Linear programming

Dear learner! Have you ever experienced the problem of allocating scarce resource to various
activities to attain the predetermined goal? If so, in what way you approached the
allocation?..........................................................................................................................................
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Introduction

A large number of decision problems faced by a business manger involve allocation of resources
to various activities, with the objective of increasing profits or decreasing costs, or both. When
resources are in excess, no difficulty is experienced. Nevertheless, such cases are very rare.
Practically in all situations, the managements are confronted with the problem of scarce
resources. Normally, there are several activities to perform but limitations of either the resources
or their use prevent each activity from being performed to the level demanded. Thus, the manger
has to take a decision as to how best the resources be allocated among the various activates.
These decision problems can be formulated and solved as mathematical programming problems
and hence knowhow of linear programming is imperative.

Definition: Linear Programming (LP):

o Is a mathematical process that has been developed to help management in decision-
making involving the efficient allocation of scares resources to achieve a certain
objective/s.
o Is a method for choosing the best alternative from a set of feasible alternatives?

Requirements to Apply Linear Programming: To apply LP, the following conditions must be
satisfied.

a. There should be an objective that should be clearly identified and measurable in quantitative
terms. Example, maximization of sales, profit, and minimization of costs etc.
b. The activities to be included should be distinctly identifiable and measurable in quantitative
terms.
c. The resources of the system which are to be allocated for the attainment of the goal should
also be identifiable and measurable quantitatively. They must be in limited supply. These
resources should be allocated in a manner that would trade off returns on investment of the
resources for the attainment of the objective.
d. The relationship representing the objective and the resource limitation considerations
represented by the objective function and the constraint equations or inequalities,
respectively, must be linear in nature.
e. There should be a series of feasible alternative courses of actions available to the decision-
maker that is determined by the resource constraints.

When these stated conditions are satisfied in a given solution, the problem can be expressed in
algebraic form called linear programming problem (LPP), and then solved for optimal decision.
Diagrammatically Linear Programming (LP) model can be presented as shown below.

Scares To be allocated to:

Resource

Resource

Objectives Constraints constraints

Non-negativity

Optimization Constraints

Fig 3.1. Linear Programming Model

Maximization Minimization

Dear learner! Let’s first illustrate the formulation of linear programming problems and then
consider the method of their solution.

Formulation of linear programming model: Problem Formulation or Modelling is the process

of translating the verbal statement of a problem in to mathematical statements. Formulating
model is an art that can only be measured with practice and experience. Even though every
problem has certain unique features, most problems have common features. Therefore, some
general guidelines for model formulation are helpful. Thus, to understand the formulation let’s
see cases on maximization and minimization problems.

The Maximization Case: A firm is engaged in producing two products, A and B. Each unit of
product A requires two kgs of raw material and four labor hours for processing whereas each unit
of product B requires three kg of raw material and three hours of labor of the same type. Every
week the firm has an availability of 60 kgs of raw material and 96 labor hours. One unit of
product A sold yields Birr 40 and one unit of product B sold yields Birr 35 as profit. Formulate
this problem as a linear programming problem to determine as to how many units of each of the
products should be produced per week so that the firm can maximum the profit. Assume that
there is no marketing constraint so that all that is produced can be sold.

The objective function: the first major requirement of linear programming problem (LPP) is
that we should be able to identify the goal in terms of the objective function. This function
relates mathematically the variables with which we are dealing in the problem. For our problem,
the goal is the maximization of profit, which would be obtained by producing (and selling) the
products A and B. If we let x1 and x2 represent the number of units produced per week of the
products A and B respectively, the total profit, Z, would be equal to 40 x1 +35x2 is then, the
objective function, relating the profit and the output level of each of the two items. Notice that
the function is a linear one. Further, since the problem calls for a decision about the optimal
values of x1 and x2, these are known as the decision variables.

The constraints: As has been laid, another requirement of linear programming is that the
resources must be in limited supply. The mathematical relationship which is used to explain this
limitation is inequality. The limitation itself is known as a constraint. Each unit of product A
requires 2 kg of raw material while each unit of product B needs 3 kg. The total consumption
would be 2x2 and 3x2, which cannot be the total the availability of 60 kg every week. We can
express this constraint as 2x1 and 3x2 < 60. Similarly, it is given that a unit of A requires 4 labor
hours for its production and one unit of B requires 3 hours. With an availability of 96 hours a
week, we have 4 x1 and 3x2 < 96 as the labor hour's constraint. It is important to note that for each
of the constraint, inequality rather than equation has been used. This is because the profit
maximizing output might not use all the resources to the full leaving some unused, hence the <
sign. However, it may be noticed that all the constraints are also linear in nature.

Non-negativity Condition: Quite obviously, x1 and x2, being the number of units produced,
cannot have negative values. Thus both of them can assume values only greater than or equal to
zero. This is the non-negativity condition, expressed symbolically as x1 > 0 and x2, > 0.
Now we can write the problem in complete form as follows.
Maximize Z = 40 X1 + 35 X2, Profit
Subject to
2X1 + 3X2 < 60 Raw material constraint
4X1 + 3X2 < 96 Labor hours constraint
X1, X2, > 0 Non-negativity restriction
The Minimization Case: The agricultural Research institute has suggested to a farmer to spread
out at least 4800 kg of a special phosphate fertilizer and no less than 7200 kg of a special
nitrogen fertilizer to raise productivity of crops in his fields. There are two resources for
obtaining these mixtures A and B. Both of these are available in bags weighing 100 kg each and
they cost Birr 40 and Birr 24 respectively. Mixture A contains phosphate and nitrogen equivalent
of 20 kg and 80 respectively, while mixture B contains these ingredients equivalent of 50 kg
each. Write this as a linear programming problem and determine how many bags of each type
the farmer should buy in order to obtain the required fertilizer at minimum cost.

The Objective Function: In the given problem, such a combination of mixtures A and B is
sought to be purchased as would minimize the total cost. If x 1 and x2 are taken to represent the
number of bags of mixtures A and B respectively, the objective function can be expressed as
follows:
Minimize Z = 40x1 + 24 x2 Cost

The constraints: In this problem, there are two constrains, namely, a minimum of 4800 kg of
phosphate and 7200 kg of nitrogen ingredients are required. It is known that each bag of mixture
A contains 20 kg and each bag of mixture B contains 50 kg of phosphate. The phosphate
requirement can be expressed as 20x1 + 50x2 > 4800. Similarly, with the given information on the
contents, the nitrogen requirement would be written as 80 x1 + 50x2 > 7200.

Non-negativity condition: As before, it lays that the decision variables, representing the number
of bags of mixtures A and B, would be non-negative. Thus x1 > 0 and x2 > 0. The linear
programming problem can now be expressed as follows:
Minimize Z = 40x1 + 24 x2 Cost
Subject to
20x1 + 50x2 > 4800 Phosphate requirement
80x1 + 50x2 > 7200 Nitrogen requirement
x1, x2 > 0 Non negativity restriction
In general, linear programming problem can be written as
Maximize Z = c1x1 + c2x2 ………+ cn xn Objective Function
Subject to
a11x11 + a22 x2 +………………………..+ ain x n < b1
a21x1 + a22 x2 + ………………………..+ ain x n < b2
am1 x1 + am2 x2 + ............................+ amn < xn bm
x1, x2, ……………………….., xn > 0
Where cj, aij, bi (i = 1, 2, ……..…., m; j = 1,2,……n) are known as constants and
x’s are decision variables
 c’s are termed as the profit coefficients
aij’s the technological coefficients
b’s the resource values
Note:

Although, generally, the constraints in the maximization problems are of the < type, and the
constraints in the minimization problems are of > type , a given problem might contain a mix of
the constraints, involving the signs <, >, and /or =
\
Assumptions Underlying Linear Programming: A linear programming model is based on the
assumptions detailed hereunder.

1. Proportionality: A basic assumption of linear programming is that proportionality exists in

the objective function and the constraint inequalities. For example, if one unit of a product is
assumed to contribute Birr 10 toward profit, then the total contribution would be equal to
10x1 where x1 is the number of units of the product. For 4 units, it would equal Birr 40 and
for 8 units it would be Birr 80, thus if the output (and sales) is doubled, the profit would also
be doubled. Similarly, if one unit takes 2 hours of labor of a certain type, 10 units would
require 20 hours, 20 units would require 40 hours….and so on. In effect, then, proportionality
means that there are constant returns to scale and there are no economies of scale.

2. Additively: Another assumption underlying the linear programming model is that in the
objective function and constraint inequalities both, the total of all the activities is given by
the sum total of each activity conducted separately. Thus, the total profit in the objective
function is determined by the sum of the profit contributed by each of the products
separately. Similarly, the total amount of a resource used is equal to the sum of the resource
values used by various activities.

3. Continuity: It is also an assumption of a linear programming model that the decision

variables are continuous. Therefore, combinations of output with fractional values, in the
context of production problems, are possible and obtained frequently. For example, the best
solution to a problem might be to produces 5¾ units of product B per week. Although in
 many situations we can have only integer values, but we can deal with the fractional values,
when they appear.

4. Certainty: A further assumption underlying a linear programming model is that the various
parameters, namely, the objective function coefficients, the coefficients of the
inequality/equality constraints and the constraint (resource) values are known with certainty.
Thus, the profit per unit of the product, requirements of materials and labor per unit,
availability of materials, labor etc. are given and known in a problem involving these. The
linear programming is obviously deterministic in nature.

5. Finite Choices: A linear programming model also assumes that a limited number of choices
are available to a decision maker and the decision variables do not assume negative values.
Thus, only non-negative levels of activity are considered feasible. This assumption is indeed
a realistic one. For instance, in the production problems, the output cannot obviously be
negative, because a negative production implies that we should be above to reverse the
production process and convert the finished output back in to the raw materials!

Solution approaches to LPPS: Now we shall consider the solution to the linear programming
problems. They can be solved by using graphic method or by applying algebraic method, called
the Simplex Method. The graphic method is restricted in application – it can only be used when
two variables are involved. Nevertheless, it provides an intuitive grasp of the concepts that are
used in the simplex technique. The Simplex method, is the mathematical technique of solving
linear programming problems with two or more variables.

Graphial Solution to Linear Programming Problems: To use the graphic method, the
following steps are needed:
i. Identify the problem – determine the decision variables, the objective function, and
the constraints.
ii. Draw a graph including all the constraints and identify the feasible region.
iii. Obtain a point on the feasible region that optimizes the objective function – optimal
solution.
iv. Interpret the results.

Note: Graphical LP is a two-dimensional model.

a) Maximization Problem: This is the case of Maximize Z with inequalities of constraints in <
form. Consider two models of color TV sets; Model A and B, are produced by a company to
maximize profit. The profit realized is $300 from A and $250 from set B. The limitations are
a. Availability of only 40 hrs of labor each day in the production department,
b. A daily availability of only 45 hrs on machine time, and
c. Ability to sale 12 set of model A.

How many sets of each model will be produced each day so that the total profit will be as large
as possible?

Resources used per unit

Constraints Maximum Available
Model A Model B Hours
(x1) (x2)
Labor Hours 2 1 40

Machine Hours 1 3 45

Marketing Hours 1 0 12

Profit $300 $250

Solution:

1. Formulation of mathematical model of LPP

Max Z=300X1 +250X2
St:
2X1 +X2< 40
X1 +3X2< 45 LP Model
X1 < 12
X1, X2 > 0
2. Convert constraints inequalities into equalities
2X1 + X2 = 40
X1 + 3X2 = 45
X1 = 12
3. Draw the graph by finding out the x– and y–intercepts
2X1 +X2 = 40 ==> (0, 40) and (20, 0)
X1 +3X2 = 45 ==> (0, 15) and (45, 0)
X1 = 12 ==> (12, 0)
X1 , X2 = 0
 2X1 +X2 = 40
X2
X1=0
40 X1=12

X1 +X2 = 45
15

Feasible C (12, 11)

Region X2=0
X1
D
A 12 20 45
4. Identify the feasible area of the solution which satisfies all constrains. The shaded region in
the above graph satisfies all the constraints and it is called Feasible Region.

5. Identify the corner points in the feasible region. Referring to the above graph, the corner
points are in this case are:
A (0, 0), B (0, 15), C (12, 11) and D (12, 0)

6. Identify the optimal point.

Corners Coordinates Max Z = 300 X1 +250X2

A (0, 0) $0

B (0, 15) $3750

C (12, 11) $ 6350 (Optimal)

D (12, 0) $3600

7. Interpret the result. Accordingly, the highlighted result in the table above implies that 12
units of Model A and 11 units of Model B TV sets should be produced so that the total profit
will be $6350.