Quantitative methods for

management

LINEAR PROGRAMMING
 Outline

• Examples

• Geometric approach

• Linear programming with Excel

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 Outline

• Examples

• Geometric approach

• Linear programming with Excel

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 Examples

• Profit maximization

• Cost minimization

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Example 1: Profit maximization
• A company manufactures:
– Product 1: gas clothes dryers
– Product 2: electric clothes dryers.

• Production consists of a machining process that takes

raw materials and converts them into unassembled parts.
• These are then sent to one of two divisions for assembly into
the final product-Division 1 for Product 1 and Division 2 for
Product 2

• The problem is to determine the optimal level of output for

two products (1 and 2).

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Example 1: Profit maximization

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 Formulation

• Objective: to maximize the total contributions from the

production of the two products the contribution per unit of
each product times the number of units produced.

• Let X1 and X2 be the output levels of Products 1 and 2,

respectively.

• Objective function: Max f(x)=100X1 + 60X2

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 Constraint Relationships
• The sum of these two quantities of raw materials must be less than or
equal to the quantity available:
20X1 + 40X2 <= 400

• The machine-processing constraint can be developed in a

time manner: like
5X1 + 2X2 <= 40

• The capacities of the two assembly divisions also limit output:

X1<= 6 and X2<= 9

• The negative output quantities are not possible:

X1 >= 0 and X2>= 0

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Linear programming problem

Max f(x)=100X1 + 60X2

s.t.
20X1 + 40X2 <= 400
5X1 + 2X2 <= 40
X1 <= 6
X2 <= 9
X1 , X2 >= 0

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 Example 2: Cost minimization
• A company owns two different mines (A and B) for producing
uranium ore.

• The two mines are located in different areas and

produce different qualities of uranium ore.

• After the ore is mined, it is separated into 3 grades: high-,

medium-, and low-grade

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 Information about the problem

Determine the number of hours per week it should operate each mine to
minimize the total cost.

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 Formulation

• Variable:
– X1 as the number of hours per week that Mine A is operated
– X2 as the number of hours per week that Mine B is operated

• Objective function:
Min f(x)=50X1 + 40X2

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 Constraint Relationships
• Require output of high-grade ore:
0.75X1+ 0.25X2 >= 36

• Require output of medium-grade

ore:
0.25X1+

0.25X2 >=

24

• Require output of low-grade ore:

0.50X1+ 13
Linear programming problem

Min f(x)=50X1 + 40X2

s.t.
0.75X1+ 0.25X2 >= 36
0.25X1+ 0.25X2 >= 24
0.50X1+ 1.50X2 >= 72
X1 , X2 >= 0

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 Example 3

Consider the problem of a toy company that produces toy

planes and toy boats. The toy company can sell its planes for
$10 and its boats for $8 dollars. It costs $3 in raw materials to
make a plane and $2 in raw materials to make a boat. A plane
requires 3 hours to make and 1 hour to finish while a boat
requires 1 hour to make and 2 hours to finish. The toy
company knows it will not sell anymore than 35 planes per
week. Further, given the number of workers, the company
cannot spend anymore than 160 hours per week finishing toys
and 120 hours per week making toys. In order to maximize the
profit, how much of each toy should be produced?

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 Formulation

x1: number of planes

x2 :number of boats

• The profit:
– for each plane
is $10 - $3 =
$7
– for each boat
is $8 - $2 = $6

• Total profit: z(x1;

x2) = 7x1 + 6x2 16
 Formulation

The company can spend no more than 120 hours per week
making toys and since a plane takes 3 hours to make and a
boat takes 1 hour to make, we have:
3x1 + x2 <= 120

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 Formulation

Likewise, the company can spend no more than 160 hours per
week finishing toys and since it takes 1 hour to finish a plane
and 2 hours to finish a boat, we have:
x1 + 2x2 <= 160

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 Formulation

Since the company will make no more than 35 planes per week:
x1 <= 35

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Linear programming problem

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 Optimization problem
Min f(x)
s.t.
g(x) >= 0 (1)
h(x) <= 0 (2)
r(x) = 0 (3)

x: variable
f(x): objective function
g(x), h(x), r(x): constraint functions
D = {x| x satisfies (1)(2) and (3)}: feasible set
x in D: feasible solution (solution, in short)
x* in D such that f(x*) = min f(x): optimal
solution

Solve an optimization probem => Find such

a x* 21
 Linear programming

Min f(x)
s.t.
g(x) (1)
> (2)
= (3)
0
h(x)
<
=
0
r(x)

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 History
• The earliest linear programming was first developed by Leonid
Kantorovich in 1939 for use during World War II to plan
expenditures and returns in order to reduce costs to the army and
increase losses to the enemy. The method was kept secret.
• In 1947, George B. Dantzig published the simplex method when
studying the planning problem in U.S. Air Force.

• In 1979, it was first shown to be solvable in polynomial time by

Leonid Khachiyan

• In 1984, Narendra Karmarkar introduced a new interior

point method

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 Achievement

• Many practical problem in production, planning,

management, technology, transportation ….

• It is a great achievement in 20th century.

Kantorovich: Nobel prize in economics, 1975

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Formulation

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 How to solve a linear programming (LP)?

- 2 variables => graphical method (geometric approach)

- simplex method in general

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 Outline

• Examples

• Geometric approach

• Linear programming with Excel

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Geometric approach-Idea

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Geometric approach-Idea

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Existence of a Solution

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No Solution

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Existence of a Solution

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Bounded Feasible Set

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Multiple Solution

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Solution step

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Solution Example

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Solution Example

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Solution Example

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Solution Example

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Exercise 1

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Exercise 1-Solution

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Exercise 2

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Exercise 2-Solution

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Exercise 3

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Exercise 3-Solution

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Exercise 4

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Exercise 4-Solution

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 Exercise 5 – Nutrition problem

Katy needs at least 60 units of carbohydrates, 45 units of

protein, and 30 units of fat each month. From each pound of
food A, she receives 5 units of carbohydrates, 3 of protein,
and 4 of fat. Food B contains 2 units of carbohydrates, 2 units
of protein, and 1 unit of fat per pound. If food A costs $1.30
per pound and food B costs $0.80 per pound, how many
pounds of each food should Katy buy each month to keep
costs at a minimum?

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 Exercise 6 – Production problem

Scheduling A company sells two types of shoes. The first uses

2 units of leather and 2 units of synthetic material and yields a
profit of $8 per pair. The second type requires 5 units of
leather and 1 unit of synthetic material and gives a profit of
$10 per pair. If there are 40 units of leather and 16 units of
synthetic material available, how many pairs of each type of
shoe should be manufactured to maximize profit? What is the
maximum profit?

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