programming Problem

• There are many situations in which some of the variables are restricted to be
integers and some are not.
• Bagwell Chemical Company produces two industrial chemicals.
• Xyline must be produced in 50-pound bags.
• Hexall is sold by the pound and can be produced in any quantity.
• Both xyline and hexall are composed of three ingredients – A, B, and C.
• Bagwell sells xyline for $85 a bag and hexall for $1.50 per pound.
AMOUNT PER AMOUNT PER AMOUNT OF
50-POUND BAG POUND OF INGREDIENTS
OF XYLINE (LB) HEXALL (LB) AVAILABLE
30 0.5 2,000 lb–ingredient A
18 0.4 800 lb–ingredient B
2 0.1 200 lb–ingredient C

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Integer, Goal, and Non-Linear Programming
BA201 Quantitative Analysis and Statistics
University of Bohol Graduate School and Professional Studies

• Bagwell wants to maximize profit.

• Let X = number of 50-pound bags of xyline.
• Let Y = number of pounds of hexall.
• This is a mixed-integer programming problem as Y is not required to be an integer.
• The model is:
Maximize profit = $85X + $1.50Y
subject to 30X + 0.5Y ≤ 2,000
18X + 0.4Y ≤ 800
2X + 0.1Y ≤ 200
X, Y ≥ 0 and X integer

Using Software for Mixed-Integer Programming Problem Example

QM for Windows Solution for Bagwell Chemical Problem

Excel 2010 Solver Solution for Bagwell Chemical Problem

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Integer, Goal, and Non-Linear Programming
BA201 Quantitative Analysis and Statistics
University of Bohol Graduate School and Professional Studies

Modeling with 0-1 (Binary) Variables

• We can demonstrate how 0-1 variables can be used to model several diverse
situations.
• Typically a 0-1 variable is assigned a value of 0 if a certain condition is not met and
a 1 if the condition is met.
• This is also called a binary variable.

Capital Budgeting
• A common capital budgeting problem is selecting from a set of possible projects
when budget limitations make it impossible to select them all.
• A 0-1 variable is defined for each project.
• Quemo Chemical Company is considering three possible improvement projects for
its plant:
o A new catalytic converter.
o A new software program for controlling operations.
o Expanding the storage warehouse.
• It cannot do them all
• It wants to maximize net present value of projects undertaken.

Illustrative Example

Quemo Chemical Company Information

PROJECT NET PRESENT VALUE YEAR 1 YEAR 2
Catalytic $25,000 $8,000 $7,000
Converter
Software $18,000 $6,000 $4,000
Warehouse $32,000 $12,000 $8,000
expansion
Available $20,000 $16,000
funds
The basic model is:
Maximize net present value of projects undertaken subject to
Total funds used in year 1 ≤ $20,000
Total funds used in year 2 ≤ $16,000
The decision variables are:
X1 = { 1if catalytic converter project is funded
0 otherwise
X2 = { 1 if software project is funded
0 otherwise
X3 = { 1 if warehouse expansion project is funded
0 otherwise

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Integer, Goal, and Non-Linear Programming
BA201 Quantitative Analysis and Statistics
University of Bohol Graduate School and Professional Studies

The mathematical statement of the integer programming problem becomes:

Maximize NPV = 25,000X1 + 18,000X2 + 32,000X3
subject to 8,000X1 + 6,000X2 + 12,000X3 ≤ 20,000
7,000X1 + 4,000X2 + 8,000X3 ≤ 16,000
X, X2, X3 = 0 or 1
Excel Solver Solution for Quemo Chemical Problem

• This is solved with computer software, and the optimal solution is X1 = 1, X2 = 0, and
X3 = 1 with an objective function value of 57,000.
• This means that Quemo Chemical should fund the catalytic converter and
warehouse expansion projects only.
• The net present value of these investments will be $57,000.

Limiting the Number of Alternatives Selected

• One common use of 0-1 variables involves limiting the number of projects or items
that are selected from a group.
• Suppose Quemo Chemical is required to select no more than two of the three
projects regardless of the funds available.
• This would require adding a constraint:
X1 + X2 + X3 ≤ 2
• If they had to fund exactly two projects the constraint would be:
X1 + X2 + X3 = 2

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Integer, Goal, and Non-Linear Programming
BA201 Quantitative Analysis and Statistics
University of Bohol Graduate School and Professional Studies

Dependent Selections
• At times the selection of one project depends on the selection of another project.
• Suppose Quemo’s catalytic converter could only be purchased if the software was
purchased.
• The following constraint would force this to occur:
X1 ≤ X2 or X1 – X2 ≤ 0
• If we wished for the catalytic converter and software projects to either both be
selected or both not be selected, the constraint would be:
X1 = X2 or X1 – X2 = 0

Fixed-Charge Problems
Often businesses are faced with decisions involving a fixed charge that will affect
the cost of future operations.

Illustrative Example

• Sitka Manufacturing is planning to build at least one new plant and three cities are
being considered in:
o Baytown, Texas
o Lake Charles, Louisiana
o Mobile, Alabama
• Once the plant or plants are built, the company wants to have capacity to produce
at least 38,000 units each year.
• Fixed and variable costs for Sitka Manufacturing
SITE ANNUAL VARIABLE ANNUAL
FIXED COST PER CAPACITY
COST UNIT
Baytown, TX $340,000 $32 21,000
Lake Charles, $270,000 $33 20,000
LA
Mobile, AL $290,000 $30 19,000
Define the decision variables as:
X1 = { 1 if factor is built in Baytown
0 otherwise
X2 = { 1 factory is built in Lake Charles
0 otherwise
X3 = { 1 if factory is built in Mobile
0 otherwise
X4 = number of units produced at Baytown plant
X5 = number of units produced at Lake Charles plant
X6 = number of units produced at Mobile plant

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Integer, Goal, and Non-Linear Programming
BA201 Quantitative Analysis and Statistics
University of Bohol Graduate School and Professional Studies

The integer programming formulation becomes

Minimize cost = 340,000X1 + 270,000X2 + 290,000X3 + 32X4 + 33X5 + 30X6
Subject to X4 + X5 + X6 ≥ 38,000
X4 ≤ 21,000X1
X5 ≤ 20,000X2
X6 ≤ 19,000X3
X1, X2, X3 = 0 or 1;
X4, X5, X6 ≥ 0 and integer
The optimal solution is:
X1 = 0, X2 = 1, X3 = 1, X4 = 0, X5 = 19,000, X6 = 19,000
Objective function value = $1,757,000

Excel Solver Solution for Sitka Manufacturing Problem

Financial Investment
Illustrative Example

• Simkin, Simkin, and Steinberg specialize in recommending oil stock portfolios for
wealthy clients.
• One client has the following specifications:
o At least two Texas firms must be in the portfolio.
o No more than one investment can be made in a foreign oil company.
o One of the two California oil stocks must be purchased.
• The client has $3 million to invest and wants to buy large blocks of shares.
• Below is the table for Simkin, Simkin, and Steinberg’s Oil Investment Opportunities
COMPANY EXPECTED ANNUAL COST FOR BLOCK OF
STOCK
NAME RETURN ($1,000s) SHARES ($1,000s)
1 Trans-Texas Oil 50 480
2 British Petroleum 80 540
3 Dutch Shell 90 680

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Integer, Goal, and Non-Linear Programming
BA201 Quantitative Analysis and Statistics
University of Bohol Graduate School and Professional Studies

4 Houston Drilling 120 1,000

5 Texas Petroleum 110 700
6 San Diego Oil 40 510
7 California Petro 75 900
Model formulation:
Maximize return = 50X1 + 80X2 + 90X3 + 120X4 + 110X5 + 40X6 + 75X7
Subject to X1 + X4 + X5 ≥ 2 (Texas constraint)
X2+ X3 ≤ 1 (foreign oil constraint)
X6 + X7 = 1 (California constraint)
480X1 + 540X2 + 680X3 + 1,000X4 + 700X5 + 510X6 + 900X7 ≤ 3,000 ($3 million limit)
All variables must be 0 or 1

Excel Solver Solution for Financial Investment Problem

Goal Programming

• Firms often have more than one goal.

• In linear and integer programming methods the objective function is measured in
one dimension only.
• It is not possible for LP to have multiple goals unless they are all measured in the
same units, and this is a highly unusual situation.
• An important technique that has been developed to supplement LP is called goal
programming.
• Typically goals set by management can be achieved only at the expense of other
goals.
• A hierarchy of importance needs to be established so that higher-priority goals are
satisfied before lower-priority goals are addressed.
• It is not always possible to satisfy every goal so goal programming attempts to reach
a satisfactory level of multiple objectives.

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Integer, Goal, and Non-Linear Programming
BA201 Quantitative Analysis and Statistics
University of Bohol Graduate School and Professional Studies

• The main difference is in the objective function where goal programming tries to
minimize the deviations between goals and what we can actually achieve within the
given constraints.

Illustrative Example – Harrison Electric Company

The LP formulation for the Harrison Electric Company problem is:

Maximize profit = $7X1 + $6X2
subject to 2X1 + 3X2 ≤ 12 (wiring hours)
6X1 + 5X2 ≤ 30 (assembly hours)
X1, X2 ≥ 0
Where:
X1 = number of chandeliers produced
X2 = number of ceiling fans produced

• Harrison is moving to a new location and feels that maximizing profit is not a realistic
objective.
• Management sets a profit level of $30 that would be satisfactory during this period.
• The goal programming problem is to find the production mix that achieves this goal
as closely as possible given the production time constraints.
• We need to define two deviational variables:
o d1 – = underachievement of the profit target
o d1+ = overachievement of the profit target
• We can now state the Harrison Electric problem as a single-goal programming
model:
Minimize under or overachievement of profit target = d1– + d1+
Subject to $7X1 + $6X2 + d1– – d1+ = $30 (profit goal constraint)
2X1 + 3X2 ≤ 12 (wiring hours)
6X1 + 5X2 ≤ 30 (assembly hours)
–
X1, X2, d1 , d1 ≥ 0
+

Extension to Equally Important Multiple Goals

• Suppose Harrison’s management wants to achieve several goals that are equal in
priority:
Goal 1: to produce a profit of $30 if possible during the production period.
Goal 2: to fully utilize the available wiring department hours.
Goal 3: to avoid overtime in the assembly department.
Goal 4: to meet a contract requirement to produce at least seven ceiling fans.
• The deviational variables are:
d1– = underachievement of the profit target
d1+ = overachievement of the profit target
d2– = idle time in the wiring department (underutilization)
d2+ = overtime in the wiring department (overutilization)

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Integer, Goal, and Non-Linear Programming
BA201 Quantitative Analysis and Statistics
University of Bohol Graduate School and Professional Studies

d3– = idle time in the assembly department (underutilization)

d3+ = overtime in the assembly department (overutilization)
d4– = underachievement of the ceiling fan goal
d4+ = overachievement of the ceiling fan goal

Because management is unconcerned about d1+, d2+, d3–, and d4+ these may be
omitted from the objective function.
• The new objective function and constraints are:
Minimize total deviation = d1– + d2– + d3+ + d4–
subject to 7X1 + 6X2 + d1– – d1+ = 30 (profit constraint)
–
2X1 + 3X2 + d2 – d2 +
= 12 (wiring hours)
–
6X1 + 5X2 + d3 – d3 +
= 30 (assembly hours)
X2 + d4– – d4+ = 7 (ceiling fan
constraint)
All Xi, di variables ≥ 0

Ranking Goals with Priority Levels

• In most goal programming problems, one goal will be more important than another,
which will in turn be more important than a third.
• Higher-order goals are satisfied before lower-order goals.
• Priorities (Pi’s) are assigned to each deviational variable with the ranking so that P1
is the most important goal, P2 the next most important, P3 the third, and so on.
• Harrison Electric has set the following priorities for their four goals:
GOAL PRIORITY
Reach a profit as much above $30 as P1
possible
Fully use wiring department hours P2
available
Avoid assembly department overtime P3
Produce at least seven ceiling fans P4
• This effectively means that each goal is infinitely more important than the next lower
goal.
• With the ranking of goals considered, the new objective function is:
Minimize total deviation = P1d1– + P2d2– + P3d3+ + P4d4–
• Constraints remain identical to the previous formulation.

Goal Programming with Weighted Goals

• Normally priority levels in goal programming assume that each level is infinitely more
important than the level below it.
• Sometimes a goal may be only two or three times more important than another.

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Integer, Goal, and Non-Linear Programming
BA201 Quantitative Analysis and Statistics
University of Bohol Graduate School and Professional Studies

• Instead of placing these goals on different levels, we place them on the same level
but with different weights.
• The coefficients of the deviation variables in the objective function include both the
priority level and the weight.
• Suppose Harrison decides to add another goal of producing at least two chandeliers.
• The goal of producing seven ceiling fans is considered twice as important as this
goal.
• The goal of two chandeliers is assigned a weight of 1 and the goal of seven ceiling
fans is assigned a weight of 2 and both will be priority level 4.
• The new constraint and objective function are:
X1 + d5– – d5+ = 2 (chandeliers)
Minimize = P1d1– + P2d2– + P3d3+ + P4(2d4–) + P4d5–

Using QM for Windows to Solve Goal Programming Problem

Harrison Electric’s Goal Programming Analysis Using QM Windows: Inputs

Summary Screen for Harrison Electric’s Goal Programming Analysis Using QM for
Windows

Nonlinear Programming

• The methods seen so far have assumed that the objective function and constraints
are linear.
• Terms such as X13, 1/X2, log X3, or 5X1X2 are not allowed.

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Integer, Goal, and Non-Linear Programming
BA201 Quantitative Analysis and Statistics
University of Bohol Graduate School and Professional Studies

• But there are many nonlinear relationships in the real world that would require the
objective function, constraint equations, or both to be nonlinear.
• Excel can be used to solve these nonlinear programming (NLP) problems.
• One disadvantage of NLP is that the solution yielded may only be a local optimum,
rather than a global optimum.
o In other words, it may be an optimum over a particular range, but not overall.

Nonlinear Objective Function and Linear Constraints

• The Great Western Appliance Company sells two models of toaster ovens, the
Microtoaster (X1) and the Self-Clean Toaster Oven (X2).
• They earn a profit of $28 for each Microtoaster no matter the number of units sold.
• For the Self-Clean oven, profits increase as more units are sold due to a fixed
overhead.
o The profit function for the Self-Clean over may be expressed as:
21X2 + 0.25X22
• The objective function is nonlinear and there are two linear constraints on production
capacity and sales time available.
Maximize profit = 28X1 + 21X2 + 0.25X22
subject to X1 + 21X2 ≤ 1,000 (units of production capacity)
0.5X1 + 0.4X2 ≤ 500 (hours of sales time available)
X1, X2 ≥0
• When an objective function contains a squared term and the problem constraints
are linear, it is called a quadratic programming problem.

Excel Solver Solution for Great Western Appliance NLP Problem

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Integer, Goal, and Non-Linear Programming
BA201 Quantitative Analysis and Statistics
University of Bohol Graduate School and Professional Studies

Both Nonlinear Objective Function and Nonlinear Constraints

• The annual profit at a medium-sized (200-400 beds) Hospicare Corporation hospital

depends on the number of medical patients admitted (X1) and the number of surgical
patients admitted (X2).
• The objective function for the hospital is nonlinear.
• They have identified three constraints, two of which are nonlinear.
o Nursing capacity - nonlinear
o X-ray capacity - nonlinear
o Marketing budget required
• The objective function and constraint equations for this problem are:
Maximize profit = $13X1 + $6X1X2 + $5X2 + $1/X2
subject to 2X12 + 4X2 ≤ 90 (nursing capacity in ths. of labor-days)
X1 + X23 ≤ 75 (x-ray capacity in thousands)
8X1 – 2X2 ≤ 61 (marketing budget req. in thousands of $)

Excel Solution for Hospicare’s NLP Problem

Linear Objective Function and Nonlinear Constraints

• Thermlock Corp. produces massive rubber washers and gaskets like the type used
to seal joints on the NASA Space Shuttles.
• It combines two ingredients, rubber (X1) and oil (X2).

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Integer, Goal, and Non-Linear Programming
BA201 Quantitative Analysis and Statistics
University of Bohol Graduate School and Professional Studies

• The cost of the industrial quality rubber is $5 per pound and the cost of high
viscosity oil is $7 per pound.
• Two of the three constraints are nonlinear.
• The firm’s objective function and constraints are:
Minimize costs = $5X1 + $7X2
subject to 3X1 + 0.25X12 + 4X2 + 0.3X22 ≥ 125 (hardness constraint)
13X1 + X13 ≥ 80 (tensile strength)
0.7X1 + X2 ≥ 17 (elasticity)

Excel Solution for Thermock NLP Problem

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Integer, Goal, and Non-Linear Programming
BA201 Quantitative Analysis and Statistics
University of Bohol Graduate School and Professional Studies

References
Render, B., Stair Jr, R., Hanna, M., & Hale, T. (2018). Quantitative Analysis for
Management. Pearson Education Limited.

Render, B., Stair, R., & Hanna, M. (2012). Quantitative Analysis for Management,
Eleventh Edition. New Jersey: Pearson Education Inc.

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