Spreadsheet Modeling and Decision Analysis 8th Edition
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Preface
Spreadsheets are one of the most popular and ubiquitous software packages on the
planet. Every day, millions of business people use spreadsheet programs to build models
of the decision problems they face as a regular part of their work activities. As a result,
employers look for experience and ability with spreadsheets in the people they recruit.
Spreadsheets have also become the standard vehicle for introducing undergraduate
and graduate students in business and engineering to the concepts and tools covered
in the introductory business analytics course. This simultaneously develops students’
skills with a standard tool of today’s business world and opens their eyes to how a
variety of quantitative analysis techniques can be used in this modeling environment.
Spreadsheets also capture students’ interest and add a new relevance to business ana-
lytics, as they see how it can be applied with popular commercial software being used
in the business world.
provides an introduction to the most com-
monly used descriptive, predictive, and prescriptive business analytics techniques and
shows how these tools can be implemented using Microsoft® Excel. Prior experience
with Excel is certainly helpful, but is not a requirement for using this text. In general, a
student familiar with computers and the spreadsheet concepts presented in most intro-
ductory computer courses should have no trouble using this text. Step-by-step instruc-
tions and screen shots are provided for each example, and software tips are included
throughout the text as needed.
What’s New in the Eighth Edition?
The eighth edition introduces a brand new MindTap product. For each chapter, this
all-digital version of the book enhances learning with an engagement video and discus-
sion, a quiz with rich feedback, videos by the author that explain chapter concepts, and
end-of-chapter assignments that are tailored to work well digitally. If you’re interested
in all these features, talk to your Cengage learning consultant.
The most significant feature in the eighth edition of
is its focus on business analytics and extensive coverage and use of Analytic
Solver Platform for Education by Frontline Systems, Inc. Analytic Solver Platform for
Education is an add-in for Excel that provides access to analytical tools for performing
optimization, simulation, sensitivity analysis, and decision tree analysis, as well as a
variety of tools for data mining. Analytic Solver Platform for Education makes it easy
to run multiple parameterized optimizations and simulations and apply optimization
techniques to simulation models in one integrated, coherent interface. Analytic Solver
Platform also offers amazing interactive simulation features in which simulation results
are automatically updated in real-time whenever a manual change is made to a spread-
sheet. Additionally, when run in its optional “Guided Mode,” Analytic Solver Platform
provides students with over 100 customized dialog boxes that provide diagnoses of
various model conditions and explain the steps involved in solving problems. Analytic
Solver Platform also includes Frontline’s XLMiner Platform product that offers easy
access to a variety of data mining techniques including discriminant analysis, logistic
iii
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iv Preface
regression, neural networks, classification and regression trees, k-nearest neighbor clas-
sification, cluster analysis, and affinity analysis. Analytic Solver Platform offers numer-
ous other features and, I believe, will transform the way we approach education in
quantitative analysis now and in the future.
Additional changes in the eighth edition of
from the seventh edition include:
• Microsoft® Office 2016 is featured throughout.
• Data files and software to accompany the book are now available for download
online at the book’s companion site, which you can access at www.CengageBrain.
com. There, enter this book’s ISBN number and you’ll be able to access the accom-
panying materials.
• Chapter 1 includes an expanded discussion and definition of good decision making.
• Chapter 6 features a new section on the topic of line balancing problems.
• Chapter 10 has undergone extensive revision to reflect changes in XLMiner Plat-
form and was expanded to include discussion of precision, recall (sensitivity), spec-
ificity, F1 scores, and ROC curves.
• Chapter 11 introduces new, simplified techniques for producing forecasts for sta-
tionary time series data.
• Several new and revised end-of-chapter problems are included throughout.
Innovative Features
Aside from its strong spreadsheet orientation, the eighth edition of
contains several other unique features that distinguish it from other texts.
• Algebraic formulations and spreadsheets are used side-by-side to help develop
conceptual thinking skills.
• Step-by-step instructions and numerous annotated screen shots make examples
easy to follow and understand.
• Emphasis is placed on model formulation and interpretation rather than on
algorithms.
• Realistic examples motivate the discussion of each topic.
• Solutions to example problems are analyzed from a managerial perspective.
• Spreadsheet files for all the examples are provided on a data disk bundled with the text.
• A unique and accessible chapter covering data mining is provided.
• Sections entitled “The World of Business Analytics” show how each topic has been
applied in a real company.
Organization
The table of contents for is laid out in a fairly
traditional format, but topics may be covered in a variety of ways. The text begins with
an overview of business analytics in Chapter 1. Chapters 2 through 8 cover various topics
in prescriptive modeling techniques: linear programming, sensitivity analysis, networks,
integer programming, goal programming and multiple objective optimization, and non-
linear and evolutionary programming. Chapters 9 through 11 cover predictive modeling
and forecasting techniques: regression analysis, data mining, and time series analysis.
Chapters 12 and 13 cover descriptive modeling techniques: simulation and queuing
theory. Chapter 14 covers decision analysis, and Chapter 15 (available exclusively in
MindTap) provides an introduction to project management.
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Preface v
After completing Chapter 1, a quick refresher on spreadsheet fundamentals
(entering and copying formulas, basic formatting and editing, etc.) is always a good
idea. Suggestions for the Excel review may be found at this book’s companion site.
(To access, go to www.CengageBrain.com and add this book to your bookshelf by
searching its ISBN.) Following this, an instructor could cover the material on optimiza-
tion, regression, forecasting, data mining, or simulation, depending on personal pref-
erences. The chapters on queuing and project management make general references to
simulation and, therefore, should follow the discussion of that topic.
Several excellent ancillaries for the instructor accompany this edition of
All instructor ancillaries are provided at www.Cengage-
Brain.com. Included in this convenient format are:
• The Instructor’s Manual, prepared by the author, contains
solutions to all the text problems and cases.
• The Test Bank, prepared by Tom Bramorski, University of Georgia,
includes multiple choice, true/false, and short answer problems for each text
chapter. Cengage Learning Testing Powered by Cognero is a flexible, online sys-
tem that allows you to author, edit, and manage test bank content, create multiple
test versions in an instant, and deliver tests from your LMS, in your classroom or
through CengageNOW.
On the book’s companion site, you’ll also find the test bank in Microsoft® Word format.
• PowerPoint presentation slides, prepared by the
author, provide ready-made lecture material for each chapter in the book.
I thank the following colleagues who made important contributions to the develop-
ment and completion of this book. The reviewers for the eighth edition were:
Layek Abdel-Malek, New Jersey Institute of Technology
Ajay Aggarwal, Millsaps College
Aydin Alptekinoglu, University of Florida
Leonard Asimow, Robert Morris University
Tom Bramorski, University of Georgia
John Callister, Cornell University
Moula Cherikh, Virginia State University
Steve Comer, The Citadel
David L. Eldredge, Murray State University
Ronald Farina, University of Denver
Konstantinos Georgatos, John Jay College
Michael Gorman, University of Dayton
Deborah Hanson, University of Great Falls
Duncan Holthausen, North Carolina State University
Mark Isken, Oakland University
PingSun Leung, University of Hawaii at Manoa
Mary McKenry, University of Miami
Anuj Mehrotra, University of Miami
Stephen Morris, University of San Francisco
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vi Preface
Manuel Nunez, University of Connecticut
Alan Olinsky, Bryant University
John Olson, University of St Thomas
Mark Parker, Carroll College
Tom Reiland, North Carolina State University
Thomas J. Schriber, University of Michigan
Bryan Schurle, Kansas State University
John Seydel, Arkansas State University
Peter Shenkin, John Jay College of Criminal Justice
Stan Spurlock, Mississippi State University
Donald E. Stout, Jr., Saint Martin’s College
Ahmad Syamil, Arkansas State University
Pandu R. Tadikamalla, University of Pittsburgh
Shahram Taj, University of Detroit Mercy
Danny Taylor, University of Nevada
G. Ulferts, University of Detroit Mercy
Tim Walters, University of Denver
Larry White, Prairie View A&M University
Barry A. Wray, University of North Carolina-Wilmington
I also thank Tom Bramorski at the University of Georgia for preparing the test bank
that accompanies this book. David Ashley also provided many of the summary articles
found in “The World of Business Analytics” feature throughout the text and created the
queuing template used in Chapter 13. Jack Yurkiewicz, Pace University, contributed
several of the cases found throughout the text.
My sincere thanks goes to all students and instructors who have used previous
editions of this book and provided many valuable comments and suggestions for
making it better. I also thank the wonderful SMDA team at Cengage: Aaron Arnsparger,
Senior Product Manager; and Conor Allen, Content Developer. I feel very fortunate and
privileged to work with them both.
A very special word of thanks to my friend Dan Fylstra and the crew at Frontline
Systems ( for conceiving and creating Analytic Solver Platform
and supporting me so graciously and quickly throughout my revision work on this
book. In my opinion, Analytic Solver Platform is the most significant development in
business analytics education since the creation of personal computers and the electronic
spreadsheet. (Dan, you get my vote for a lifetime achievement award in analytical
modeling and induction in the OR/MS Hall of Fame!)
Once again, I thank my dear wife, Kathy, for her unending patience, support, encour-
agement, and love. This book is dedicated to my parents, Roy and Mamie Ragsdale,
who both departed the planet we call Earth during the preparation of this revision but
whose influence and memory endure.
I hope you enjoy the spreadsheet approach to teaching business analytics as much as
I do and that you find this book to be very interesting and helpful. If you find creative
ways to use the techniques in this book or need help applying them, I would love to
hear from you. Also, any comments, questions, suggestions, or constructive criticism
you have concerning this text are always welcome.
Cliff T. Ragsdale
e-mail: Cliff.Ragsdale@vt.edu
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Brief Contents
1 Introduction to Modeling and Decision Analysis 1
2 Introduction to Optimization and Linear Programming 17
3 Modeling and Solving LP Problems in a Spreadsheet 46
4 Sensitivity Analysis and the Simplex Method 141
5 Network Modeling 189
6 Integer Linear Programming 247
7 Goal Programming and Multiple Objective Optimization 326
8 Nonlinear Programming & Evolutionary Optimization 371
9 Regression Analysis 447
10 Data Mining 499
11 Time Series Forecasting 566
12 Introduction to Simulation Using Analytic Solver Platform 635
13 Queuing Theory 721
14 Decision Analysis 754
Index 829
vii
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Contents
1. Introduction to Modeling and Decision Analysis 1
Introduction 1
The Modeling Approach to Decision Making 3
Characteristics and Benefits of Modeling 3
Mathematical Models 4
Categories of Mathematical Models 6
Business Analytics and the Problem-Solving Process 7
Anchoring and Framing Effects 10
Good Decisions vs. Good Outcomes 11
Summary 12
References 12
Questions and Problems 14
Case 15
2. Introduction to Optimization and Linear Programming 17
Introduction 17
Applications of Mathematical Optimization 17
Characteristics of Optimization Problems 18
Expressing Optimization Problems Mathematically 19
Decisions 19 Constraints 19 Objective 20
Mathematical Programming Techniques 20
An Example LP Problem 21
Formulating LP Models 21
Steps in Formulating an LP Model 21
Summary of the LP Model for the Example Problem 23
The General Form of an LP Model 23
Solving LP Problems: An Intuitive Approach 24
Solving LP Problems: A Graphical Approach 25
Plotting the First Constraint 26 Plotting the Second Constraint 27 Plotting the Third
Constraint 28 The Feasible Region 28 Plotting the Objective Function 29 Finding
the Optimal Solution Using Level Curves 29 Finding the Optimal Solution
by Enumerating the Corner Points 32 Summary of Graphical Solution to LP
Problems 33 Understanding How Things Change 33
Special Conditions in LP Models 34
Alternate Optimal Solutions 34 Redundant Constraints 34 Unbounded
Solutions 36 Infeasibility 37
viii
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Contents ix
Summary 38
References 39
Questions and Problems 39
Case 44
3. Modeling and Solving LP Problems in a Spreadsheet 46
Introduction 46
Spreadsheet Solvers 46
Solving LP Problems in a Spreadsheet 47
The Steps in Implementing an LP Model in a Spreadsheet 47
A Spreadsheet Model for the Blue Ridge Hot Tubs Problem 49
Organizing the Data 50 Representing the Decision Variables 50 Representing the
Objective Function 50 Representing the Constraints 51 Representing the Bounds on
the Decision Variables 51
How Solver Views the Model 52
Using Analytic Solver Platform 54
Defining the Objective Cell 55 Defining the Variable Cells 56 Defining the Constraint
Cells 57 Defining the Nonnegativity Conditions 60 Reviewing the Model 61 Other
Options 62 Solving the Problem 63
Using Excel’s Built-in Solver 64
Goals and Guidelines for Spreadsheet Design 65
Make vs. Buy Decisions 67
Defining the Decision Variables 68 Defining the Objective Function 68 Defining the
Constraints 68 Implementing the Model 69 Solving the Problem 70 Analyzing the
Solution 71
An Investment Problem 72
Defining the Decision Variables 72 Defining the Objective Function 73 Defining the
Constraints 73 Implementing the Model 73 Solving the Problem 75 Analyzing the
Solution 75
A Transportation Problem 76
Defining the Decision Variables 77 Defining the Objective Function 78 Defining
the Constraints 78 Implementing the Model 78 Heuristic Solution for the
Model 80 Solving the Problem 81 Analyzing the Solution 82
A Blending Problem 82
Defining the Decision Variables 83 Defining the Objective Function 83 Defining the
Constraints 83 Some Observations about Constraints, Reporting, and Scaling 84
Re-scaling the Model 85 Implementing the Model 86 Solving the Problem 87
Analyzing the Solution 87
A Production and Inventory Planning Problem 89
Defining the Decision Variables 90 Defining the Objective Function 90 Defining the
Constraints 90 Implementing the Model 91 Solving the Problem 93 Analyzing the
Solution 94
A Multiperiod Cash Flow Problem 94
Defining the Decision Variables 95 Defining the Objective Function 96 Defining the
Constraints 96 Implementing the Model 98 Solving the Problem 100 Analyzing the
Solution 101 Modifying the Taco-Viva Problem to Account for Risk (Optional) 102
Implementing the Risk Constraints 104 Solving the Problem 105 Analyzing the
Solution 105
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x Contents
Data Envelopment Analysis 106
Defining the Decision Variables 107 Defining the Objective 107 Defining the
Constraints 107 Implementing the Model 108 Solving the Problem 110 Analyzing
the Solution 113
Summary 114
References 115
Questions and Problems 116
Case 134
4. Sensitivity Analysis and the Simplex Method 141
Introduction 141
The Purpose of Sensitivity Analysis 141
Approaches to Sensitivity Analysis 142
An Example Problem 142
The Answer Report 143
The Sensitivity Report 145
Changes in the Objective Function Coefficients 145 A Comment about
Constancy 147 Alternate Optimal Solutions 148 Changes in the RHS
Values 148 Shadow Prices for Nonbinding Constraints 149 A Note about Shadow
Prices 149 Shadow Prices and the Value of Additional Resources 151 Other
Uses of Shadow Prices 151 The Meaning of the Reduced Costs 152 Analyzing
Changes in Constraint Coefficients 154 Simultaneous Changes in Objective Function
Coefficients 155 A Warning about Degeneracy 156
The Limits Report 156
Ad Hoc Sensitivity Analysis 157
Creating Spider Plots and Tables 157 Creating a Solver Table 161 Comments 164
Robust Optimization 164
The Simplex Method 168
Creating Equality Constraints Using Slack Variables 168 Basic Feasible Solutions 169
Finding the Best Solution 172
Summary 172
References 172
Questions and Problems 173
Case 183
5. Network Modeling 189
Introduction 189
The Transshipment Problem 189
Characteristics of Network Flow Problems 189 The Decision Variables for Network
Flow Problems 191 The Objective Function for Network Flow Problems 191 The
Constraints for Network Flow Problems 192 Implementing the Model in a
Spreadsheet 193 Analyzing the Solution 195
The Shortest Path Problem 196
An LP Model for the Example Problem 198 The Spreadsheet Model and Solution 198
Network Flow Models and Integer Solutions 200
The Equipment Replacement Problem 201
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Contents xi
The Spreadsheet Model and Solution 202
Transportation/Assignment Problems 204
Generalized Network Flow Problems 205
Formulating an LP Model for the Recycling Problem 207 Implementing the Model 208
Analyzing the Solution 210 Generalized Network Flow Problems and Feasibility 211
Maximal Flow Problems 214
An Example of a Maximal Flow Problem 214 The Spreadsheet Model and Solution 216
Special Modeling Considerations 218
Minimal Spanning Tree Problems 221
An Algorithm for the Minimal Spanning Tree Problem 222 Solving the Example
Problem 222
Summary 223
References 223
Questions and Problems 225
Case 241
6. Integer Linear Programming 247
Introduction 247
Integrality Conditions 247
Relaxation 248
Solving the Relaxed Problem 249
Bounds 250
Rounding 252
Stopping Rules 254
Solving ILP Problems Using Solver 255
Other ILP Problems 258
An Employee Scheduling Problem 259
Defining the Decision Variables 260 Defining the Objective Function 260 Defining
the Constraints 260 A Note about the Constraints 261 Implementing the
Model 261 Solving the Model 263 Analyzing the Solution 263
Binary Variables 264
A Capital Budgeting Problem 264
Defining the Decision Variables 265 Defining the Objective Function 265 Defining the
Constraints 265 Setting Up the Binary Variables 265 Implementing the Model 265
Solving the Model 266 Comparing the Optimal Solution to a Heuristic Solution 268
Binary Variables and Logical Conditions 268
The Line Balancing Problem 269
Defining the Decision Variables 269 Defining the Constraints 270 Defining the
Objective 271 Implementing the Model 272 Analyzing the Solution 274
Extension 275
The Fixed-Charge Problem 278
Defining the Decision Variables 279 Defining the Objective Function 279 Defining
the Constraints 280 Determining Values for “Big M” 280 Implementing the
Model 281 Solving the Model 282 Analyzing the Solution 283 A Comment on IF( )
Functions 284
Minimum Order/Purchase Size 285
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xii Contents
Quantity Discounts 286
Formulating the Model 286 The Missing Constraints 287
A Contract Award Problem 287
Formulating the Model: The Objective Function and Transportation Constraints 288
Implementing the Transportation Constraints 289 Formulating the Model: The Side
Constraints 290 Implementing the Side Constraints 291 Solving the Model 292
Analyzing the Solution 293
The Branch-and-Bound Algorithm (Optional) 293
Branching 295 Bounding 296 Branching Again 296 Bounding Again 298
Summary of B&B Example 299
Summary 300
References 301
Questions and Problems 302
Case 321
7. Goal Programming and Multiple Objective Optimization 326
Introduction 326
Goal Programming 326
A Goal Programming Example 327
Defining the Decision Variables 328 Defining the Goals 328 Defining the Goal
Constraints 328 Defining the Hard Constraints 329 GP Objective Functions 330
Defining the Objective 331 Implementing the Model 332 Solving the Model 333
Analyzing the Solution 334 Revising the Model 335 Trade-offs: The Nature of GP 336
Comments about Goal Programming 337
Multiple Objective Optimization 338
An MOLP Example 340
Defining the Decision Variables 340 Defining the Objectives 340 Defining
the Constraints 341 Implementing the Model 341 Determining Target Values
for the Objectives 342 Summarizing the Target Solutions 344 Determining
a GP Objective 345 The Minimax Objective 347 Implementing the Revised
Model 348 Solving the Model 348
Comments on MOLP 351
Summary 352
References 352
Questions and Problems 353
Case 366
8. Nonlinear Programming & Evolutionary Optimization 371
Introduction 371
The Nature of NLP Problems 371
Solution Strategies for NLP Problems 373
Local vs. Global Optimal Solutions 374
Economic Order Quantity Models 376
Implementing the Model 379 Solving the Model 379 Analyzing the
Solution 381 Comments on the EOQ Model 381
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Contents xiii
Location Problems 382
Defining the Decision Variables 383 Defining the Objective 383 Defining the
Constraints 384 Implementing the Model 384 Solving the Model and Analyzing
the Solution 385 Another Solution to the Problem 386 Some Comments about the
Solution to Location Problems 388
Nonlinear Network Flow Problem 388
Defining the Decision Variables 388 Defining the Objective 388 Defining the
Constraints 389 Implementing the Model 390 Solving the Model and Analyzing the
Solution 391
Project Selection Problems 393
Defining the Decision Variables 393 Defining the Objective Function 394 Defining the
Constraints 394 Implementing the Model 395 Solving the Model 396
Optimizing Existing Financial Spreadsheet Models 398
Implementing the Model 398 Optimizing the Spreadsheet Model 399 Analyzing the
Solution 401 Comments on Optimizing Existing Spreadsheets 401
The Portfolio Selection Problem 401
Defining the Decision Variables 403 Defining the Objective 403 Defining the
Constraints 404 Implementing the Model 404 Analyzing the Solution 406 Handling
Conflicting Objectives in Portfolio Problems 408
Sensitivity Analysis 410
Lagrange Multipliers 413 Reduced Gradients 413
Solver Options for Solving NLPs 413
Evolutionary Algorithms 415
Forming Fair Teams 416
A Spreadsheet Model for the Problem 417 Solving the Model 418 Analyzing the
Solution 418
The Traveling Salesperson Problem 419
A Spreadsheet Model for the Problem 420 Solving the Model 422 Analyzing the
Solution 423
Summary 424
References 424
Questions and Problems 425
Case 442
9. Regression Analysis 447
Introduction 447
An Example 447
Regression Models 449
Simple Linear Regression Analysis 450
Defining “Best Fit” 451
Solving the Problem Using Solver 452
Solving the Problem Using the Regression Tool 454
Evaluating the Fit 456
The R2 Statistic 458
Making Predictions 460
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xiv Contents
The Standard Error 460 Prediction Intervals for New Values of Y 461 Confidence
Intervals for Mean Values of Y 463 Extrapolation 463
Statistical Tests for Population Parameters 464
Analysis of Variance 464 Assumptions for the Statistical Tests 465 Statistical Tests 466
Introduction to Multiple Regression 467
A Multiple Regression Example 469
Selecting the Model 470
Models with One Independent Variable 471 Models with Two Independent
Variables 471 Inflating R2 474 The Adjusted-R2 Statistic 474 The Best Model
with Two Independent Variables 475 Multicollinearity 475 The Model with Three
Independent Variables 475
Making Predictions 477
Binary Independent Variables 478
Statistical Tests for the Population Parameters 478
Polynomial Regression 479
Expressing Nonlinear Relationships Using Linear Models 480 Summary of Nonlinear
Regression 484
Summary 484
References 485
Questions and Problems 486
Case 494
10. Data Mining 499
Introduction 499
Data Mining Overview 499
Classification 502
A Classification Example 503 Classification Data Partitioning 510
Discriminant Analysis 512
Discriminant Analysis Example 514
Logistic Regression 520
Logistic Regression Example 522
k-Nearest Neighbor 525
-Nearest Neighbor Example 527
Classification Trees 528
Classification Tree Example 532
Neural Networks 536
Neural Network Example 537
Naïve Bayes 539
Naïve Bayes Example 543
Comments on Classification 546
Combining Classifications 547 The Role of Test Data 547
Prediction 548
Association Rules (Affinity Analysis) 548
Association Rules Example 550
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Contents xv
Cluster Analysis 551
Cluster Analysis Example 553 -Mean Clustering Example 553 Hierarchical
Clustering Example 556
Time Series 557
Summary 558
References 559
Questions and Problems 560
Case 564
11. Time Series Forecasting 566
Introduction 566
Time Series Methods 567
Measuring Accuracy 567
Stationary Models 568
Moving Averages 569
Forecasting with the Moving Average Model 571
Weighted Moving Averages 572
Forecasting with the Weighted Moving Average Model 575
Exponential Smoothing 575
Forecasting with the Exponential Smoothing Model 576
Seasonality 578
Stationary Data with Additive Seasonal Effects 579
Forecasting with the Model 583
Stationary Data with Multiplicative Seasonal Effects 584
Forecasting with the Model 586
Trend Models 587
An Example 588
Double Moving Average 589
Forecasting with the Model 590
Double Exponential Smoothing (Holt’s Method) 591
Forecasting with Holt’s Method 594
Holt-Winter’s Method for Additive Seasonal Effects 595
Forecasting with Holt-Winter’s Additive Method 599
Holt-Winter’s Method for Multiplicative Seasonal Effects 599
Forecasting with Holt-Winter’s Multiplicative Method 603
Modeling Time Series Trends Using Regression 603
Linear Trend Model 603
Forecasting with the Linear Trend Model 605
Quadratic Trend Model 606
Forecasting with the Quadratic Trend Model 608
Modeling Seasonality with Regression Models 609
Adjusting Trend Predictions with Seasonal Indices 609
Computing Seasonal Indices 609 Forecasting with Seasonal Indices 611 Refining the
Seasonal Indices 613
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xvi Contents
Seasonal Regression Models 615
The Seasonal Model 615 Forecasting with the Seasonal Regression Model 618
Combining Forecasts 619
Summary 619
References 620
Questions and Problems 621
Case 630
12. Introduction to Simulation Using Analytic Solver
Platform 635
Introduction 635
Random Variables and Risk 635
Why Analyze Risk? 636
Methods of Risk Analysis 636
Best-Case/Worst-Case Analysis 637 What-If Analysis 638 Simulation 638
A Corporate Health Insurance Example 639
A Critique of the Base Case Model 641
Spreadsheet Simulation Using Analytic Solver Platform 641
Starting Analytic Solver Platform 642
Random Number Generators 642
Discrete vs. Continuous Random Variables 644
Preparing the Model for Simulation 645
Alternate RNG Entry 647
Running the Simulation 649
Selecting the Output Cells to Track 649 Selecting the Number of Replications 650
Selecting What Gets Displayed on the Worksheet 651 Running the Simulation 652
Data Analysis 652
The Best Case and the Worst Case 652 The Frequency Distribution of the Output
Cells 653 The Cumulative Distribution of the Output Cells 654 Obtaining Other
Cumulative Probabilities 655 Sensitivity Analysis 656
The Uncertainty of Sampling 657
Constructing a Confidence Interval for the True Population Mean 657 Constructing
a Confidence Interval for a Population Proportion 659 Sample Sizes and Confidence
Interval Widths 659
Interactive Simulation 660
The Benefits of Simulation 661
Additional Uses of Simulation 662
A Reservation Management Example 662
Implementing the Model 663 Details for Multiple Simulations 664 Running the
Simulations 666 Data Analysis 666
An Inventory Control Example 667
Creating the RNGs 669 Implementing the Model 670 Replicating the Model 673
Optimizing the Model 674 Analyzing the Solution 680 Other Measures of Risk 682
A Project Selection Example 684
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Contents xvii
A Spreadsheet Model 684 Solving and Analyzing the Problem with Analytic Solver
Platform 686 Considering Another Solution 687
A Portfolio Optimization Example 689
A Spreadsheet Model 690 Solving the Problem with Analytic Solver Platform 692
Summary 695
References 695
Questions and Problems 696
Case 711
13. Queuing Theory 721
Introduction 721
The Purpose of Queuing Models 721
Queuing System Configurations 722
Characteristics of Queuing Systems 723
Arrival Rate 724 Service Rate 725
Kendall Notation 727
Queuing Models 727
The M/M/s Model 729
An Example 730 The Current Situation 730 Adding a Server 731 Economic
Analysis 732
The M/M/s Model with Finite Queue Length 732
The Current Situation 733 Adding a Server 734
The M/M/s Model with Finite Population 734
An Example 735 The Current Situation 736 Adding Servers 737
The M/G/1 Model 738
The Current Situation 739 Adding the Automated Dispensing Device 740
The M/D/1 Model 742
Simulating Queues and the Steady-State Assumption 742
Summary 743
References 743
Questions and Problems 745
Case 751
14. Decision Analysis 754
Introduction 754
Good Decisions vs. Good Outcomes 754
Characteristics of Decision Problems 755
An Example 755
The Payoff Matrix 756
Decision Alternatives 756 States of Nature 757 The Payoff Values 757
Decision Rules 758
Nonprobabilistic Methods 758
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xviii Contents
The Maximax Decision Rule 759 The Maximin Decision Rule 760 The Minimax
Regret Decision Rule 760
Probabilistic Methods 762
Expected Monetary Value 763 Expected Regret 764 Sensitivity Analysis 765
The Expected Value of Perfect Information 767
Decision Trees 769
Rolling Back a Decision Tree 770
Creating Decision Trees with Analytic Solver Platform 771
Adding Event Nodes 772 Determining the Payoffs and EMVs 775 Other Features 776
Multistage Decision Problems 777
A Multistage Decision Tree 778 Developing a Risk Profile 779
Sensitivity Analysis 780
Tornado Charts 781 Strategy Tables 784 Strategy Charts 786
Using Sample Information in Decision Making 788
Conditional Probabilities 789 The Expected Value of Sample Information 790
Computing Conditional Probabilities 791
Bayes’s Theorem 793
Utility Theory 794
Utility Functions 794 Constructing Utility Functions 795 Using Utilities to Make
Decisions 798 The Exponential Utility Function 798 Incorporating Utilities in
Decision Trees 799
Multicriteria Decision Making 800
The Multicriteria Scoring Model 801
The Analytic Hierarchy Process 805
Pairwise Comparisons 805 Normalizing the Comparisons 806 Consistency 807
Obtaining Scores for the Remaining Criteria 810 Obtaining Criterion Weights 810
Implementing the Scoring Model 810
Summary 811
References 811
Questions and Problems 813
Case 823
Index 829
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Chapter 1
Introduction to Modeling
and Decision Analysis
1.0 Introduction
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2 Chapter 1 Introduction to Modeling and Decision Analysis
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Characteristics and Benefits of Modeling 3
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4 Chapter 1 Introduction to Modeling and Decision Analysis
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Mathematical Models 5
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6 Chapter 1 Introduction to Modeling and Decision Analysis
FIGURE 1.2
1.4 Categories of Mathematical Models
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Business Analytics and the Problem-Solving Process 7
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8 Chapter 1 Introduction to Modeling and Decision Analysis
FIGURE 1.4
Identify Problem Formulate and Analyze Test Implement
(or “Probortunity”) Implement Model Model Results Solution
Unsatisfactory Results
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Business Analytics and the Problem-Solving Process 9
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10 Chapter 1 Introduction to Modeling and Decision Analysis
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Good Decisions vs. Good Outcomes 11
Payoffs FIGURE 1.5
Alternative A
$1,500
Initial state
Heads (50%)
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12 Chapter 1 Introduction to Modeling and Decision Analysis
FIGURE 1.7 Outcome Quality
Good Bad
Good Deserved Success Bad Luck
Decision Quality
Bad Dumb Luck Poetic Justice
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References 13
THE WORLD OF BUSINESS ANALYTICS
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14 Chapter 1 Introduction to Modeling and Decision Analysis
OR/MS TODAY
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Case 1.1 15
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16 Chapter 1 Introduction to Modeling and Decision Analysis
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Chapter 2
Introduction to Optimization and
Linear Programming
2.0 Introduction
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18 Chapter 2 Introduction to Optimization and Linear Programming
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Expressing Optimization Problems Mathematically 19
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Problems Mathematically
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20 Chapter 2 Introduction to Optimization and Linear Programming
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Formulating LP Models 21
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22 Chapter 2 Introduction to Optimization and Linear Programming
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The General Form of an LP Model 23
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24 Chapter 2 Introduction to Optimization and Linear Programming
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Solving LP Problems: A Graphical Approach 25
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„ ™¦ ™‰‰ 2 ›œ 5 ™¦ ›œ 5 œˆš€ ˆ¥™
™§§‰ 2 œ™›œ 5 ˆ¥™ ›œ 5 œˆš€
€ ”
¨©Š‰›œ 1 ¨©‰‰™ 5 ¨©Š‰ 3 œˆš 1 ¨©‰‰ 3 ‰ 5 ¨¦‰¥‰‰
‚ ›œ 5 œˆš ›™ 5 ‰
‘ ›œ ›™
‘
†
„’
2.10 Solving LP Problems:
A Graphical Approach
† £
£ †
‚
†
„
†
‡ „ ¡ © †
†
…
€‘
›” ©Š‰›œ 1 ©‰‰›™ €
… ” œ›œ 1 œ›™ # ™‰‰
¥›œ 1 ¦›™ # œŠ¦¦
œ™›œ 1 œ¦›™ # ™§§‰
œ›œ $ ‰
œ›™ $ ‰
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
26 Chapter 2 Introduction to Optimization and Linear Programming
2.10.1 PLOTTING THE FIRST CONSTRAINT
™‰‰ ƒ ”
›œ 1 ›™ 5 ™‰‰
›™ 5 ‰ ƒ ™™¦
›œ 5 ™‰‰ ›œ ›™ 5 ™‰‰ ‰ ›œ 5 ‰
ƒ ™™¦ ›™ 5 ™‰‰ … ›œ ›™ 5 ‰ ™‰‰
‚ ª™œ
ƒ ™™¦
¢ ƒ ™™¦
›œ ›™ ‚ ª™œ „
›œ ›™
›œ $ ‰ ›™ $ ‰€
‰ ™‰‰€ ™‰‰ ‰€ ‚ ª™œ
›œ ›™ ƒ ›œ 1 ›™ 5 ™‰‰
† ƒ ›œ 1 ›™ # ™‰‰
‚ ›œ ›™ 5 ‰ ‰
‰ ‰€
‚ ª™œ
FIGURE 2.1
X2
250
(0, 200)
200
150
Boundary line of
pump constraint:
100 X1 1 X2 5 200
50
(200, 0)
0
X1
0 50 100 150 200 250
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Solving LP Problems: A Graphical Approach 27
2.10.2 PLOTTING THE SECOND CONSTRAINT
… †
‚
›œ ›™ 5 ™‰‰ ‰
ƒ œŠ¦¦
¥ 3 ™‰‰ 1 ¦ 3 ‰ 5 œ§‰‰€ … ›œ ›™
‘ ƒ
£
”
¥›œ 1 ¦›™ 5 œŠ¦¦
›œ 5 ‰ ƒ ™™ˆ ›™ 5 œŠ¦¦«¦ 5 ™¦œ … ‰ ™¦œ€
ƒ ™™ˆ … ›™ 5 ‰ ƒ ™™ˆ
›œ 5 œŠ¦¦«¥ 5 œˆš … œˆš ‰€
ƒ ™™ˆ
‚ ª™™
‚ ª™™ ƒ ™™ˆ
›œ ›™ 5 ‰ ‰ ¥›œ 1 ¦›™ # œŠ¦¦
FIGURE 2.2
X2
(0, 261)
250
200
Boundary line of
150 labor constraint:
9X1 1 6X2 5 1,566
100
Boundary line of
50 pump constraint
(174, 0)
0
X1
0 50 100 150 200 250
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
28 Chapter 2 Introduction to Optimization and Linear Programming
FIGURE 2.3
X2
250
(0, 180)
200 Boundary line of
labor constraint
Boundary line of
pump constraint
150
100
Boundary line of
Feasible Region
tubing constraint:
50 12X1 1 16X2 5 2,880
(240, 0)
0
X1
0 50 100 150 200 250
2.10.3 PLOTTING THE THIRD CONSTRAINT
›œ ›™
ƒ ™§§‰
”
œ™›œ 1 œ¦›™ 5 ™§§‰
›œ 5 ‰ ƒ ™™§ ›™ 5 ™§§‰«œ¦ 5 œ§‰ … ‰ œ§‰€
ƒ ™™§ … ›™ 5 ‰ ƒ ™™§
›œ 5 ™§§‰«œ™ 5 ™š‰ … ™š‰ ‰€
ƒ ™™§
‚ ª™©
‚ ª™© ƒ ™™§
›œ ›™ 5 ‰ ‰ œ™›œ 1 œ¦›™ # ™§§‰
2.10.4 THE FEASIBLE REGION
‚ ª™© •‚ ‡ —
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Solving LP Problems: A Graphical Approach 29
‚ ™œ ™™ ™©
‚ ª™™
… ‚ ª™©
2.10.5 PLOTTING THE OBJECTIVE FUNCTION
¢ †
‚ ª™©
‚
†
†
‚
†
† …
›œ ›™ ¨©Š‰‰‰
›œ ›™
ƒ ¨©Š‰‰‰ ”
¨©Š‰›œ 1 ¨©‰‰›™ 5 ¨©Š‰‰‰
ƒ …
›œ 5 ‰ ƒ ™™¥ ›™ 5 œœ¦¦ˆ … ›™ 5 ‰ ƒ ™™¥
›œ 5 œ‰‰ … ›œ ›™ 5 ‰ œœ¦¦ˆ ›œ ›™ 5 œ‰‰ ‰
¨©Š‰‰‰ ¢
¨©Š‰‰‰€ ‚ ª™š
¢ ›œ ›™
¨Š™Š‰‰
›œ ›™€ ƒ ¨Š™Š‰‰ ”
¨©Š‰›œ 1 ¨©‰‰›™ 5 ¨Š™Š‰‰ €
ƒ
’ ›œ ›™ 5 ‰ œˆŠ ›œ ›™ 5 œŠ‰ ‰
‚ ª™Š
2.10.6 FINDING THE OPTIMAL SOLUTION
USING LEVEL CURVES
‚ ª™Š
¢ ‚ ª™Š
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30 Chapter 2 Introduction to Optimization and Linear Programming
FIGURE 2.4
X2
250
200
150 Objective function:
350X1 1 300X2 5 35,000
100
50
0
X1
0 50 100 150 200 250
FIGURE 2.5
X2
250
200
150 Objective function:
350X1 1 300X2 5 35,000
100
50 Objective function:
350X1 1 300X2 5 52,500
0
X1
0 50 100 150 200 250
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Solving LP Problems: A Graphical Approach 31
£ ‰ ‰€
‚ ª™¦
‚ ª™¦
‡ „
‘
‚ ª™¦ ‚ ª™©
ƒ €
›œ ›™
ƒ ™™¦ ™™ˆ ”
›
œ 1 ›™ 5 ™‰‰
¥ ›œ 1 ¦›™ 5 œŠ¦¦
‚ ƒ ›™ 5 ™‰‰ 2 ›œ
›™ ƒ ”
¥›œ 1 ¦ ™‰‰ 2 ›œ 5 œŠ¦¦
“ ƒ ›œ 5 œ™™
›™ 5 ™‰‰ 2 ›œ ›™ 5 ˆ§
›œ ›™ 5 œ™™ ˆ§
‚ ª™¦
FIGURE 2.6
X2
250
200
Objective function:
150 350X1 1 300X2 5 35,000
100
Optimal solution
50 Objective function:
350X1 1 300X2 5 52,500
0
X1
0 50 100 150 200 250
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
32 Chapter 2 Introduction to Optimization and Linear Programming
›œ 5 œ™™ ›™ 5 ˆ§ ‡ „
¨¦¦œ‰‰ œ™™ ƒ … ˆ§ „ †
¨©Š‰ 3 œ™™ 1 ¨©‰‰ 3 ˆ§ 5 ¨¦¦œ‰‰
¨¦‰¥‰‰€
2.10.7 FINDING THE OPTIMAL SOLUTION
BY ENUMERATING THE CORNER POINTS
– †
…
†
‚ ª™ˆ ›œ ›™
›œ ›™ 5 œ™™ ˆ§
–
ƒ
FIGURE 2.7
X2
250
200 (0, 180)
Objective function value: $54,000
150
(80, 120)
Objective function value: $64,000
100
(122, 78)
Objective function value: $66,100
50
(0, 0) (174, 0)
Objective function value: $0 Objective function value: $60,900
0
X1
0 50 100 150 200 250
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Solving LP Problems: A Graphical Approach 33
2.10.8 SUMMARY OF GRAPHICAL SOLUTION TO LP PROBLEMS
†
”
œ
™
© † ”
…
2.10.9 UNDERSTANDING HOW THINGS CHANGE
†
Ž
¡ š „
‚ ª™§ ‚™ § €
FIGURE 2.8
€ ‚
ƒ
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
34 Chapter 2 Introduction to Optimization and Linear Programming
ž
† ¡ ™œ
ƒ
‚ ª™§€
2.11 Special Conditions in LP Models
… † ”
† £
†
2.11.1 ALTERNATE OPTIMAL SOLUTIONS
… †
€
‚ „ ƒ …
¨šŠ‰ ¨©Š‰ †
”
›” šŠ‰›œ 1 ©‰‰›™
… ” œ›œ 1 œ›™ # ™‰‰
¥›œ 1 ¦›™ # œŠ¦¦
œ™›œ 1 œ¦›™ # ™§§‰
œ›œ $ ‰
œ›™ $ ‰
…
‚ ª™¥
¢ ‚ ª™¥
œ™™ ˆ§€ œˆš ‰€
¨ˆ§©‰‰
¡ ˆ •Œ —
2.11.2 REDUNDANT CONSTRAINTS
‡
†
‚ ™™Š
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Special Conditions in LP Models 35
FIGURE 2.9
X2
„ ƒ
250
Objective function:
450X1 1 300X2 5 45,000
200
Objective function:
450X1 1 300X2 5 63,000
150
Objective function:
450X1 1 300X2 5 78,300
100
Alternate optimal solutions
50
0
X1
0 50 100 150 200 250
™‰‰ †
”
›” ©Š‰›œ 1 ©‰‰›™
… ” œ›œ 1 œ›™ # ™™Š
¥›œ 1 ¦›™ # œŠ¦¦
œ™›œ 1 œ¦›™ # ™§§‰
œ›œ $ ‰
œ›™ $ ‰
€ ‚ ª™œ‰
¢
€
£
‚ ª™œ‰
‚ ª™œ‰
ƒ
œ›œ 1 œ›™ , ™™Š ƒ œ›œ 1 œ›™ 5 ™™Š
€ † „
• — ¤
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
36 Chapter 2 Introduction to Optimization and Linear Programming
FIGURE 2.10
X2
„
250
200
Boundary line of
tubing constraint
150
Boundary line of
pump constraint
100
50 Boundary line of
labor constraint
0
X1
0 50 100 150 200 250
‚ ‚ ª™©
™‰‰
€
2.11.3 UNBOUNDED SOLUTIONS
Ž †
€ €
† ”
›” ›œ 1 ›™
… ” ›œ 1 ›™ $ š‰‰
2›œ 1 ™›™ # š‰‰
›œ $ ‰
›™ $ ‰
‚ ª™œœ
‚
†
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Special Conditions in LP Models 37
FIGURE 2.11
X2
„
ƒ
1000
Objective function:
800 X1 1 X2 5 600
Objective function: 2X1 1 2X2 5 400
600 X1 1 X2 5 800
400
200
X1 1 X2 5 400
0
X1
0 200 400 600 800 1000
£
Ž †
‚ ª™œœ
‚ ª™œœ š‰‰ ‰€
œ©©© ™¦¦¦€
€ š‰‰
š‰‰
… „ …
…
†
2.11.4 INFEASIBILITY
†
† ”
›” ›œ 1 ›™
… ” ›œ 1 ›™ # œŠ‰
›œ 1 ›™ $ ™‰‰
›œ $ ‰
›™ $ ‰
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
38 Chapter 2 Introduction to Optimization and Linear Programming
FIGURE 2.12
X2
„ ƒ
250
200
150
X1 1 X2 5 200
100 Feasible region for
second constraint
50 X1 1 X2 5 150
Feasible region for
rst constraint
0
X1
0 50 100 150 200 250
‚ ª™œ™ ¢
›œ ›™
†
£ ƒ
ƒ
€
ƒ
€ ‚
œŠ‰ ™Š‰
œŠ‰
€ Ž
™Š‰ £
œ‰‰
2.12 Summary
€
£
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Questions and Problems 39
€
¡
€
† †€
… †
†
€
…
2.13 References
˜ ˜ ƒ † ‡ ¢ ž ” Ž œ¥¥‰
Œ ƒ „ ¢˜” “ œ¥¦©
– Œ ‚ Œ ¡ … ˆ ‰ – ¡ ¢˜” „
œ¥¥©
… ˆ ‰ – ¡ ¢˜” „ œ¥§§
Ž Ž € Š ‹ ‹ ¡” œ¥¥ˆ
Questions and Problems
œ † †
‘ Ž ‘
™ ‡ „ ›œ
›™ €
† ‘ †
‘ Ž ‘
© ƒ
ƒ
ƒ Ž ‘
š † ƒ ‘
›œ ›™ ‘ Ž ‘
›” ™›œ 1 ©›™
¢” ¬ ™›œ 2 ©›™
Š Ž
‘
™›œ 1 ›™ 2 ©›© $ Š‰
™›œ 1 ›™ $ ¦‰
œ
š›œ 2 ›™ 5 ˆŠ
©
©›œ 1 ™›™ 2 ©›©
# ‰¥
›œ 1 ›™ 1 ›©
©›™œ 1 ˆ›™ # šŠ
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
40 Chapter 2 Introduction to Optimization and Linear Programming
¦ … †
›” ©›œ 1 š›™
… ” ›œ # œ™
› ™ # œ‰
š›œ 1 ¦›™ # ˆ™
›œ ›™ $ ‰
ˆ … †
›” ™›œ 1 Š›™
… ” ¦›œ 1 Š›™ # ¦‰
™›œ 1 ©›™ # ™š
©›œ 1 ¦›™ # š§
›œ ›™ $ ‰
§ … †
¢” Š›œ 1 ™‰›™
… ” ›œ 1 ›™ $ œ™
™›œ 1 Š›™ $ š‰
›œ 1 ›™ # œŠ
›œ ›™ $ ‰
¥ ¡ †
›” ©›œ 1 ™›™
… ” ©›œ 1 ©›™ # ©‰‰
¦›œ 1 ©›™ # š§‰
©›œ 1 ©›™ # š§‰
›œ ›™ $ ‰
…
Ž ‘
œ‰ … †
¢” ™›œ 1 ©›™
… ” ™›œ 1 œ›™ $ ©
š›œ 1 Š›™ $ ™‰
™›œ 1 §›™ $ œ¦
Š›œ 1 ¦›™ # ¦‰
›œ ›™ $ ‰
œœ … †
›” š›œ 1 Š›™
… ” ™›œ 1 ©›™ # œ™‰
š›œ 1 ©›™ # œš‰
›œ 1 ›™ $ §‰
›œ ›™ $ ‰
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Questions and Problems 41
œ™ … †
›” œ‰›œ 1 œ™›™
… ” §›œ 1 ¦›™ # ¥§
¦›œ 1 §›™ # ¥§
›œ 1 ›™ $ œš
›œ ›™ $ ‰
ϩ
– ¨œœ ¨œˆ ¨œ‰Š‰
¨œŠ ƒ
Amount Required Per Amount
Resource Softball Baseball Available
† Š š ¦‰‰‰
¢ ¦ © Šš‰‰
¡ š ™ š‰‰‰
† ™Š ™ ©Š‰‰
… œ œ œŠ‰‰
‚ †
…
Ž ‘
œš
„ „ – ƒ
– „ ƒ
„ ƒ
– „ ¨œ‰
„ ¨œ™ ¥‰‰ š‰‰ œ™‰‰
œ‰Š¦
„ „
‚ †
…
‚
œŠ Œ Œ ¡ ”
– ¨©™‰ ¨™™‰
– ¨™¦‰ ¨œ§‰ –
ƒ
”
Hours Required per Unit
Manufacturing Process Propane Electric
™ œ
‚ š Š
™ ©
œ œ
™š‰‰
¦‰‰‰ ©©‰‰ œŠ‰‰
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
42 Chapter 2 Introduction to Optimization and Linear Programming
Œ Œ
‚ †
…
œ¦ – ¡ ”
ƒ
– ƒ ™ œ
¨™Š‰ – ƒ ©
™ ¨œŠ‰ ™¦‰
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‚ †
…
œˆ ‡ ƒ … – ’
™‰ ™‰
‡ †
…
… – ƒ
… ‘ Ž ‘
œ§ ’ Œ
ƒ
™Š® §‰® ™‰® ¨‰§Š
„ ˆ‰® ©‰® ¨‰¦Š
™Š®
‚ † ‚”
€
…
œ¥ …“‹
‹ …“‹
¨Š‰‰‰‰‰
…“‹ ©® œ®
¨ˆŠ‰‰‰‰
…“‹ ™® œ® š®
…“‹ ©® œš® š®
‚ †
…
Ž ‘
™‰ ‹
ƒ – ‹ ¨Š‰‰‰
©‰‰‰‰‰ – ¨™‰‰‰
Š‰‰‰‰‰ ¨œ‰‰‰‰‰
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Questions and Problems 43
‹ ¤
¨ˆ‰‰‰‰ ‹ ¨Š‰‰‰‰
¨‰‰Š
‚ †
…
‚
™œ ‡
– œ ™‰® ™‰® œŠ® –
™ ©‰® ™Š® œ‰® œ
¨¥‰ ™ ¨œ™‰
§ ¦ Š
‚ †
…
‚
™™ Ÿ
š¥ €” ‡ Ÿ
ˆ‰‰
‡ Ÿ ©‰‰ –
‡ ¨ˆ‰ Ÿ
¨š‰
– ‡ ’
ƒ ™ © Ÿ
ƒ œ š ¥‰‰
™š‰‰
‚ †
…
Ž ‘
™© ’ ¡
ƒ ©‰ ƒ œ
Š ¨œš¥
… ƒ ™š ƒ œ
© ¨œ©Š
œŠ‰‰‰ ƒ ¨œ©Š ƒ
¦‰‰ ¨šˆŠ
©‰‰‰
‚ †
…
Ž ‘
™š Œ œ‰‰
– ƒ Š‰
™‰ –
ƒ ˆŠ
œŠ
™ ™Š
„
¨© ¨œ –
¥‰ –
©‰‰ ¦‰‰‰
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
44 Chapter 2 Introduction to Optimization and Linear Programming
„
¨œ‰ Š‰ ‚
¨Š
‘
‚ †
…
‚
™Š …
– ”
– ƒ œ ©‰
©‰ – ƒ ©‰
šŠ œ …
š‰ š‰ ¦‰
¨Š‰‰ ¨š‰‰
‚ †
…
Ž ‘
™¦ ¡ –
¨¦‰‰ ¨¥‰‰
¡ –
§‰
ˆŠ ¡ – ¡ –
™
©
©‰‰
’
‚ †
…
‚
For The Lines They Are A-Changin’
CASE 2.1 (with apologies to Bob Dylan)
‡ „ „ ˜
† „
†
‚ ™§ ‚™ §
€
“ „
ƒ ¡ ‡ ‚™ §
ƒ
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Case 2.1 45
Important Software Note
‚™ §
€ – ” ‚
¡ ¡ … … •
— ¯ ¢ –
–
œ
‘
™ ‘ Ž
‘
ƒ ‘
© ƒ ‘ Ž ‘
ƒ
‘
š ƒ ‘ Ž ‘
ƒ
‘
Š ƒ
ƒ … ¥ § ‘ ‚ § ˆ ‘ ‚ ˆ ¦ ‘
¦ ƒ
„ † ¦ Š ‘ ‚ Š š ‘ ‚ š © ‘
ˆ „
ƒ ƒ … œ™ œ© ‘ ‚ œ© œš ‘
‚ œš œŠ ‘
§ „
ƒ „ † œ¦ œˆ ‘ ‚ œˆ œ§ ‘
‚ œ§ œ¥ ‘
¥ ƒ …
‘
œ‰ „ †
‘
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Chapter 3
Modeling and Solving LP
Problems in a Spreadsheet
3.0 Introduction
€
€ ‚ ‚
‚
3.1 Spreadsheet Solvers
ƒ ‚
‚„
€
‚
…
‚ ‚
† ‡ˆ‰ „Š‹ŒŽ‰‘‰ Š ’
‚
46
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
The Steps in Implementing an LP Model in a Spreadsheet 47
The Spreadsheet Solver Company
˜ ‘ “ ‚ ‡
Œ ™ Ž ˜ š
Ž
š › ˜
œœ
3.2 Solving LP Problems
in a Spreadsheet
€ ‚ ƒ
„ ‚„ …
†‡ˆ‰
†‡‰‰
‰‰ ‚ˆ„„ ŠŠ‰
‹
Œ Ž ‘
’‚ ’
“ ’ ‡ˆ‰’‚ ‡‰‰’ ” •
– ‚’‚ ‚’ ‰‰ ”
€’‚ „’ ‚ˆ„„ ”
‚’‚ ‚„’ ŠŠ‰ ”
‚’‚ ‰ ”
‚’ ‰ ”
— ˜
3.3 The Steps in Implementing an LP
Model in a Spreadsheet
‹ Ž
‚
–
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48 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
ž Ÿ
‹
š ˜
‹ š
‹ ¡ ¢ ‹
¢
…
£
ž¤
Ž
‘
Ž
Ž Ÿ
–
š
‘
‡
– –
ž Ÿ
¥
ž Ÿ
“
Ž
‘
‚ ‡ ¥
š œ
–
ž Ÿ
Ž ¡
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A Spreadsheet Model for the Blue Ridge Hot Tubs Problem 49
3.4 A Spreadsheet Model for
the Blue Ridge Hot Tubs Problem
£ ˜ ¦‡‚
ž ˜ ‡ ‚ šŸ ¡ š
FIGURE 3.1
X1
X2
Objective Function 5
B6 3 B5 1 C6 3 C5
LHS of 1st Constraint 5
B9 3 B5 1 C9 3 C5
LHS of 2nd Constraint 5
B10 3 B5 1 C10 3 C5
LHS of 3rd Constraint 5
B11 3 B5 1 C11 3 C5
A Note about Macros
‘ š š
ž Ÿ
š ˜ £ Œ Œ “
ƒ §… ¨ƒ š £©ƒ š
£© ‘
š
š
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50 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
3.4.1 ORGANIZING THE DATA
£ Ž ‹
‘ ˜ ‡‚
„ Œ„ ¤
€ Œ‚‚ € Œ€
‚‰ Œ‚‰
€
„ Œ ‚‚ Œ‚‚ ‚
‚„
€ ‚‚ ¤
3.4.2 REPRESENTING THE DECISION VARIABLES
˜ ‡‚ ˆ Œˆ ’‚ ’
ª ‹
ˆ Œˆ š
˜ ‡ ‹
FIGURE 3.2
Decision variables: X1 X2
Spreadsheet cells: B5 C5
3.4.3 REPRESENTING THE OBJECTIVE FUNCTION
Ž
–
– ‡ˆ‰’‚ 1 ‡‰‰’
5 ‡ˆ‰« ˆ 1 ‡‰‰«Œˆ
– š
– „
Œ„ –
„ Œ„
– …„
˜ …„ 5 „« ˆ 1 Œ„«Œˆ
˜ ‡‚ …„ ‰
ˆ Œˆ ‹ ˜ ‡‡ ‹
– …„
–
¤ …„
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A Spreadsheet Model for the Blue Ridge Hot Tubs Problem 51
FIGURE 3.3
Algebraic objective: 350 X1 1 300 X2
Formula in cell D6: 5 B6*B5 1 C6*C5
3.4.4 REPRESENTING THE CONSTRAINTS
Ž
‚’‚ ‚’ ‰‰
€’‚ „’ ‚ˆ„„
‚’‚ ‚„’ ŠŠ‰
…€
˜ …€ 5 €« ˆ 1 Œ€«Œˆ
…‚‰
…‚‚
˜ …‚‰ 5 ‚‰« ˆ 1 Œ‚‰«Œˆ
˜ …‚‚ 5 ‚‚« ˆ 1 Œ‚‚«Œˆ
ˆ Œˆ ¤
…€ …‚‚
˜ ‡¥ ‹
š ‰‰ ‚ˆ„„ ŠŠ‰
‘
Ž
€ ‚‰ ‚‚
…€ …‚‰ …‚‚
3.4.5 REPRESENTING THE BOUNDS ON THE DECISION VARIABLES
¤
’‚ $ ‰ ’ $ ‰— Ž
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52 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
FIGURE 3.4
LHS formula for the pump constraint: 1 X1 1 1 X2
Formula in cell D9: 5 B9*B5 1 C9*C5
LHS formula for the labor constraint: 9 X1 1 6 X2
Formula in cell D10: 5 B10*B5 1 C10*C5
LHS formula for the tubing constraint: 12 X1 1 16 X2
Formula in cell D11: 5 B11*B5 1 C11*C5
š
š
š
3.5 How Solver Views the Model
‚
ž ‹ ‹ Ÿ
ž Ÿ
‡
ž Ÿ
Ž ˜
– …„
ˆ Œˆ …€ …‚‰ …‚‚
˜ ‡ˆ ˜ ‡ˆ
…„ Œ
˜ ‡‚ ˜ ‡ˆ
Ž
˜ –
– ˜ ‡„
‹
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How Solver Views the Model 53
FIGURE 3.5
Variable Cells
Objective Cell
Constraint Cells
Terms used to describe Corresponding terms used by Solver FIGURE 3.6
LP models algebraically to describe spreadsheet LP models
– –
ž Ÿ
A Note about Creating
Cell Comments…
‘ š …„ ˜ ‡ˆ
‚ Œš
Œ ¤ Œ ž 1 ˜Ÿ
‡
‚
Œ
‡ œ Œ
‚ Œš
Œ Œ ž Œ 1 ŒŸ
‡
¥ Ž Ž ž š
Ž Ÿ
ˆ Œ
„ Œš £©
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
54 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
Installing Analytic Solver
Platform for Education
š Ž ¢
‘
œœ œ œ
Ž
ž‘ š
š Ÿ š š
Ž
š
3.6 Using Analytic Solver Platform
Ž
– š
Ž ˜ ‡¬
š
FIGURE 3.7
Toggles Task Pane ON/OFF
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Using Analytic Solver Platform 55
Ž ž
£‹ … … Ÿ
š Œ Ž¡
‹ ˜ ‡¬ š
£‹ ¡ š
Software Note
š ˜ ‡¬
š “ Ž
3.6.1 DEFINING THE OBJECTIVE CELL
˜ ‡Š £–
‚ …„ ž –
Ÿ
Œš § £– ¨ š
¡ š
FIGURE 3.8
2: Click here
1: Select D6
3: Click Add Objective
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56 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
FIGURE 3.9
1: Click here
2: Select Maximize
˜ ‡€ ‘ ¡ š
…„ –
‹
‹
– ‘ ˜ ‡€ žšŸ – ž§†…†„¨Ÿ
¡ š
‘ – § ¨
‹ ‹
– ž š – ž§†…†„¨Ÿ ¡
š
‹ – Ÿ
3.6.2 DEFINING THE VARIABLE CELLS
Ž
˜ ‡‚‰
‚ ˆ Œˆ
Œš § ª ¨ š
¡ š
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Using Analytic Solver Platform 57
FIGURE 3.10
1: Select B5:C5
2: Click here
3: Select Add Variable
Œ ˆ Œˆ
‘
ž Œ
š š Ÿ š ª
š ª
3.6.3 DEFINING THE CONSTRAINT CELLS
¤
˜ ¦‡‚‚
‚ …€ …‚‚
Œš § Œ¨ š
¡ š
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58 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
FIGURE 3.11
1: Select D9:D11
2: Click here
3: Select Add Constraint
˜ ‡‚
…€ …‚‚
€ ‚‚ ‘
‘ ˜ ‡‚
ž # $ 5 Ÿ
š
˜
#
š
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Using Analytic Solver Platform 59
FIGURE 3.12
1: Select E9:E11
2: Click Add
Software Note
– ‹
š š žŸ š
£– ª Œ
š š
Ž
£‹ “ š š
Ž
Ž
‹
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60 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
3.6.4 DEFINING THE NONNEGATIVITY CONDITIONS
£ š
‹
ž ˆ
ŒˆŸ
˜ ‡‚‡
˜ ‡‚‡ ˆ Œˆ
‹ ¤
ž ‚‰ ‚‰ Ÿ
FIGURE 3.13
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Using Analytic Solver Platform 61
Software Note
£ ¡ š ž ˜ ‡‚ˆŸ
¤ ¤
ž Ÿ
‹ Ž
3.6.5 REVIEWING THE MODEL
˜ ‡‚¥ ‹
‘
š
š § ‹
¨ ‹
˜
Ž ž
FIGURE 3.14
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62 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
– Ÿ
žŒ ‹
Š Ž Ÿ
3.6.6 OTHER OPTIONS
˜ ‡‚ˆ £ “
‹
ž
Ÿ ‹ ‘
Ž ž ‹ –
Ÿ š
Ž
®
žŒ ¥
Ÿ Ž
Žœ™ ˜ ‡‚ˆ
›
FIGURE 3.15
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Using Analytic Solver Platform 63
š
Ž
3.6.7 SOLVING THE PROBLEM
Œš
¡ š ž š £‹
Ž Ÿ £ š
¡ š
‘
‹
˜ ‡‚„ ˆ ‚
Œˆ ¬Š
’‚ ’ –
ž…„Ÿ ‚
¬Š †„„‚‰‰ Œ …€ …‚‰ …‚‚
‰‰ ‚ˆ„„
¬‚ ŠŠ‰
FIGURE 3.16
Click Solve
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
64 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
Guided Mode
Ž ¯ “
Ž ‹
£ “ Ž
š
¯ “ ¯ “
Ž
š
3.7 Using Excel’s Built-in Solver
š Ž ž˜
‘Ÿ š ¡
‹
š š
Ž
˜ ‡‚¬ ¡ ž
… Ÿ
FIGURE 3.17
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Goals and Guidelines for Spreadsheet Design 65
– ž ‹Ÿ
¢– Ž
˜ ‡‚¬ ž
§ ¨ ¡ š Ÿ › š
˜ ‹ š
– ž ‹ ‹ Ÿ
® ¡
Ž
3.8 Goals and Guidelines
for Spreadsheet Design
¤ š Ž
¡ š Ž
Ž §š ¨
š
š
Œ
¢ š
§ ¨ ƒ
ž Ÿ
• ¡
–
š
•
•
“
•
‘
˜ ‡‚Š
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
66 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
FIGURE 3.18
€ SPREADSHEET DESIGN GUIDELINES
–
€ ¤
•
‚ ƒ
„
ƒ
ž Ÿ
ž Ÿ £ •
ƒ ƒ
¤
ž Ÿ
‚ …
°
†
•
†
Spreadsheet-Based LP
Solvers Create New Applications
for Linear Programming
‘ ‚€Š¬ ‚ ƒ
¢ ŽŒ
Ž ¤
Ž
ˆ ŽŒ
Ž
˜‹š ¯ Œ
‹ –
„…†
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Make vs. Buy Decisions 67
†Š‰‰‰‰ š
‡‰‰ š
‰ Ž
– ¥
š
˜ Œ ¤ ›š
‹ ¡
‹ Ž Œ
ª Œ Ž
–
š “ § “ ¤ “š Œ “ ¨ ‚
ƒ “ ¬ ‚€Š¬ ‚¬
3.9 Make vs. Buy Decisions
Ž
¤ ‹
˜ Ž –
‹ š
–
‘
ž Ÿ
š
Ž Œ ¡
¢ š
†¬ˆ‰‰‰‰
‹
Model 1 Model 2 Model 3
¤ £ ‡‰‰‰ ‰‰‰ €‰‰
® ‚ˆ ‡
® ‚ ‚
® Ž
‚‰‰‰‰
ˆ‰‰‰
‹
Model 1 Model 2 Model 3
Œ “š †ˆ‰ †Š‡ †‚‡‰
Œ †„‚ †€¬ †‚¥ˆ
Ž š
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68 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
3.9.1 DEFINING THE DECISION VARIABLES
Ž
“‚ ‚ š
“ š
“‡ ‡ š
‚ ‚
‡ ‡
’‚ ’ ’
‘
‘ “ š
‡
3.9.2 DEFINING THE OBJECTIVE FUNCTION
– ‹
‚ ž “‚Ÿ †ˆ‰ƒ
ž “Ÿ †Š‡ƒ ‡ ž “‡Ÿ
†‚‡‰ ‚ ž ‚Ÿ
†„‚ƒ ž Ÿ †€¬ƒ
‡ ž ‡Ÿ †‚¥ˆ
–
“‘¤ ¦ˆ‰“‚ 1 Š‡“ 1 ‚‡‰“‡ 1 „‚ ‚ 1 €¬ 1 ‚¥ˆ ‡
3.9.3 DEFINING THE CONSTRAINTS
“‚ ‚ˆ“ ‡“‡ ‚‰‰‰‰ ”
‚“‚ “ ‚“‡ ˆ‰‰‰ ”
‡‰‰‰ ‚ ‰‰‰
€‰‰ ‡
“‚ ‚ ‡‰‰‰ ” ‚
“ ‰‰‰
”
“‡ ‡ ¦ €‰‰ ” ‡
˜
‹
“‚ “ “‡ ‚ ‡ $‰
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Make vs. Buy Decisions 69
3.9.4 IMPLEMENTING THE MODEL
Ž Ž¡ š ‹
“‘¤ ˆ‰“‚ Š‡“ ‚‡‰“‡ „‚ ‚ €¬ ‚¥ˆ ‡ ”
– “‚ ‚ ‡‰‰‰ ” ‚
“ ‰‰‰ ”
“‡ ‡ €‰‰ ” ‡
“‚ ‚ˆ“ ‡“‡ ‚‰‰‰‰ ”
‚“‚ “ ‚“‡ ˆ‰‰‰ ”
“‚ “ “‡ ‚ ‡ ‰ ”
˜ ‡‚€
ž ˜ ‡ ‚€ šŸ
– ‚‰ …‚‚
‚¬
…‚Š ˜‚¬ ˜‚Š
‚¥ …‚¥
FIGURE 3.19 ‡
Variable Cells
Objective Cell
Constraint Cells
Key Cell Formulas
Cell Formula Copied to
B13 5B61B7 C13:D13
E11 5SUMPRODUCT(B10:D11,B6:D7) --
E17 5SUMPRODUCT(B17:D17,$B$6:$D$6) E18
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70 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
Œ „ …¬
– ‚‚
˜ ‚‚ 5 ‚‰« „ 1 Œ‚‰«Œ„ 1 …‚‰«…„ 1 ‚‚« ¬ 1 Œ‚‚«Œ¬ 1 …‚‚«…¬
‘ „ …¬
‚‰ …‚‚ƒ
¢
‘
ž Ÿ
‚‚ 5 ®“Ž£…®Œ ‚‰ …‚‚ „ …¬
š ‚‰ …‚‚
„ …¬ ž Ÿ
®“Ž£…®Œ ž Ÿ
‹
š
‚
“‚ ‚ ‚‡
¢ „ ¬
˜ ‚‡ ¦¦¦¦¦¦¦ „ ¬
žŒ Œ‚‡ …‚‡Ÿ
‚‡ Œ‚‡ …‚‡
‡
‚¬
…‚Š ‚¬
˜ ‚¬ ®“Ž£…®Œ ž ‚¬ …‚¬† †„ †…†„Ÿ
žŒ ‚ŠŸ
‚Š
ž‘
Ÿ
3.9.5 SOLVING THE PROBLEM
–
˜ ‡‚€ –
˜ ‡‰ ‹ Ž¡ š
˜ ‡‚
FIGURE 3.20
Solver Settings:
Objective: E11 (Min)
ˆ ‡
Variable cells: B6:D7
Constraints:
B13:D13 5 B14:D14
E17:E18 ,5 F17:F18
B6:D7 .5 0
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
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Make vs. Buy Decisions 71
FIGURE 3.21 ‰ ‡
3.9.6 ANALYZING THE SOLUTION
˜ ‡‚ Ž š
ž Ÿ ‡‰‰‰ ‚ ˆˆ‰ €‰‰ ‡
ž “‚ 5 ‡‰‰‰ “ 5 ˆˆ‰ “‡ 5 €‰‰Ÿ ‚¥ˆ‰
ž ‚ 5 ‰ 5 ‚¥ˆ‰ ‡ 5 ‰Ÿ
Ž †¥ˆ‡‡‰‰ €ˆˆ
‚‰‰‰‰ ˆ‰‰‰
Ž
†€¬ †‚¥
†Š‡ £ Ž
†‚‚ ‚
‘ ‚
‚
¡
‚ “š
¡ š
‚ ˜
Ž
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
72 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
3.10 An Investment Problem
‹
‹
š
‹ š
¡
¯ Ž ‘
‹
–
†¬ˆ‰‰‰‰
Company Return Years to Maturity Rating
Œ Š„ˆ± ‚‚ ‚
… €ˆ‰± ‚‰ ‡ ¯
ª ‚‰‰‰± „ ¥ ˜
““ Š¬ˆ± ‚‰ ‚
£Ž €ˆ± ¬ ‡ ¯
€‰‰± ‚‡ ª ¯
§ ¨
§› “¨
§ ¨
¡ š
¡ ˆ±
‚‰
… ª £Ž
‡ˆ±
š ž § ¨Ÿ
¡ ‹
3.10.1 DEFINING THE DECISION VARIABLES
‘
’‚ Œ
’ …
’‡ ª
’¥ ““
’ˆ £Ž
’„
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An Investment Problem 73
3.10.2 DEFINING THE OBJECTIVE FUNCTION
– ‹ ¡
Œ ’‚ Š„ˆ±
… ’ €ˆ‰± –
“ ’ ¦‰Š„ˆ’‚ 1 ‰€ˆ’ 1 ‚‰’‡ 1 ‰Š¬ˆ’¥ 1 ‰€ˆ’ˆ 1 ‰€’„ ”
3.10.3 DEFINING THE CONSTRAINTS
˜
†¬ˆ‰‰‰‰
’‚ 1 ’ 1 ’‡ 1 ’¥ 1 ’ˆ 1 ’„ 5 ¬ˆ‰‰‰‰
¤ ˆ±
†¬ˆ‰‰‰‰ †‚Š¬ˆ‰‰
†‚Š¬ˆ‰‰
’‚ # ‚Š¬ˆ‰‰
’ # ‚Š¬ˆ‰‰
’‡ # ‚Š¬ˆ‰‰
’¥ # ‚Š¬ˆ‰‰
’ˆ # ‚Š¬ˆ‰‰
’„ # ‚Š¬ˆ‰‰
ª ’‡ £Ž ’ˆ
‚‰
ž†‡¬ˆ‰‰‰Ÿ ‚‰
’‚ 1 ’ 1 ’¥ 1 ’„ $ ‡¬ˆ‰‰‰
‡ˆ±
ž†„ˆ‰‰Ÿ … ’ ª ’‡ £Ž ’ˆ
’ 1 ’‡ 1 ’ˆ # „ˆ‰‰
˜
‹
’‚ ’ ’‡ ’¥ ’ˆ ’„ $ ‰
3.10.4 IMPLEMENTING THE MODEL
Ž Ž ‘
‹
“ ’ ¦‰Š„ˆ’‚ 1 ‰€ˆ’ 1 ‚‰’‡ 1 ‰Š¬ˆ’¥ 1 ‰€ˆ’ˆ 1 ‰€’„ ”
–
’‚ # ‚Š¬ˆ‰‰ ” ˆ±
’ # ‚Š¬ˆ‰‰ ” ˆ±
’‡ # ‚Š¬ˆ‰‰ ” ˆ±
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74 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
’¥ # ‚Š¬ˆ‰‰ ” ˆ±
’ˆ # ‚Š¬ˆ‰‰ ” ˆ±
’„ # ‚Š¬ˆ‰‰ ” ˆ±
’‚ 1 ’ 1 ’‡ 1 ’¥ 1 ’ˆ 1 ’„ 5 ¬ˆ‰‰‰‰ ”
’‚ 1 ’ 1 ’¥ 1 ’„ $ ‡¬ˆ‰‰‰ ”
’ 1 ’‡ 1 ’ˆ # „ˆ‰‰ ” š
’‚ ’ ’‡ ’¥ ’ˆ ’„ $ ‰ ”
˜ ‡ ž
˜ ‡ šŸ
Œ Œ„ Œ‚‚
’‚ ’„
š …„ …‚‚
Œ„ Œ‚‚ Œ‚
Œ‚‡
˜ Œ‚ 5 ®“ Œ„ Œ‚‚
„ ‚‚
– ‚
˜ ‚ ®“Ž£…®Œ ž „ ‚‚†Œ†„ †Œ†‚‚Ÿ
FIGURE 3.22 Š ‹ ‡
Objective Cell
Variable Cells
Constraint Cells
Key Cell Formulas
Cell Formula Copied to
C12 5SUM(C6:C11) --
E12 5SUMPRODUCT(E6:E11,$C$6:$C$11) G12 and I12
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
An Investment Problem 75
¯„ ¯‚‚
§ ¨ ¤ ‹ š
Œ„ Œ¬ Œ€ Œ‚‚ ž ’‚ ’ ’¥
’„Ÿ § ¨
¯‚
˜ ¯‚ ®“Ž£…®Œ ž¯„ ¯‚‚†Œ†„ †Œ†‚‚Ÿ
‹ ‘„ ‘‚‚ š
§ š ¨
˜ ‘‚ ®“Ž£…®Œ ž‘„ ‘‚‚†Œ†„ †Œ†‚‚Ÿ
¤ ‹ ¯ ‘
š
– ‚ ¯‚ ‘‚
3.10.5 SOLVING THE PROBLEM
–
˜ ‡ ˜ ‡‡
˜ ‡¥
3.10.6 ANALYZING THE SOLUTION
˜ ‡¥
†‚‚ˆ‰‰ Œ ’‚ †¬ˆ‰‰‰ … ’ †‚Š¬ˆ‰‰ ª
’‡ †‚Š¬ˆ‰‰ ““ ’¥ †‰ £Ž ’ˆ †‚Š¬ˆ‰‰
’„ ‘ Œ
… £Ž Œ
… £Ž … £Ž
§ š¨ ‡ˆ± § š¨
ž Ÿ
‡ˆ±
š
FIGURE 3.23
Solver Settings:
Objective: E12 (Max)
Variable cells: C6:C11
Constraints:
C6:C11 ,5 D6:D11
C6:C11 .5 0
C12 5 C13
G12 .5 G13
I12 ,5 I13
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
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76 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
FIGURE 3.24 ‰
3.11 A Transportation Problem
“ š
š
ˆ
˜ “ …
Œ ¬ˆ‰‰‰ “
… ¥‰‰‰‰‰ ‡‰‰‰‰‰
Œ £ £
‰‰‰‰‰ „‰‰‰‰‰ ˆ‰‰‰
š
š
š ‹ ž
Ÿ
Distances (in miles) Between
Groves and Plants
Grove Ocala Orlando Leesburg
“ … ‚ ˆ‰ ¥‰
‡ˆ ‡‰
Œ ˆˆ ‰ ˆ
‹
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A Transportation Problem 77
3.11.1 DEFINING THE DECISION VARIABLES
‘
‹
˜ ‡ˆ
ž Ÿ ˜ ‡ˆ
¤
ž Ÿ
˜ ‡ˆ
’ 5
’‚¥ 5 “ … ž ‚Ÿ £ ž ¥Ÿ
’‚ˆ 5 “ … ž ‚Ÿ £ ž ˆŸ
’‚„ 5 “ … ž ‚Ÿ ž „Ÿ
’¥ 5 ž Ÿ £ ž ¥Ÿ
’ˆ 5 ž Ÿ £ ž ˆŸ
’„ 5 ž Ÿ ž „Ÿ
’‡¥ 5 Œ ž ‡Ÿ £ ž ¥Ÿ
’‡ˆ 5 Œ ž ‡Ÿ £ ž ˆŸ
’‡„ 5 Œ ž ‡Ÿ ž „Ÿ
FIGURE 3.25
Processing
Supply Groves Distances plants Capacity
21
Mt. Dora 50 Ocala
275,000 1 4 200,000
40
35
Eustis 30 Orlando
400,000 2 5 600,000
22
55
Clermont Leesburg
300,000 3 20 6 225,000
25
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78 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
3.11.2 DEFINING THE OBJECTIVE FUNCTION
‹ ž
Ÿ –
“‘¤ ¦‚’‚¥ 1 ˆ‰’‚ˆ 1 ¥‰’‚„ 1 ‡ˆ’¥ 1 ‡‰’ˆ 1 ’„ 1 ˆˆ’‡¥ 1 ‰’‡ˆ 1 ˆ’‡„
‚’‚¥ “
… ž ‚Ÿ £ ž ¥Ÿ ‚
3.11.3 DEFINING THE CONSTRAINTS
˜
‰‰‰‰‰ „‰‰‰‰‰ ˆ‰‰‰ £ £
’‚¥ 1 ’¥ 1 ’‡¥ # ‰‰‰‰‰ ” £
’‚ˆ 1 ’ˆ 1 ’‡ˆ # „‰‰‰‰‰ ” £
’‚„ 1 ’„ 1 ’‡„ # ˆ‰‰‰ ”
£ ž ¥Ÿ
“ … ž ‚Ÿ ž Ÿ Œ ž ‡Ÿ
£¡ ‰‰‰‰‰
£ ¤
ž‚‰ˆ‰‰‰ Ÿ ž€¬ˆ‰‰‰
Ÿ
¬ˆ‰‰‰ ¥‰‰‰‰‰ ‡‰‰‰‰‰
“ … Œ
’‚¥ 1 ’‚ˆ 1 ’‚„ 5 ¬ˆ‰‰‰ ” “ …
’¥ 1 ’ˆ 1 ’„ 5 ¥‰‰‰‰‰ ”
’‡¥ 1 ’‡ˆ 1 ’‡„ 5 ‡‰‰‰‰‰ ” Œ
“ … ž ‚Ÿ
£ ž ¥Ÿ £ ž ˆŸ ž „Ÿ
“ …
“ …
Œ
3.11.4 IMPLEMENTING THE MODEL
Ž ¡ ‹
“‘¤ ‚’‚¥ ˆ‰’‚ˆ ¥‰’‚„
‡ˆ’¥ ‡‰’ˆ ’„
ˆˆ’‡¥ ‰’‡ˆ ˆ’‡„ ž Ÿ
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A Transportation Problem 79
– ’‚¥ ’¥ ’‡¥ ‰‰‰‰‰ ” £
’‚ˆ ’ˆ ’‡ˆ „‰‰‰‰‰ ” £
’‚„ ’„ ’‡„ ˆ‰‰‰ ”
’‚¥ ’‚ˆ ’‚„ ¬ˆ‰‰‰ ” “ …
’¥ ’ˆ ’„ ¥‰‰‰‰‰ ”
’‡¥ ’‡ˆ ’‡„ ‡‰‰‰‰‰ ” Œ
’ ‰ ”
˜ ‡„ ž
˜ ‡ „ šŸ ‘
‹ Œ¬ € Œ
Œ‚¥ ‚„
¤
Œ‚¬ …‚¬ ‚¬
Œ‚¬ …‚¬ ‚¬
FIGURE 3.26
Variable Cells
Constraint Cells
Objective Cell
Key Cell Formulas
Cell Formula Copied to
C17 5SUM(C14:C16) D17:E17
F14 5SUM(C14:E14) F15:F16
E20 5SUMPRODUCT(C7:E9,C14:E16) --
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80 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
˜ Œ‚¬ ®“žŒ‚¥ Œ‚„Ÿ
žŒ …‚¬ ‚¬Ÿ
£
£ Œ Œ‚Š ‚Š
˜‚¥ ˜‚ˆ ˜‚„
˜ ˜‚¥ ®“žŒ‚¥ ‚¥Ÿ
žŒ ˜‚ˆ ˜‚„Ÿ
“ … Œ Œ ¯‚¥ ¯‚„
˜ – ‰
˜ ‰ ®“Ž£…®Œ žŒ¬ €Œ‚¥ ‚„Ÿ
®“Ž£…®Œ ž Ÿ Œ¬
€ Œ‚¥ ‚„
3.11.5 HEURISTIC SOLUTION FOR THE MODEL
¡
š
š
£ ¡
ž Ÿ ®
‚
Œ £ ž‰ Ÿ
Œ ž‡‰‰‰‰‰ Ÿ £ ž„‰‰‰‰‰
Ÿ ‡‰‰‰‰‰ Œ £
Œ
“ … £ ž‚ Ÿ
“
… ž¬ˆ‰‰‰ Ÿ £ ž‰‰‰‰‰ Ÿ
‰‰‰‰‰ “ … £ £
‡ ž Ÿ
ž¥‰‰‰‰‰ Ÿ žˆ‰‰‰ Ÿ
ˆ‰‰‰
¥ £ ž‡‰ Ÿ
ž‚¬ˆ‰‰‰ Ÿ £ ž‡‰‰‰‰‰ Ÿ
‚¬ˆ‰‰‰ £
ˆ “ … £ ž
£ Ÿ
ˆ‰
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A Transportation Problem 81
“ … ž¬ˆ‰‰‰ Ÿ
£ ž‚ˆ‰‰‰ Ÿ ¬ˆ‰‰‰ “ …
£ “ …
˜ ‡¬
¥‚ˆ‰‰‰‰
¢
— ‘
š ¥‚ˆ‰‰‰‰ —
3.11.6 SOLVING THE PROBLEM
–
˜ ‡„ ˜ ‡Š
˜ ‡€
FIGURE 3.27
FIGURE 3.28
Solver Settings:
Objective: E20 (Min)
Variable cells: C14:E16
Constraints:
F14:F16 5 G14:G16
C17:E17 ,5 C18:E18
C14:E16 .5 0
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
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82 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
FIGURE 3.29 ‰
3.11.7 ANALYZING THE SOLUTION
˜ ‡€ ‰‰‰‰‰
“ … £ ’‚¥ 5 ‰‰‰‰‰ ¬ˆ‰‰‰
“ … ’‚„ 5 ¬ˆ‰‰‰ £ ¥‰‰‰‰‰
ˆ‰‰‰‰ £ ’ˆ 5 ˆ‰‰‰‰
‚ˆ‰‰‰‰ ’„ 5 ‚ˆ‰‰‰‰ ˜ ‡‰‰‰‰‰
Œ £ ’‡ˆ 5 ‡‰‰‰‰‰ ¤
˜ ‡€
¥‰‰‰‰‰‰
Ž
3.12 A Blending Problem
“ ˜
–
‹
®
†‰‰
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A Blending Problem 83
Ž
£
š
Ž š š
¡ ‹
Percent of Nutrient in
Nutrient Feed 1 Feed 2 Feed 3 Feed 4
Œ ‡‰± ˆ± ‰± ‚‰±
¯ ‚‰± ‡‰± ‚ˆ± ‚‰±
“ ‰± ‰± ‰± ‡‰±
Œ Ž †‰ˆ †‰‡‰ †‰‡ †‰‚ˆ
£ ® ‹ ¬‰
š
š Ž –
š Š‰‰‰
‰± ‚ˆ± ‚ˆ±
Ž —
3.12.1 DEFINING THE DECISION VARIABLES
‘ Ž
¡
’‚ 5 ‚
’ 5
’‡ 5 ‡
’¥ 5 ¥
3.12.2 DEFINING THE OBJECTIVE FUNCTION
– ¡
‚ ‡ ¥ †‰ˆ †‰‡‰ †‰‡ †‰‚ˆ
–
“‘¤ ¦ˆ’‚ 1 ‡‰’ 1 ‡’‡ 1 ‚ˆ’¥
3.12.3 DEFINING THE CONSTRAINTS
˜ ¡ ˜
Š‰‰‰
’‚ 1 ’ 1 ’‡ 1 ’¥ 5 Š‰‰‰
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84 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
‰±
‚ ‡ ¥ ‡‰± ˆ± ‰± ‚‰±
‡‰’‚ 1 ‰ˆ’ 1 ‰’‡ 1 ‚‰’¥
‰± Š‰‰‰
‡‰’‚ 1 ‰ˆ’ 1 ‰’‡ 1 ‚‰’¥
$ ‰
Š‰‰‰
‚ˆ± Š‰‰‰
‚‰’‚ 1 ‡‰’ 1 ‚ˆ’‡ 1 ‚‰’¥
$ ‚ˆ
Š‰‰‰
˜ ‚ˆ± Š‰‰‰
‰’‚ 1 ‰’ 1 ‰’‡ 1 ‡‰’¥
$ ‚ˆ
Š‰‰‰
3.12.4 SOME OBSERVATIONS ABOUT CONSTRAINTS,
REPORTING, AND SCALING
š
˜ š
˜
‡‰’‚ 1 ‰ˆ’ 1 ‰’‡ 1 ‚‰’¥
$ ‰
Š‰‰‰
‡‰’‚ ‰ˆ’ ‰’‡ ‚‰’¥
1 1 1 $ ‰
Š‰‰‰ Š‰‰‰ Š‰‰‰ Š‰‰‰
Š‰‰‰
‡‰’‚ 1 ‰ˆ’ 1 ‰’‡ 1 ‚‰’¥ $ ‚„‰‰
’‚ ’¥
¤
Š‰‰‰
Š‰‰‰
¢
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A Blending Problem 85
ž Ÿ
‘ š
ž
Ÿ
˜
Š‰‰‰
‘ ’ ‰‰ˆœŠ‰‰‰
‰‰‰‰‰‰„ˆ‰
Ž
š
3.12.5 RE-SCALING THE MODEL
Ž
’‚ 5 ‚
’ 5
’‡ 5 ‡
’¥ 5 ¥
–
“‘¤ ˆ‰’‚ ‡‰‰’ ‡‰’‡ ‚ˆ‰’¥ ”
– ’‚ ’ ’‡ ’¥ Š ”
‡‰’‚ 1 ‰ˆ’ 1 ‰’‡ 1 ‚‰’¥
$ ‰‰ ” ±
Š
‚‰’‚ 1 ‡‰’ 1 ‚ˆ’‡ 1 ‚‰’¥
$ ‰‚ˆ ” ±
Š
‰’‚ 1 ‰’ 1 ‰’‡ 1 ‡‰’¥
$ ‰‚ˆ ” ±
Š
’‚ ’ ’‡ ’¥ ‰ ”
’‚ ’ ’‡ ’¥ ‚‰‰‰ ‚ ‡ ¥
– ž ‚‰‰‰ Ÿ
’‚ ’ ’‡ ’¥ †ˆ‰ †‡‰‰ †‡‰ †‚ˆ‰
–
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86 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
¤ ‰‰ˆœŠ ²
‰‰‰„ˆ Š ž Ÿ ‘
‰‰‰‰‰‰„ˆ
Š‰‰‰
Using Automatic Scaling
š §® ¨
‘
Scaling and Linear Models
¡ Ž ‹
–
‘ ¡
‚‰‰±
š ‘
‘
š
3.12.6 IMPLEMENTING THE MODEL
£ ˜ ‡‡‰ ž
˜ ‡ ‡‰ šŸ ‘ ˆ ˆ
‚‰ ‚
Œ ¯„ ž ‚‰‰‰ Ÿ
¯‚‰ ¯‚ ¤
¯
‘ „ Œ„ …„ „
’‚ ’ ’‡ ’¥
–
˜ˆ
˜ ˜ˆ ² ®“Ž£…®Œ ž ˆ ˆ „ „Ÿ
˜„
˜ ˜„ ² ®“ž „ „Ÿ
¯„
˜‚‰ ˜‚‚ ˜‚
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A Blending Problem 87
FIGURE 3.30
Variable Cells
Objective Cell
Constraint Cells
Key Cell Formulas
Cell Formula Copied to
F5 5SUMPRODUCT(B5:E5,B6:E6) --
F6 5SUM(B6:E6) --
F10 5SUMPRODUCT(B10:E10,$B$6:$E$6)/$G$6 F11:F12
ž Ÿ
˜‚‰
˜ ˜‚‰ ®“Ž£…®Œ ž ‚‰ ‚‰† †„ † †„Ÿœ†¯†„
žŒ ˜‚‚ ˜‚Ÿ
˜‚‚ ˜‚
¯‚‰ ¯‚
¤
˜
ž „ „Ÿ Š ž Ÿ ž˜‚‰
˜‚Ÿ
3.12.7 SOLVING THE PROBLEM
˜ ‡‡‚
˜ ‡‡
3.12.8 ANALYZING THE SOLUTION
˜ ‡‡ Š‰‰‰
¥ˆ‰‰ ‚ ’‚ 5 ¥ˆ
‰‰‰ ’ 5 ‚ˆ‰‰ ¥ ’¥ 5 ‚ˆ Œ ˜„
Š‰‰‰ ˜ ˜‚‰ ˜‚
‰± ‚ˆ± ‚ŠŠ±
†‚€ˆ‰ ˜ˆ
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88 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
FIGURE 3.31
Solver Settings:
Objective: F5 (Min)
Variable cells: B6:E6
Constraints:
F10:F12 .5 G10:G12
F6 5 G6
B6:E6 .5 0
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
FIGURE 3.32 ‰
Have You Seen LP at Your
Grocery Store?
š
£ š –
žš ¡
¡ Ÿ
• ‚±
• Š±
• ¥ˆ±
• ‚±
„…†
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A Production and Inventory Planning Problem 89
‘ š
ª ž
Ÿ š
“
¤ –
Ž
3.13 A Production and Inventory
Planning Problem
£
® Œ
š ®
„
¢ Ž
š
‹ ®¡
„
Month
1 2 3 4 5 6
†ˆ †¥‰ †ˆ‰ †„ˆ †Šˆ †Š‰ †„‰
†€ ‚‰‰‰ ¥ˆ‰‰ „‰‰‰ ˆˆ‰‰ ‡ˆ‰‰ ¥‰‰‰
ˆ ¥‰‰‰ ‡ˆ‰‰ ¥‰‰‰ ¥ˆ‰‰ ¥‰‰‰ ‡ˆ‰‰
¯ ‹ ®¡ „‰‰‰
š š
‚ˆ‰‰ š
š
®¡
‚ˆ±
®
¬ˆ‰ ®
„
‹
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90 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
3.13.1 DEFINING THE DECISION VARIABLES
®¡
„
Ž‚ 5 ‚
Ž 5
Ž‡ 5 ‡
Ž¥ 5 ¥
Žˆ 5 ˆ
Ž„ 5 „
3.13.2 DEFINING THE OBJECTIVE FUNCTION
– ‹
Ž Œ 5 ¥‰Ž‚ 1 ˆ‰Ž 1 „ˆŽ‡ 1 ŠˆŽ¥ 1 Š‰Žˆ 1 „‰Ž„
š
‚ˆ±
†‡„‰ ‚ ž ‚ˆ± †¥‰ †‡„‰Ÿ †‡¬ˆ ž ‚ˆ±¦ †ˆ‰ †‡¬ˆŸ
£
‘ Œ ‡„ž ‚ Ÿœ ‡¬ˆž ‡Ÿœ ‡€Šž ‡ ¥Ÿœ
¥Šž ¥ ˆŸœ ¥‰ž ˆ „Ÿœ ‡€ž „ ¬Ÿœ
¤
‚ ‚ ‚
‚ –
“‘¤ ¥‰Ž‚ ˆ‰Ž „ˆŽ‡ ŠˆŽ¥ Š‰Žˆ „‰Ž„
‡„ž ‚ Ÿœ ‡¬ˆž ‡Ÿœ ‡€Šž ‡ ¥Ÿœ
¥Šž ¥ ˆŸœ ¥‰ž ˆ „Ÿœ ‡€ž „ ¬Ÿœ
3.13.3 DEFINING THE CONSTRAINTS
˜
š
‰‰‰ # Ž‚ # ¥‰‰‰ ” ‚
‚¬ˆ‰ # Ž # ‡ˆ‰‰ ”
‰‰‰ # Ž‡ # ¥‰‰‰ ” ‡
ˆ‰ # Ž¥ # ¥ˆ‰‰ ” ¥
‰‰‰ # Žˆ # ¥‰‰‰ ” ˆ
‚¬ˆ‰ # Ž„ # ‡ˆ‰‰ ” „
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A Production and Inventory Planning Problem 91
‚ˆ‰‰ „‰‰‰ ‘
‘ 5 ‘ 1 ® Ž 2 ®
„ ž Ÿ ‚ˆ‰‰ „‰‰‰
‚ˆ‰‰ # ‚ 1 Ž‚ 2 ‚‰‰‰ # „‰‰‰ ” ‚
‚ˆ‰‰ # 1 Ž 2 ¥ˆ‰‰ # „‰‰‰ ”
‚ˆ‰‰ # ‡ 1 Ž‡ 2 „‰‰‰ # „‰‰‰ ” ‡
‚ˆ‰‰ # ¥ 1 Ž¥ 2 ˆˆ‰‰ # „‰‰‰ ” ¥
‚ˆ‰‰ # ˆ 1 Žˆ 2 ‡ˆ‰‰ # „‰‰‰ ” ˆ
‚ˆ‰‰ # „ 1 Ž„ 2 ¥‰‰‰ # „‰‰‰ ” „
˜ ‚
5 ‚ 1 Ž‚ 2 ‚‰‰‰
‡ 5 1 Ž 2 ¥ˆ‰‰
¥ 5 ‡ 1 Ž‡ 2 „‰‰‰
ˆ 5 ¥ 1 Ž¥ 2 ˆˆ‰‰
„ 5 ˆ 1 Žˆ 2 ‡ˆ‰‰
¬ 5 „ 1 Ž„ 2 ¥‰‰‰
3.13.4 IMPLEMENTING THE MODEL
Ž ®¡
‹
“‘¤ ¥‰Ž‚ 1 ˆ‰Ž 1 „ˆŽ‡ 1 ŠˆŽ¥ 1 Š‰Žˆ 1 „‰Ž„
1‡„ ‚ 1 œ 1 ‡¬ˆ 1 ‡ œ 1 ‡€Š ‡ 1 ¥ œ
1¥Š ¥ 1 ˆ œ 1 ¥‰ ˆ 1 „ œ 1 ‡€ „ 1 ¬ œ
– ‰‰‰ # Ž‚ # ¥‰‰‰ ” ‚
‚¬ˆ‰ # Ž # ‡ˆ‰‰ ”
‰‰‰ # Ž‡ # ¥‰‰‰ ” ‡
ˆ‰ # Ž¥ # ¥ˆ‰‰ ” ¥
‰‰‰ # Žˆ # ¥‰‰‰ ” ˆ
‚¬ˆ‰ # Ž„ # ‡ˆ‰‰ ” „
‚ˆ‰‰ # ‚ 1 Ž‚ 2 ‚‰‰‰ # „‰‰‰ ” ‚
‚ˆ‰‰ # 1 Ž 2 ¥ˆ‰‰ # „‰‰‰ ”
‚ˆ‰‰ # ‡ 1 Ž‡ 2 „‰‰‰ # „‰‰‰ ” ‡
‚ˆ‰‰ # ¥ 1 Ž¥ 2 ˆˆ‰‰ # „‰‰‰ ” ¥
‚ˆ‰‰ # ˆ 1 Žˆ 2 ‡ˆ‰‰ # „‰‰‰ ” ˆ
‚ˆ‰‰ # „ 1 Ž„ 2 ¥‰‰‰ # „‰‰‰ ” „
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92 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
5 ‚ 1 Ž‚ 2 ‚‰‰‰
‡ 5 1 Ž 2 ¥ˆ‰‰
¥ 5 ‡ 1 Ž‡ 2 „‰‰‰
ˆ 5 ¥ 1 Ž¥ 2 ˆˆ‰‰
„ 5 ˆ 1 Žˆ 2 ‡ˆ‰‰
¬ 5 „ 1 Ž„ 2 ¥‰‰‰
˜ ‡‡‡ ž
˜ ‡ ‡‡ šŸ Œ Œ¬ ¬
žŽ‚ Ž„ Ÿ
– ŒŠ Š
FIGURE 3.33 Œ
Variable Cells
Constraint Cells
Objective Cell
Key Cell Formulas
Cell Formula Copied to
C9 5C61C72C8 D9:H9
D6 5C9 E6:H6
C18 5$B$18*C17 D18:H18
C20 5C17*C7 D20:H20
C21 5C18*(C61C9)/2 D21:H21
H23 5SUM(C20:H21) --
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A Production and Inventory Planning Problem 93
¬ˆ‰ Œ„
‚ Œ€
˜ Œ€ Œ„ Œ¬ŒŠ
žŒ …€ €Ÿ
…€ €
‚ …„
˜ …„ Œ€
žŒ „ „Ÿ
„ „
‘
Œ‚¬ ‚¬
Œ‚Š ‚Š
˜ Œ‚Š † †‚Š«Œ‚¬
žŒ …‚Š ‚ŠŸ
‰
‚
˜ Œ‰ Œ‚¬«Œ¬
žŒ …‰ ‰Ÿ
˜ Œ‚ Œ‚Š«žŒ„ Œ€Ÿœ
žŒ …‚ ‚Ÿ
˜ –
‡
˜ ‡ ®“žŒ‰ ‚Ÿ
3.13.5 SOLVING THE PROBLEM
˜ ‡‡¥
˜ ‡‡ˆ
FIGURE 3.34
Solver Settings:
Objective: H23 (Min)
Variable cells: C7:H7
Constraints:
C9:H9 ,5 C15:H15
C9:H9 .5 C14:H14
C7:H7 ,5 C12:H12
C7:H7 .5 C11:H11
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
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94 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
FIGURE 3.35 ‰ Œ
3.13.6 ANALYZING THE SOLUTION
˜ ‡‡ˆ ® ¥‰‰‰
‚ ‡ˆ‰‰ ¥‰‰‰ ‡ ¥ˆ‰ ¥ ¥‰‰‰
ˆ ‡ˆ‰‰ „
‚ ‚
¤
¥ “ ¥
¥
‘
„ ®¡
„
‚
‚ ®¡
„¦ ž ¬Ÿ
3.14 A Multiperiod Cash Flow Problem
¤
‘
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A Multiperiod Cash Flow Problem 95
‘
Ž
ª ‹ “
¤ Œ ž š Ÿ
Œ š „
†Š‰‰‰‰‰ ª ¡
š †ˆ‰‰‰‰
†‡‰‰‰‰‰
ƒ ‹
Available Months to Yield at
Investment in Month Maturity Maturity
‚ ‡ ¥ ˆ „ ‚ ‚Š±
‚ ‡ ˆ ‡ˆ±
Œ ‚ ¥ ‡ ˆŠ±
… ‚ „ ‚‚‰±
„ ‚
‚Š± ˜ Œ
‚ œ ¥ ‡ ˆŠ±
ª
„ ‹
ª
„
3.14.1 DEFINING THE DECISION VARIABLES
ª
œ
‚ ‡ ¥ ˆ „ ž †‚‰‰‰Ÿ
‚ ‡ ¥ ˆ „
‚ ‡ ˆ ž †‚‰‰‰Ÿ
‚ ‡ ˆ
Œ‚ Œ¥ ž †‚‰‰‰Ÿ Œ
‚ ¥
…‚ ž †‚‰‰‰Ÿ …
‚
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96 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
¤
š
3.14.2 DEFINING THE OBJECTIVE FUNCTION
ª ¡ ‹
‚
‚ ‚ Œ‚
…‚ ‚ –
“‘¤ ¦ ‚ 1 ‚ 1 Œ‚ 1 …‚ ” ‚
3.14.3 DEFINING THE CONSTRAINTS
ž‚Ÿ žŸ
ž‡Ÿ
˜ ‡‡„ ‹
³‚ ˜ ‡‡„
˜ ˜ ‡‡„
Œ ‚
†‚‰ˆŠ ‡ ¢ ¥ ž¤
¥ ‡
FIGURE 3.36
Cash In ow/Out ow at the Beginning of Month
…
Investment 1 2 3 4 5 6 7
ˆ Ž
A1 21 1.018
B1 21 1.035
C1 21 1.058
D1 21 1.11
A2 21 1.018
A3 21 1.018
B3 21 1.035
A4 21 1.018
C4 21 1.058
A5 21 1.018
B5 21 1.035
A6 21 1.018
Req’d Payments
(in $1,000s) $0 $0 $250 $0 $250 $0 $300
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A Multiperiod Cash Flow Problem 97
Ÿ
‚ ‚ Œ‚ …‚
‚ š
‡ ¥ ˆ „ ¬—
˜ ‡‡„
‚ ‚ †‚‰‚Š ‚
†‚‰‚Š ‚
‚‰‚Š ‚ 5 1 ‰ ”
‚‰‚Š ‚
ž†‰Ÿ
¤ ‡
‡
‚ ‚ †‚‰‡ˆ ‚
†‚‰‚Š †ˆ‰‰‰‰ ‡
‡
‡ ‡ ‡
‚‰‡ˆ ‚ 1 ‚‰‚Š 5 ‡ 1 ‡ 1 ˆ‰ ” ‡
‡ ‚‰‡ˆ ‚ 1 ‚‰‚Š
‡ ‡ 1 ‡ ‡
ž†ˆ‰‰‰‰Ÿ
‡
…
š
† † Ž
®
‚‰ˆŠŒ‚ 1 ‚‰‚Š ‡ 5 ¥ 1 Œ¥ ” ¥
‚‰‡ˆ ‡ 1 ‚‰‚Š ¥ 5 ˆ 1 ˆ 1 ˆ‰ ” ˆ
‚‰‚Š ˆ 5 „ ” „
‚‚‚…‚ 1 ‚‰ˆŠŒ¥ 1 ‚‰‡ˆ ˆ 1 ‚‰‚Š „ 5 ‡‰‰ ” ¬
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98 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
ž Ÿ
’‚ ’ ’ 5
‚‰‚Š ‚ 2 ‚ 5 ‰ ”
‚‰‡ˆ ‚ 1 ‚‰‚Š 2 ‚ ‡ 2 ‚ ‡ 5 ˆ‰ ” ‡
‚‰ˆŠŒ‚ 1 ‚‰‚Š ‡ 2 ‚ ¥ 2 ‚Œ¥ 5 ‰ ” ¥
‚‰‡ˆ ‡ 1 ‚‰‚Š ¥ 2 ‚ ˆ 2 ‚ ˆ 5 ˆ‰ ” ˆ
‚‰‚Š ˆ 2 ‚ „ 5 ‰ ” „
‚‚‚…‚ 1 ‚‰ˆŠŒ¥ 1 ‚‰‡ˆ ˆ 1 ‚‰‚Š „ 5 ‡‰‰ ” ¬
˜ š
† † Ž
š
˜ ‡‡„
˜ ‡‡„ƒ ‡
‡
3.14.4 IMPLEMENTING THE MODEL
Ž ª ¡ ‹
“‘¤ ‚ ‚ Œ‚ …‚ ” ‚
–
‚‰‚Š ‚ ‚ ‰ ” °
‚‰‡ˆ ‚ ‚‰‚Š ‚ ‡ ‚ ‡ ˆ‰ ” ° ‡
‚‰ˆŠŒ‚ ‚‰‚Š ‡ ‚ ¥ ‚Œ¥ ‰ ” ° ¥
‚‰‡ˆ ‡ ‚‰‚Š ¥ ‚ ˆ ‚ ˆ ˆ‰ ” ° ˆ
‚‰‚Š ˆ ‚ „ ‰ ” ° „
‚‚‚…‚ ‚‰ˆŠŒ¥ ‚‰‡ˆ ˆ ‚‰‚Š „ ‡‰‰ ” ° ¬
Œ … ‰ ”
£ ˜ ‡‡¬ ž
˜ ‡ ‡¬ šŸ
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A Multiperiod Cash Flow Problem 99
FIGURE 3.37 Ž
Variable Cells
Objective Cell
Constraint Cells
Key Cell Formulas
Cell Formula Copied to
D18 5SUMIF(B6:B17,1,D6:D17) --
F6 5IF($B65F$5,21,IF($C6=F$5,11$E6,IF(AND($B6,F$5,$C6.F$5),",----.",""))) F6:L17
G18 5SUMPRODUCT(G6:G17,$D$6:$D$17) H18:L18
‹
Œ …„ …‚¬
ž †‚‰‰‰Ÿ
–
‚ …‚Š
˜ …‚Š ¦¦¦¦¦¦² ®“‘˜ž „ ‚¬‚…„ …‚¬Ÿ
®“‘˜ž Ÿ „ ‚¬ ‚ ž
Ÿ ‘ „ ‚¬ ‚
…„ …‚¬ ‘ „ € ‚ƒ
…„ …€ ¤
– ®“ž…„ …€Ÿ
®“‘˜ž Ÿ š ‘
‚ ®“‘˜ž Ÿ
– ®“ž Ÿ
£ – œ ˜
‡‡„ ˜ ‡‡„
˜ ˜„ ‘˜ž† „˜†ˆ ‚‘˜ž†Œ„˜†ˆ‚ † „‘˜ž ¤…ž† „´˜†ˆ†Œ„µ˜†ˆŸ¨´ µ¨¨ §ŸŸŸ
žŒ ˜„ ‚¬Ÿ
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100 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
š § ¨
ˆ ‘ ‚
£ š § ¨ Œ
ˆ ‘ ‚
ž Ÿ ‘
š ˆ
§ ¨ ž Ÿ §
¨ ž ŒŸ ‘ §´ µ¨
˜
ž
Ÿ §¨ š
‘˜ “
Œ
¬ œ
˜
¯‚Š
˜ ¯‚Š ®“Ž£…®Œ ž¯„ ¯‚¬†…†„ †…†‚¬Ÿ
žŒ ‚Š ‚ŠŸ
¯„ ¯‚¬
…„ …‚¬
‚Š ‚Š ž¤ ®“Ž£…®Œ ž Ÿ
‹ Ÿ š
¯‚Š ‚Š
Œ ¯‚€ ‚€
3.14.5 SOLVING THE PROBLEM
–
˜ ‡‡¬ ˜ ‡‡Š
˜ ‡‡€
FIGURE 3.38
Solver Settings:
Objective: D18 (Min)
Variable cells: D6:D17
Constraints:
G18:L18 5 G19:L19
D6:D17 .5 0
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
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A Multiperiod Cash Flow Problem 101
FIGURE 3.39 ‰ Ž
3.14.6 ANALYZING THE SOLUTION
– ž…‚ŠŸ ˜ ‡‡€ †¬¥‚‡„‡
ª ¡ – Œ …„
…Š †¥‚‡¬
‚ ‚ 5 ¥‚‡¬ †ˆ‰‰‚„
Œ Œ‚ 5 ˆ‰‰‚„
‚ †¥ˆˆŠ‰ ¥‚‡¬ 3 ‚‰‚Š 5 ¥ˆˆŠ‰
…‚‰ š
5 ¥ˆˆŠ‰
‡ †ˆ‰‰‰‰
†ˆ‰‰‰‰ ‚‰‚Š 3 ¥ˆˆŠ‰ 5 ˆ‰‰‰‰ ¢ š
¥ Œ
‚ †ˆ€‚‡¥ £ †¥ˆˆŠ‰
¥ 5 ¥ˆˆŠ‰
Œ Œ¥ 5 Š‡ˆˆ¥
‘
Ž
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102 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
3.14.7 MODIFYING THE TACO-VIVA
PROBLEM TO ACCOUNT FOR RISK (OPTIONAL)
‘ š š
š ˜
žŒ˜£Ÿ ª š
‚ ‚‰ ž ‚ š ‚‰
šŸ Œ˜£
š ˆ
Investment Risk Rating
‚
‡
Œ Š
… „
š ˆ ¡
‚
‘ ‚ ‚ ‚ Œ‚ œ …‚
š š
‚ š
‚ ‚ 1‡ ‚ 1 ŠŒ‚ 1 „…‚
š ‚ 5
‚ 1 ‚ 1 Œ ‚ 1 …‚
š ‚ ˆ
Ž
‚ ‚ 1‡ ‚ 1 ŠŒ‚ 1 „…‚
# ˆ ” š ‚
‚ 1 ‚ 1 Œ ‚ 1 …‚
¤ œ
‚ Œ‚ …‚ œ
š
‡ ‚ 1 ŠŒ‚ 1 „…‚ 1 ‚
š 5
‚ 1 Œ ‚ 1 …‚ 1
ˆ
‡ ‚ 1 ŠŒ‚ 1 „…‚ 1 ‚
# ˆ ” š
‚ 1 Œ ‚ 1 …‚ 1
š ‡ „
ŠŒ‚ 1 „…‚ 1 ‚ ‡ 1 ‡ ‡
# ˆ ” š ‡
Œ ‚ 1 …‚ 1 ‡ 1 ‡
„…‚ 1 ‡ ‡ 1 ‚ ¥ 1 ŠŒ¥
# ˆ ” š ¥
…‚ 1 ‡ 1 ¥ 1 Œ¥
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A Multiperiod Cash Flow Problem 103
„…‚ 1 ŠŒ¥ 1 ‚ ˆ 1 ‡ ˆ
# ˆ ” š ˆ
…‚ 1 Œ ¥ 1 ˆ 1 ˆ
„…‚ 1 ŠŒ¥ 1 ‡ ˆ 1 ‚ „
# ˆ ” š „
…‚ 1 Œ ¥ 1 ˆ 1 „
š
ž
Ÿ ‘
š ‚
‚“
‚ ‚ 1‡ ‚ 1 ŠŒ‚ 1 „…‚
‚ 1 ‚ 1 Œ ‚ 1 …‚ # ‚ 1 ‚ 1 Œ ‚ 1 …‚ ˆ
‚ 1 ‚ 1 Œ ‚ 1 …‚
‚ ‚ 1‡ ‚ 1 ŠŒ‚ 1 „…‚ # ˆ ‚ 1ˆ ‚ 1 ˆŒ‚ 1 ˆ…‚
‚ 2 ˆ ‚ 1 ‡ 2 ˆ ‚ 1 Š 2 ˆ Œ ‚ 1 „ 2 ˆ …‚ # ‰
2¥ ‚ 2 ‚ 1 ‡Œ‚ 1 ‚…‚ # ‰
‚ ‚ 1‡ ‚ 1 ŠŒ‚ 1 „…‚
# ˆ ” š ‚
‚ 1 ‚ 1 Œ ‚ 1 …‚
2¥ ‚ 2 ‚ 1 ‡Œ‚ 1 ‚…‚ # ‰ ” š ‚
‚ ‚ Œ‚ …‚
ž
Ÿ
š
2 ‚ 1 ‡Œ‚ 1 ‚…‚ 2 ¥ # ‰ ” š
‡Œ‚ 1 ‚…‚ 2 ¥ ‡ 2 ‡ # ‰ ” š ‡
‚…‚ 2 ‡ 2 ¥ ¥ 1 ‡Œ¥ # ‰ ” š ¥
‚…‚ 1 ‡Œ¥ 2 ¥ ˆ 2 ˆ # ‰ ” š ˆ
‚…‚ 1 ‡Œ¥ 2 ˆ 2 ¥ „ # ‰ ” š „
¤ š
š ˆ ‚ 2 ˆ 5 2¥ƒ
‡ 2 ˆ 5 2ƒ Œ Š 2 ˆ 5 ‡ƒ
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104 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
… „ 2 ˆ 5 ‚
3.14.8 IMPLEMENTING THE RISK CONSTRAINTS
˜ ‡¥‰ ž ˜ ‡ ¥‰ šŸ
š
š š
š
˜ ‡¥‰
®“Ž£…®Œ ž Ÿ
š
š
˜
2‚
§´¨ ž §´ µ¨ Ÿ
œ ˜
FIGURE 3.40 Ž
Variable Cells
Constraint Cells
Objective Cell
Key Cell Formulas
Cell Formula Copied to
D18 5SUMIF(B6:B17,1,D6:D17) --
F6 5IF($B65F$5,21,IF($C65F$5,11$E6,IF(AND($B6,F$5,$C6>F$5),",----.",""))) F6:L17
G18 5SUMPRODUCT(G6:G17,$D$6:$D$17) H18:L18 and
N18:S18
N6 5IF(OR(F6521,LEFT(F6)5","),$M62$Q$20,"") N6:S17
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A Multiperiod Cash Flow Problem 105
‚ Œ‚ …‚ œ
˜ ‡¥‰ ž ¯¬ ¯Š ¯€ ¯‚‰ Ÿ
‚ §´¨
š
œ ‚
§´¨ š
¤„
˜ ¤„ ‘˜ž£ž˜„ ‚ ˜ ž˜„Ÿ¨´¨Ÿ†“„ †™†‰¨ §Ÿ
žŒ ¤„ ‚¬Ÿ
¤„ š ˜„
‚ § ´¨ ‘
š š “„
š ™‰ƒ
ž ‹ Ÿ
¤„ ‚¬ ˜ ‡¥‰
¤„ ‚¬ ˜ ‡¥‰
š
š ‚ ¤‚Š
˜ ¤‚Š ®“Ž£…®Œ ž¤„ ¤‚¬†…†„ †…†‚¬Ÿ
žŒ £‚Š ‚ŠŸ
š
£‚Š ‚Š
‹
3.14.9 SOLVING THE PROBLEM
š ˜ ‡¥‚
˜ ‡¥
3.14.10 ANALYZING THE SOLUTION
ª š
‘
FIGURE 3.41
Solver Settings:
Objective: D18 (Min)
Variable cells: D6:D17
Constraints:
G18:L18 5 G19:L19
N18:S18 ,5 0
D6:D17 .5 0
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
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106 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
FIGURE 3.42 ‰ Ž
š
…
š Œ
Œ ‚
š š
3.15 Data Envelopment Analysis
“
…
ž… Ÿ Ž …
ž Ÿ
…
“š š ¶
“š ‚ “š
š
¡
“š ‚
¡ ž †‚‰‰‰‰‰Ÿ
ž ‚‰‰‰‰‰Ÿ ž †‚‰‰‰‰‰‰Ÿ
…
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Data Envelopment Analysis 107
Outputs Inputs
Unit Profit Satisfaction Cleanliness Labor Hours Operating Costs
‚ ˆ€Š ¬¬ € ¥¬¥ „¬ˆ
¬‚Š €¬ €€ „‡Š ¬¥
‡ ¥€¬ €‡ €Š ˆ‰¥ „‡ˆ
¥ ˆ‡ ¬¬ Š¬ ‡„‚ „‡¥
ˆ ‡‡€ ¬Š €¥ ‡¥ˆ ¥¥‡
„ ¥€ˆ ¬€ ŠŠ ˆˆ „‡‚
¬ Š€ Š„ €‰ ‡„ ‡‡
Š „¥‰ €‚ ‚‰‰ ¬‰€ Š„€
€ „‰‚ ¬‡ Š€ „¥€ ¬Š
‚‰ „€¥ ŠŠ Š€ ¬‡„ €‰¬
‚‚ ˆŠ„ Š €‡ ˆ¥„ „„€
‚ Š‡ˆ €„ €¬ „ˆŠ Š¬ˆ
3.15.1 DEFINING THE DECISION VARIABLES
® …
a £
£
¡ 5‚
5
a ‘
5 ‘
¡
5‚
£ ‘
‰ ‹
…
…
3.15.2 DEFINING THE OBJECTIVE
Ž …
– ‹ ¡ ˜
–
“ ’ ¦ a £
£
5‚
Ž
ž ‹
Ÿ –
3.15.3 DEFINING THE CONSTRAINTS
‘ ‚‰‰± Ž
ž Ÿ ‚‰‰±
¡
ž ‚‰‰±Ÿ
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108 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
a £ # a ‘ ¦¦ 5 ‚
£ ‹
5‚ 5‚
a £ 2 a ‘
£ ‹
# ‰ ¦ 5 ‚
5‚ 5‚
ž Ÿ
a ‘
‹
5 ‚
5‚
ž ‹ Ÿ
ž ‚‰‰±Ÿ
… ‚‰‰±
Important Points
… § ¨ ž
Ÿ § ¨ ž Ÿ
… ˜
§ ¨
‰ ‹
‰ 3 ‹
‰ 3 ‹
3.15.4 IMPLEMENTING THE MODEL
‚
Ž
“ ’ ˆ€Š ‚ ¬¬ € ‡ ” ‚
– ˆ€Š ‚ ¬¬ € ‡ ¥¬¥ ‚ „¬ˆ ‰ ” • ‚
¬‚Š ‚ €¬ €€ ‡ „‡Š ‚ ¬¥ ‰ ” •
Š‡ˆ ‚ €„ €¬ ‡ „ˆŠ ‚ Š¬ˆ ‰ ” • ‚
¥¬¥ ‚ „¬ˆ ‚ ” ‚
‚ ‡ ‚ ‰ ”
˜ ‡¥‡ ž
˜ ‡ ¥‡ šŸ
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Data Envelopment Analysis 109
FIGURE 3.43 ‘
Variable Cells
Objective Cell
Constraint Cells
Key Cell Formulas
Cell Formula Copied to
G6 5SUMPRODUCT(B6:D6,$B$19:$D$19) G7:G17
H6 5SUMPRODUCT(E6:F6,$E$19:$F$19) H7:H17
I6 5G62H6 I7:I17
B22 5INDEX(G6:G17,B21,1) --
B23 5INDEX(H6:H17,B21,1) --
‘ ˜ ‡¥‡ ‚€ ˜‚€
¯
˜ ¯„ ®“Ž£…®Œ ž „ …„† †‚€ †…†‚€Ÿ
žŒ ¯¬ ¯‚¬Ÿ
˜ „ ®“Ž£…®Œ ž „ ˜„† †‚€ †˜†‚€Ÿ
žŒ ¬ ‚¬Ÿ
‘ ‰
˜ ‘„ ¯„ „
žŒ ‘¬ ‘‚¬Ÿ
‚ ž ¯„Ÿ
– –
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110 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
‚ „
‚ ž ‚ Ÿ
Ž ‚
–
‚
Œ
¯
˜ ²‘¤… ’ž¯„ ¯‚¬ ‚‚Ÿ
‘ ‘¤… ’ž Ÿ
‚
‚
¯„ ¯‚¬¢ ¯„
‚ ‚ ‚
– …
‚
‡
˜ ‡ ²‘¤… ’ž„ ‚¬ ‚‚Ÿ
‚
– ‹ ‡
‚
…
3.15.5 SOLVING THE PROBLEM
–
˜ ‡¥¥ ¤
… ‚
˜ ‡¥ˆ ¤ ‚ ‰€„„¬
“š
‚ ‡ ‚ ‹ š
‚‰
‚ ˜
Ž
FIGURE 3.44
Solver Settings:
Objective: B22 (Max)
Variable cells: B19:F19
Constraints:
I6:I17 ,5 0
B23 5 1
B19:F19 .5 0
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Data Envelopment Analysis 111
FIGURE 3.45 ‰ ’
˜ ‡¥„
š ˜
‚
˜ ‚ ²ŽŒ £ž Ÿ
ŽŒ £ž Ÿ
Ž
§ ‹ ‹¨
‹ ž Ž£Žž Ÿ
‹
Ÿ ‘ ŽŒ £ž Ÿ
‚ ‹
‹ ‚ ‹
ž ‚ Ÿ ‚ š
‚ ‡ · ‚ ‚ ‹
˜ ‡¥„
˜ „ Ž£ª ž† † „Ÿ
žŒ ¬ ‚¬Ÿ
Ž£ª ž Ÿ Ž
‹ ‹ Ž
‹ ‹
¡
Ž£ª ž Ÿ
¡ Ž£ª ž† † „Ÿ
ž † †Ÿ
‹ ž „Ÿ ‘
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112 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
FIGURE 3.46 “
Optimizations to Run
Key Cell Formulas
Cell Formula Copied to
G6 5SUMPRODUCT(B6:D6,$B$19:$D$19) G7:G17
H6 5SUMPRODUCT(E6:F6,$E$19:$F$19) H7:H17
I6 5G6-H6 I7:I17
J6 5PsiOptValue($B$22,A6) J7:J17
B21 5PsiCurrentOpt( ) --
B22 5INDEX(G6:G17,B21,1) --
B23 5INDEX(H6:H17,B21,1) --
Ž£ª ž Ÿ §¸¤œ ¨
š ‹
ž – Ÿ
˜ ‡¥¥ ‡¥ˆ ˜
‡¥„ Ž š
§£‹ ¨ ‚ ¤
‚ ‹ ‚
‚¦¦‚ ž Ž£Žž Ÿ ‚Ÿ –
ž Ž£ª ž Ÿ
Ÿ ˜ ‡¥¬
‘ ˜ ‡¥¬ ‚ ‹
‚ ‹
Ž ˜ ‡¥¬
‹ ‚‰
–
‹
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Data Envelopment Analysis 113
FIGURE 3.47
Software Note
‹ ‹
š š ž Ÿ –
Ž£ª ž Ÿ £ “
š §“ ª ¨
‘ š ž
Ÿ ‹
3.15.6 ANALYZING THE SOLUTION
˜ ‡¥¬ ¥ ¬ ‚
‚‰‰± ž … Ÿ
¤ ‚‰‰±
‘
£ …
…
˜ ‚ €„„¬±
˜ ‡¥Š ž ˜ ‡ ¥Š šŸ
„‡Š± ¥ Š‚ˆ± ¬ ¥ˆ‰¬± ‚
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114 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
FIGURE 3.48
’
Key Cell Formulas
Cell Formula Copied to
B19 5SUMPRODUCT(B6:B17,$G$6:$G$17) C19:F19
‚ ‚ … ‚
˜
‚Ÿ …
Ÿ £ Ž £‹
‘ Ž
§… ¨
‚
˜ ‡¥€ ž
¥Ÿ
3.16 Summary
Ž
Ž
–
Ž
Ž
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
References 115
FIGURE 3.49
’
Composite Unit
Weights
Ž
3.17 References
Œ Œ ” Š “ Š ¤ ›š ©
Ž ‚€€„
š §“ Ž Ž
ª ¨ ‹ ‚‚ „ ‚€Š‚
‹ Œ § Ž ˜ Ž ¨ ‹ ‚¬ ¥ ‚€Š¬
“© § Ž “ ¨ ƒ ‰
‡„ ‚€Šˆ
§® Œ Œ Ž ˜ ˜ ¨
‹ ¥ ‚€€¥
“ Œ ¤ Ž ‚€ŠŠ
§Œ ˜ … ¨ ‹ ¥ ‚ ‚€€¥
“ “ ¤ ›š ‚€€‰
THE WORLD OF BUSINESS ANALYTICS
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116 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
THE WORLD OF BUSINESS ANALYTICS
© Œ ž œœ © Ÿ
‘ ‚€€€
© ¡ †¬ ©
® Œ
š š
© ¡ ‘ ©
Š‰ „‰‰
š š €‰ ‚Š‰ š
£‹
‚€€‰ ©
© Ž ž©Ž Ÿ
“ š ©
ž ŽŸ © ¡ Ž
©Ž Ž
©Ž š
©Ž
š ©
†¥‰³†¥ˆ ©Ž
¯ © ª © § © Œ £‹
Ž ‘ …¨ ‹ ‡ˆ „ ‰‰‚
Questions and Problems
‚ ‘
‹ ¡ —
—
˜
‡ ‚‡ Œ ‘
¥ ‚¥ Œ ‘
ˆ ‚„ Œ ‘
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Questions and Problems 117
„ ‚ˆ Œ ‘
¬ ‚€ Œ ‘
Š Œ ‘
€ ‡ Œ ‘
‚‰ ¥ Œ ‘
‚‚ ˆ Œ ‘
‚ „ Œ ‘
‚‡ š Œ
‡‰‰‰‰ ‚ˆ‰‰‰
š ¡
š ‹
Hours Required per Trimmer
Electric Gas Hours Available
Ž ‰‰ ‰¥‰ ‚‰‰‰‰
‰‡‰ ‰ˆ‰ ‚ˆ‰‰‰
Žš ‰‚‰ ‰‚‰ ˆ‰‰‰
š †ˆˆ
†Šˆ †„¬
†€ˆ š
š
—
˜ Ž
Œ
—
‚¥ ž Ÿ
Total Machine Time
Machine Country Contemporary Available per Week
‚ˆ ‰ ‚‰‰‰
‡‰ ¥ˆ ‰‰‰
Ž ˆ ‚ˆ ‚ˆ‰‰
Œ †‡ˆ‰ †¥ˆ‰ “
‰±
‡‰±
‹ —
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118 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
˜ Ž
Œ
—
ˆ
‚ˆ¦ —
‚ˆ “ ¥
š ‹
ˆ‰
Resources Required per Pallet of Paneling Type
Paneling Type Tahoe Pacific Savannah Aspen
¯ ž Ÿ ˆ‰ ˆ‰ ‚‰‰ ˆ‰
Ž žŸ ˆ‰ ‚ˆ‰ ‚‰‰ ˆ‰
Ž žŸ ˆ‰‰ ¥‰‰ ‡‰‰ ‰‰
£š žŸ ˆ‰‰ ¬ˆ‰ ˆ‰ ˆ‰‰
„‰‰‰ ƒ ¬ˆ‰‰ ƒ
‡‰‰‰‰ ƒ „ˆ‰‰ š
˜ Ž
†¥ˆ‰ †‚‚ˆ‰ †Š‰‰ †¥‰‰
˜ š ¥
˜ Ž
Œ
—
‚„ ®
š © £š
‹
š
ž Ÿ
‹
Nutrient (in ounces) per Pound of Feed
Nutrient Feed 1 Feed 2 Feed 3
‡ ¥
‡ ‚ ‡
Œ ‚ ‰
… „ Š ¥
‚ ‡ †‰‰ †ˆ‰ †‡‰‰
¥ ˆ
‚ Œ Š …
ž¤ ‚„ Ÿ
‚ˆ‰‰
‚‰‰ ® ‚ˆ
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Questions and Problems 119
˜
Œ
—
‚¬ ‘ ¥‰
š ž Ÿ
Product 1 Product 2 Product 3
‰ ‚
Š ‡ ¥ „
‹ ¥ „ ˆ
‚€ š
‡ˆ š ‚‰ ‚ „
Š ‡ Ž ‚ ‡ †€‰ †‚‰
†‚ˆ‰
˜ Ž
‘
—
š —
‚Š š £ š š
¯ Œ Œ Ž
†ˆ‰ †‚ˆ‰ †‰‰ †‡ˆ‰ †‡‰‰
ž Ÿ
‹
Raisins Grain Chocolate Peanuts Almonds
‰ ‚‰ ‚‰ ‡‰ ‰
¬ ¥ ˆ € ‡
ˆ ¥ ‚ ‚‰ ‚
¥ˆ‰ ‚„‰ ˆ‰‰ ‡‰‰ ˆ‰‰
š
¥‰ ‚ˆ ‚‰
„‰‰ š
ˆ± ˆ‰± š
˜ Ž
‘
š —
‚€ š †„ˆ‰‰‰‰
‚‰± Šˆ± €ˆ± ‚ˆ± š
š š
ˆ± š
š
˜ Ž – ‹
‘
—
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120 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
‰ Œ
Ž Ž †¥‰‰
†‡„‰ ‡‰‰
‘ †‡‰
Œ ‡‰‰ ¥‰‰ ˆ‰‰
‡ Œ
˜ Ž
‘
—
ˆ‰
—
‚‰‰
—
‚ ª Œ
ŽŒ ‹
Per Unit Requirements
HyperLink FastLink SpeedLink MicroLink EtherLink
ˆ ‡ ‰ ‚ˆ ‚‰ Š ˆ
Œ
Š ¥ ‚Š ‚ ‚„
Š Š ¥ ¥ „
‰¬ˆ ‰„ ‰ˆ ‰„ˆ ‚
Per Unit Revenues and Costs
HyperLink FastLink SpeedLink MicroLink EtherLink
Ž ˆ †‚Š€ †‚¥€ †‚€ †‚„€ †‚‡€
†‚‡„ †‚‰‚ †€„ †‚‡¬ †‚‰‚
‘ ª Œ Š‰‰‰‰ ŽŒ
‚‰‰‰‰‰ ‡‰‰‰‰ ˆ‰‰‰
š
ˆ‰‰
˜š š
‹
˜ Ž
Œ
—
Œ ª Œ š š š
—
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Questions and Problems 121
š ¤ š
†‚‰‰‰‰‰ ‹
Annual
Bond Return Maturity Risk Tax-Free
€ˆ± ›
Š‰± ›
Œ €‰± ¤
… €‰± ›
€‰± ¤
ˆ‰±
ˆ‰± š ‡‰±
¥‰±
˜ Ž
Œ
—
‡ … š
Œ ž‚ ¦Ÿ
‚„ ‚Š ž‡ ¥ ˆ „Ÿ
‚‰ ‚
‹
Costs of Transporting Cars Between Locations
Location 3 Location 4 Location 5 Location 6
‰ †ˆ¥ †‚¬ †‡ †‡‰
Š †¥ †‚Š †‚€ †‡‚
‡¥ ‚ ¥‰
‡ ¥ ˆ „
š
˜ Ž
Œ
—
¥ “š ¤ Œ ž“¤ŒŸ š
‘ ž Ÿ
žŒ Ÿ žŒŸ
ž Ÿ š
“¤Œ
š
š “¤Œ ‚‰‰‰
¥‰‰ ˆ‰‰ Œ ‚ˆ‰ Œ
‰‰
Œ Œ „‰± ¥‰± ‰±
‚‰‰±
‚‚‰‰ Š‰‰
š
ž Ÿ š
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122 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
‹
„‰ š
Minutes Required per Pound
Machine Whole Cluster Crunch Roasted
‚‰‰ ‚‰‰ ‚‰‰ ‚‰‰
‰‰ ‚ˆ‰ ‚‰‰ ‚¬ˆ
‚‰‰ ‰¬‰ ‰‰ ‰‰‰
ˆ ‘ ˆ‰ ‚„‰ ‚ˆ ‚‰‰
‹
Per Pound Revenue and Costs
Whole Cluster Crunch Roasted
ˆ †ˆ‰‰ †¥‰‰ †‡‰ †¥ˆ‰
†‡‚ˆ †„‰ †‚„ †‡‚‰
˜ Ž
Œ
—
ˆ †‚¥ˆ‰‰‰
‹
No. of New Customers
Media & No. of Ads Reached Cost per Ad
¤ ‚‚‰ €‰‰ †‚‰‰‰
¤ ‚‚‰ ¬‰‰ †€‰‰
¤ ‚‡‰ ¥‰‰ †Š‰‰
‚ˆ ‚‰‰‰‰ †‚‰‰‰
„‚‰ ¬ˆ‰‰ †‚‰‰‰‰
‚‚‚ˆ ˆ‰‰‰ †Š‰‰‰
˜ ‚‰
†‚‰‰‰ €‰‰ ‚‰
†€‰‰ ¬‰‰ ¤
š
‡‰ ‚ˆ
Ÿ ˜ Ž ‹
Ÿ ‘
Ÿ —
Ÿ ‚‚³‰ ¥‰‰
‚³‡‰ ¬‰‰ “š
‹
— ž Ÿ —
„ ¤ š
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Questions and Problems 123
… ˆ
Month 1 2 3 4 5
Œ ’ ‰‰‰‰ ‡‰‰‰‰ ¥‰‰‰‰ ‡ˆ‰‰‰ ˆ‰‰‰‰
Lease term (months) 1 2 3 4 5
Œ †ˆˆ †€ˆ †‚‡‰ †‚ˆˆ †‚Šˆ
‚
¥ †‚ˆˆ
‡ †€ˆ
ˆ
˜ Ž
Œ
—
‚ —
¬
‹
Bids by Companies
(in $1,000s) for Various Subcontracts
Company
Component A B C D
‚ ‚Šˆ ˆ ‚€‡ ‰¬
‰‰ ‚€‰ ‚¬ˆ ˆ
‡ ‡‡‰ ‡‰ ‡‚ˆ ‡‰‰
¥ ‡¬ˆ ‡Š€ ¥ˆ ¥¥ˆ
‹ —
˜ Ž
Œ
—
Š ˜ Œ š
– ‚ ž Ÿ
ˆ ž Ÿ ‹ ¡
Grade 1 2 3 4 5
‰“““ €‰ ˆ ‡‰‰ ‚‰‰ ¬ˆ
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124 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
š †ˆ‰
– †‚¬ˆ
š ‡¬ˆ
– ˆ‰
˜ ‹
‘
—
€ £ Œ © š
†‚
€‰ †ˆ
€¬
Barrels Available
Input Cost per Barrel Octane Rating (in 1000s)
‚ †‚¬ˆ ‚‰‰ ‚ˆ‰
†‚ˆ¬ˆ Š¬ ‡ˆ‰
‡ †‚¬¬ˆ ‚‚‰ ‡‰‰
‡‰‰‰‰‰ ¥ˆ‰‰‰‰
‹ —
˜ Ž
Œ
—
‡‰ “ – š ˜
¥
š š š Š
¥
š ¦
‹ ¥
Time Period Minimum Employees Needed
‚ ¥ €‰
¥ Š ‚ˆ
Š ‚ ˆ‰
‚ ¥ ‚„ˆ
¥ Š ‡‰‰
Š ‚ ‚ˆ
˜ Ž
Œ
—
‡‚ “
‹
‹
‹ š
š š
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Questions and Problems 125
‹ ‹
Required Specimen Processing Time in Minutes
Specimen Type
Machine 1 2 3 4 5
‡ ¥ ¥ ˆ ‡
ˆ ‡ ˆ ¥ ˆ
Œ ˆ ‡ ‡ ¥
Š
Š‰ ‚
¬ˆ Š‰ ‡ ‚‰ ¥ „‰
ˆ š
‹ ‹
‹
˜ Ž
Œ
—
—
—
‡ ª
š
Ž
ž Ž Ÿ
š š ˆ‰‰ žŸ
Š š žš Ÿ ‹
Sulfur Coal Dust Pounds of Steam
Coal (in ppm) (in kg) Produced
‚ ‚‚‰‰ ‚¬ ¥‰‰‰
‡ˆ‰‰ ‡ ‡„‰‰‰
‡ ‚‡‰‰ ¥ Š‰‰‰
˜ ‡ˆ±
‚ ¥‰± ˆ± ‡ ž Ÿ
‰‡ˆ 3 ‚‚‰‰ 1 ‰¥‰ 3 ‡ˆ‰‰ 1 ‰ˆ 3 ‚‡‰‰ 5 ‚‚‰
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126 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
Ž
˜ Ž
Œ
—
‘ ‡‰
—
‡‡ Ž Œ š š
“ Ž¡ š
Š‰‰‰ ‚‰
ƒ ‚‰‰‰‰ Š
ƒ ‚‰‰‰ “ ˆ
†‚‰ ‘
†„ †ˆˆ‰
†ˆˆ “
š
š š
†ˆ‰‰‰
†ˆ‰‰‰
‹ —
˜ Ž
Œ
—
‡¥ Ž Œ –
ˆ
Month 1 2 3 4 5
’
‰“““Œ ˆ ‚‰ ‰ ‚‰ ˆ
£ ˆ
Ž
Length of Lease (in months) 1 2 3 4 5
‰“““Œ †‡‰‰ †ˆˆ †¬¬ˆ †Šˆ‰ †€¬ˆ
Ž
ˆ ˜ ˆ‰‰‰
¥ ‚ ž Šˆ‰ 3 ˆŸ ‚‰‰‰‰
‡ ž ˆˆ 3 ‚‰Ÿ
˜ Ž
Œ
—
‡ˆ š Œ š
“ … Ž
†‡ˆˆ‰ †‡¬ˆ‰ †‡€‰‰ †‡„ˆ
‚Š‰‰‰ ‚ˆ‰‰‰ ˆ‰‰‰ ‰‰‰‰
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Questions and Problems 127
¡ š
®
‹
Unit Shipping Cost to Distributor in
Plants Tacoma San Diego Dallas Denver St. Louis Tampa Baltimore
“ †ˆ‰ †¬ˆ †‚¬ˆ †‰‰ †‚‰ †‚Š‰ †‚„ˆ
†‚Šˆ †‚€‰ †‚ˆ‰ †‚„‰ †‚‰‰ †‚€‰ †‚Šˆ
… †‡‰ †ˆ †‚Šˆ †‚ˆ †‚ˆ‰ †ˆ †‰‰
Ž †‚€‰ †‰€‰ †‚„‰ †‚¬ˆ †‰‰ †ˆ‰ †„ˆ
… Šˆ‰‰ ‚¥ˆ‰‰ ‚‡ˆ‰‰ ‚„‰‰ ‚Š‰‰‰ ‚ˆ‰‰‰ €‰‰‰
š
‹
š
Š‰±
Œ
—
‡„
š š
‹ š
Recycling Yield
Newsprint Packaging Print Stock
¤ Šˆ± Š‰± ¢
“ Ž €‰± Š‰± ¬‰±
£ Ž €‰± Šˆ± Š‰±
Œ Š‰± ¬‰± ¢
˜ ‰Šˆ
‰Š‰ š
‰Š‰ ‰¬‰ š
¤ š
‹
Processing Costs per Ton Purchase Cost Tons
Newsprint Packaging Print Stock Per Ton Available
¤ †„ˆ‰ †‚‚‰‰ ¢ †‚ˆ „‰‰
“ Ž †€¬ˆ †‚ˆ †€ˆ‰ †‚„ ˆ‰‰
£ Ž †¥¬ˆ †¬¬ˆ †Šˆ‰ †‚€ ‡‰‰
Œ †¬ˆ‰ †Šˆ‰ ¢ †‚¬ ¥‰‰
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128 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
ˆ‰‰
„‰‰ š ‡‰‰ š
Œ
—
‡¬
Vineyard Capacity Cost per Bottle
‚ ‡ˆ‰‰ †‡
‡‚‰‰ †ˆ
˜ ‘
š
‹
Restaurant Maximum Demand Price
‚ ‚Š‰‰ †„€
‡‰‰ †„¬
‡ ‚ˆ‰ †¬‰
¥ ‚¬ˆ‰ †„„
‹
Restaurant
Vineyard 1 2 3 4
‚ †¬ †Š †‚‡ †€
†‚ †„ †Š †¬
‹
˜ Ž
Œ
—
‡Š Ž ‘ Œ Œ
ž‘ŒŒŸ ¤ ¤ ª Ž
‘ŒŒ ¯
Amount Available Volume per Ton Profit per Ton
Commodity (tons) (cubic feet) ($)
‚ ¥Š‰‰ ¥‰ ¬‰
ˆ‰‰ ˆ ˆ‰
‡ ‚‰‰ „‰ „‰
¥ ‚¬‰‰ ˆˆ Š‰
Ž œ
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Questions and Problems 129
Cargo Hold Weight Capacity (tons) Volume Capacity (cubic feet)
˜ ‡‰‰‰ ‚¥ˆ‰‰‰
Œ „‰‰‰ ‚Š‰‰‰‰
¥‰‰‰ ‚ˆˆ‰‰‰
“
‚‰±
¥‰± „‰±
˜ Ž
Œ
—
‡€ “ š
¥
Month
1 2 3 4
… ¥‰ ˆŠ‰ ‡‚‰ ˆ¥‰
Ž Œ †¥€‰‰ †¥ˆ‰‰ †¥„‰‰ †¥¬‰‰
Ž Œ ˆ‰‰ ˆ‰ ¥ˆ‰ ˆˆ‰
†‚ˆ‰
ž
Ÿ Œ ‚‰
š ¥‰‰
š ˆ‰
¥
˜ Ž
Œ
—
¥‰‰ —
¥‰ Œ Œ
¯ Œ
š Œ
†‚‰
ž
Ÿ Œ
¥‰‰ Œ
„¦ ‹
Month 1 2 3 4 5 6
ˆ ‚ †‚‡ˆ †‚‚‰ †‚ˆ‰ †‚¬ˆ †‚‡‰ †‚¥ˆ
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130 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
Œ ¬‰
Œ „
‹ —
˜ Ž
Œ
—
¥‚ …Œ Œ
†ˆ‰‰‰‰ ‚
‰‚Š ‘ †‚‰‰‰ š
ž †‰‰‰ Ÿ ‚
‰‰ ‰‡
‚ †€¬‰ †„ˆ ‚
‰‚€ ‰ †‚‰„ˆ ‚ ‰‡
†€Š‰ †¬‡ ‚ ‰‚€ ‰Š
†‚‰¬‡ ‚ ‰€ ‡ †‚‰ˆ
†Šˆ ‚ ‰‚€ ‰‡‚
†‚‰Šˆ ‚ ‰‡ ¡ ¥ˆ±
‚ ‰‚Š
‚ ‰‡ —
Œ
—
¥ š Ž †‚‰‰‰‰‰‰ ª
‹
Summary of Cash Inflows and Outflows
(at beginning of years)
1 2 3 4
]‚ ‰ˆ‰ ‰Š‰
]‚ dS ‚ˆ
Œ ]‚ dS dS ‚‡ˆ
… ]‚ ‚‚‡
]‚ dS ‚¬
‘ š †‚ ‚ †‰ˆ‰
†‰Š‰ ‡
†‚ †‚ˆ
¥ §dS¨
š
š Š± š †ˆ‰‰‰‰
š ¡
†ˆ‰‰‰‰‰ š
‹ ¡ ¥—
˜ Ž
Œ
—
¥‡ ˜ “
¡
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Questions and Problems 131
ˆ “
†‚‰‰‰ †‰‰‰
‡¦ “
Investment Available Matures Return at Maturity
‚ „±
‚ ‡ ˆ ¬ ‚¥±
Œ ‚ ¥ ‡ ‚Š±
… ‚ ¬ „ˆ±
“
¡
˜ Ž
Œ
—
¥¥ “
š
Investment Risk Factor
‚
‡
Œ „
… Š
‘ “ š
¥ ¡
—
˜ Ž
Œ
—
¥ˆ
‚‰ ‹ ž
žŸŸ
§ š¨ § ¨
Day 1 2 3 4 5 6 7 8 9 10
†‡‰„ †¥‰‚ †„‰‡ †¥‰„ †¥‰‚ †ˆ‰ †ˆ‚‰ †¥‰Š †‡‰‚ †¥‰‚
š †‡ †¥‚‰ †„‚‡ †¥‚€ †¥‰ˆ †ˆ‚ †ˆŠ †¥‡ †‡‚ˆ †¥‚Š
‚ˆ‰‰‰‰
‡‰‰‰‰‰
– ‰‰‰‰‰
‚Š‰‰‰‰
–
ˆ± š žŸ
ž ¡
Ÿ
Œ
—
—
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132 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
¥„ Œ ¶ š
¯ ‚ Œ ¶
¯ Œ ¶
¯ ‡
¯ ¥
¥‰‰‰
‹
Survey Costs
Group Telephone Web Cam
‚ †‚Š †¥‰
†‚¥ †‡ˆ
‡ †ˆ †„‰
¥ †‰ †¥ˆ
Œ ¶
• ‚‰± ˆ‰±
• ˆ‰± Œ ¶
• ˆ±
• ˆ‰± Œ ¶
• ¥‰±
• ˆ±
˜ Ž
Œ
—
¥¬ Œ˜£ ¯
¡ „ ‹
ž
†‚‰‰‰‰‰Ÿ
January February March April May June
‚ˆ‰ ‚‰‰ ‚¥‰ ‡‰ ‰‰ ‚‰‰
‡ €
ˆ ˆ ‚Š‰ ‚„‰ ‰ ‚‰ ‰Š‰ ‚‰
†¥‰‰‰‰
†ˆ‰‰‰
‚ ‘ ¡
‚
±
ž ± Ÿ
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Questions and Problems 133
‘ ¡ š
¬ˆ±
‚ˆ±
‡ ¡ š
„ ‘
‚±
‰ˆ±
Œ
ž‡‡ Ÿ „
—
¥Š ‹ š ¯
£ „
Month
1 2 3 4 5 6
†‚‰‰‰‰‰ †ˆ‰‰‰ †¬ˆ‰‰‰ †‡ˆ‰‰‰‰ †¥¬ˆ‰‰‰ †„ˆ‰‰‰
‡€ †¥‰‰‰‰‰ †ˆ‰‰‰‰‰ †„‰‰‰‰‰ †‡‰‰‰‰‰ †‰‰‰‰‰ †‚‰‰‰‰‰
š †‰‰‰‰
†‚‰‰‰‰‰ š
œ ‚ ‚± ‚¬ˆ± ‡
¥€± ¥ ‡± ˆ ‡€¥±
˜ †‚‰‰‰‰
‡ š †‚‰‚¬ˆ ˆ
Œ
—
š
†‚‰‰‰‰‰ œ
—
‘ š¡
—
¥€ ˜ ¶ ž˜ ¶Ÿ š
® ˜ ¶ ‹
…
š
Branch R.O.A. New Loans Satisfaction Labor Hours Op. Costs
‚ ˆ‡ ¬¬‰ € ‡¬‡ „‡¥
‡‡€ ¬Š‰ €¥ ‡¥€ ¥¥‡
‡ ¥€ˆ ¬€‰ €‡ ˆ€Š „‡‚
¥ „‰‚ ¬‡‰ Š „¥€ ¬Š
ˆ „¥‰ €‚‰ €Š ¬‰€ Š„€
„ Š€ Š„‰ €‰ ‡¥„ ‡‡
¬ „€¥ ŠŠ‰ Š€ ¬‡„ €‰¬
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134 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
Branch R.O.A. New Loans Satisfaction Labor Hours Op. Costs
Š ¬‚Š €¬‰ €€ „‡Š ¬¥
€ ˆ€Š ¬¬‰ €¥ ¥¬¥ „¬ˆ
‚‰ ¥€¬ €‡‰ €‚ ˆ‰¥ „‡ˆ
‘ ˜ ¶
… —
Œ …
… —
ˆ
—
ˆ‰
– …
¡
ž ‰ ‚‰‰ ‚‰‰ Ÿ
ž
Ÿ
Satis- Conven- Room Climate Food
Brand faction Value Price ience Comfort Control Service Quality
ŠŠ Š €‰‰‰ ‡ ‚Š ¬ ‚ˆ ‡‡
‘ Š¬ €‡ ¬‰‰‰ ‚ˆ ‚‚ ‰ ‰ˆ ‰ˆ
¬Š Š¬ ¬ˆ‰‰ ¥ „ ˆ ‡
ª ‘ Š¬ ŠŠ ¬ˆ‰‰ ‚Š ‚„ ‚ˆ ‚Š ‡
“ Š€ €¥ Š‰‰‰ ‰ˆ ‚¥ ‰¥ ‰€ „
˜Ž ‘ €‡ €‡ Š‰‰‰ ‚‡ ‰€ ‰ ‰„ Š
Žš ‘ €‰ €‚ ¬¬‰‰ ‰ ‚‡ ‰€ ‚ ‡‰
Ž ¡ ŠŠ €ˆ Šˆ‰‰ ‚€ ‚¬ „ ‚„ ‚Š
¡ €¥ ¬Š €‰‰‰ ‚¥ ‚ ‰‰ ‰Š ‚
Ž €‡ Š¬ €‡‰‰ ‰¬ ‡ ˆ ‡ ‡
“ £ €‚ Š€ ¬¬‰‰ ‚€ ‚ˆ ‚€ ‚€ ‰Š
Š €‡ ¬„‰‰ ‚‡ ‰Š ‰Š ‡
‘ €‡ €‰ ŠŠ‰‰ ‚ˆ ‰€ ‰ˆ ‚„ ‡
Œ Œ Š¬ Š€ Š¬‰‰ ‡ ‚¥ ‚ ‰
¤ ‘ € €‚ Šˆ‰‰ ‚¥ ‚‡ ‰„ ‚¥ ‚
€¬ € €‰‰‰ ‰‡ ‚¬ ‚¬ ‚¬ ‚Š
Œ …
—
‘ — ‘
—
CASE 3.1 Putting the Link in the Supply Chain
š ª Ž ¯ ¡ š ž ¯Ÿ
‹ š
ž Œ“Ÿ Œ“
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Case 3.1 135
Œ“ š ‹
š¡
¯
¯ –
… ˜ƒ “ ¤ƒ ¹
…
“ ¡ ¡ “ ¡
¡
š
¯
‹
Resources Required per Club Set (in lbs)
Men’s Women’s Junior’s
‚ € ¬ ˆ
¥ˆ ¥ ˆ
‘ ˆ¥ ˆ ¥Š
š
Estimated Resource Availability (in lbs)
Daytona Memphis Tempe
‚ ¥ˆ‰‰ Šˆ‰‰ ‚¥ˆ‰‰
„‰‰‰ ‚‰‰‰ ‚€‰‰‰
‘ €ˆ‰‰ ‚„‰‰‰ ‚Š‰‰‰
¯¡
š “ ¡ ¡ ¡
†ˆ †‚€ˆ †‚„ˆ Œ
Œ
… Œ£ Ž Ž
š ¯¡
€‰± ž
‚‰‰±Ÿ š
Number of Club Sets Ordered
Men’s Women’s Junior’s
¬‰‰ €‰‰ €‰‰
€ ˆˆ‰ ‚‰‰‰ ‚ˆ‰‰
ˆ €‰‰ ‚‰‰ ‚‚‰‰
‹ ¤ …
¡ “ “ ¡
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136 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
Shipping Costs
Men’s Women’s Junior’s
To \ From Daytona Tempe Daytona Memphis Tempe Memphis Tempe
†ˆ‚ †‚‰ †¥€ †‡‡ †€ †‡‚ †Š
€ †Š †¥‡ †¬ † †¥ †‚ †¥‰
ˆ †‡„ †ˆ„ †‡¥ †‚‡ †ˆ¥ †‚ †ˆ
š š
‚ Œ
—
‘ š
—
‡ ¯¡
€‰± ¡ —
¥ ¯¡ †‚‰‰‰‰
€‰± ¡
Š‰± ¡ Œ ¯
Foreign Exchange Trading at Baldwin
CASE 3.2 Enterprises
® Œ˜£
‹ š
š š
‹ ¡
® ž® …Ÿ ®¡ ž ®Ÿ ¯
¡ ž¯ ŽŸ © ž©…Ÿ žŽ›Ÿ
¡
ž Ÿ
˜
®
ž˜’Ÿ š š š
š
˜’ š ¥
š £
†‚ˆ
˜’ š š
š
ž œœ œ Ÿ
˜’ š š š
š ž Ÿ
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Case 3.3 137
š
š š š
³
‹ š š
‹ ˜’
Convert \ To USD EUR GBP HKD JPY
†€ ‚ ‚‰‚Š„¥ ‰„¥‰€ ¬¬€Šˆ ‚‚Šˆˆ
…† ‰€¬¥ ‚ ‰„€ˆ ¬„ˆˆ ‚‚„¥‚
”‡ˆ ‚ˆˆ€‡ ‚ˆŠŠ‚ ‚ ‚‚ˆ¥ ‚Š¥€¬
•€ ‰‚Š‚ ‰‚‡‰¥ ‰‰Š‚ ‚ ‚ˆ‚‰‰ˆ
–ˆ— ‰‰‰Š¥‡ ‰‰‰Šˆ„ ‰‰‰ˆ¥ ‰‰„ˆŠ ‚
˜ ‚ ž¯ ŽŸ ž
Ÿ ‚ˆˆ€‡ ® ž® …Ÿ †‚ˆˆ€‡ ®
‚¦ ‚ ® ž® …Ÿ
žŸ ‰„¥‰€ ž¯ ŽŸ š ‚ˆ„‰‡ ® ž ‚œ‰„¥‰€Ÿ
‚ ž š ® ‚
†‚ˆ„‰‡Ÿ
¤ š ‚ ‚ˆˆ€‡ ®
‚ˆˆ€‡ š
‰€€€‡ˆˆ ž ‚ 3 ‚ˆˆ€‡ 3 ‰„¥‰€ 5 ‰€€€‡ˆˆŸ
¡ ® … ˆ
® ‚ ¯ Ž ‡ ©… ‡‰ Ž›
†€‰ˆŠˆ„‰ ® … ž Ÿ š
¡
Š ® ˆ¥ Ž›
†ˆ‰‰‰‰ ® …
® …
‚ Œ
—
‡ ž ® …Ÿ—
¥ š †ˆ‰‰‰‰ ® …
†ˆ‰‰‰‰ ® … …
— —
ˆ ® … ¯ Ž ‰„¥‰€
‰„¥‚¥ —
The Wolverine Retirement Fund CASE 3.3
© “
‹ š £ –
¡
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138 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
†‚ˆ
‰
†‰‰‰‰ ‚
‚‡ˆ± ‚€
š š
¡ Œ˜£ ¡
‹
Company Maturity Coupon Payment Price Par Value
˜ ‚ˆ †Š‰ †Š¥¬ŠŠ †‚‰‰‰
™‡’ ‚‰ †€‰ †€‡Šˆˆ †‚‰‰‰
‰ †Šˆ †Š¬‡‰ †‚‰‰‰
Œ¶Œ †Š¥¬ŠŠ
Œ¶Œ †Š‰ ‚ˆ
†‚‰‰‰ ž Ÿ
‘ ¤ “ š
ˆ±
¡
¡ Œ˜£ š ©
¡
‚ ‘ © Œ˜£—
¤
‚‰±
—
CASE 3.4 Saving the Manatees
§ ‘ ¨
§˜ “ ¨¢ ‹
“
‚‰ ‚‰‰‰ “
‘ ®
˜
ª Œ
“
¡ ‹ ˜
š
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Case 3.4 139
‹
†‡‰‰‰‰‰ ˜ “
§ ¨ ¥ š
ª
‹ š
Advertising Medium Unit Cost Unit Impact Rating
… †Š‰‰ ˆˆ
˜ … †‚¥‰‰ ¬ˆ
†‚‰‰ „ˆ
˜ †‚Š‰‰ Š‰
… ª †ˆ‰‰ Šˆ
ª †‡ˆ‰‰ ‚‰‰
†¬ˆ‰ ‡ˆ
‚ˆ †‚ˆ‰ ¥ˆ
‡‰ †‡‰‰ ˆˆ
‹ †ˆ‰‰ ˆ‰
˜ ‹ †€‰‰ „‰
š
ª
§ ¨ ‚‰‰
ª ˜ ‹
ª ˆ‰
†‡‰‰‰‰‰
‹ ‹
ª
˜ ‰
“ … ¥ š
ž“ Ÿ
š
š
¥Š ž ¥ š „ š ²
¥ŠŸ
Š
ª
¥ š ª
‚‰
¥ š ‚
£ “
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140 Chapter 3 Modeling and Solving LP Problems in a Spreadsheet
‚ˆ ‡‰
‚ˆ ‡‰
š ‹
‹ ¥ š
‹
š ‹
‚ ž ¥ š ‡ ‹ ‚ ‹
š ² ‚ Ÿ
¡ š
¡
š § ‘
—¨
‚ Œ
—
£ § ¨
– —
‡ ª
—
¥
—
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Chapter 4
Sensitivity Analysis and
the Simplex Method
4.0 Introduction
4.1 The Purpose of Sensitivity Analysis
€ ‚ ƒ„ …€… 1 € 1 1 €
† ……€… 1 …€ 1 1 … € # …
‡
…€… 1 € 1 1 € $
‡
…€… 1 € 1 1 € 5
‚ „
ˆ
141
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142 Chapter 4 Sensitivity Analysis and the Simplex Method
€‚
ƒ„… † ‡ ‡
ˆ‰Šƒ‚ ‡ ‡ ˆ
ƒ‚ ‡ … ˆ
ƒ ˆ ˆ ˆ
ˆ ˆ
ˆ
4.2 Approaches to Sensitivity Analysis
‹ ‡ ˆ ˆ ˆ Œˆ
‡‡ ‡ ˆ
Ž ‘ ‡‡
Œ ˆ
ˆ …
ˆ‡ ‡‡ ˆ ˆ
‡ ˆ ‡
‡ ‡
‡ ‡ ’ ˆ ‡ …
‡ ‡ ˆ ˆ
… Œ‡ ‡ ‡
• ‘
‡
• ‘ ‡ ‡
ˆ
• ‘ ‡ ‡
ˆ ‡
• ‘ ‡ ‡
‡
4.3 An Example Problem
‚ “ ‘‡ ˆ‡ ˆ
ˆ ‘ ‡
‡ ” ‡ … Ž ‡ ” ‡
ˆ Ž ‡
• ” –—”1 ——” ˜‡ ™
”1 ” # —— ˜‡‡
š”1 ›” #–›› ˜
”1 ›” # œœ— ˜
”” $ — ˜ ˆ
‘ ‡ ‡ † ž †žŽ
‡ ‡ ‡
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The Answer Report 143
FIGURE 4.1
Variable Cells
Objective Cell
Constraint Cells
Key Cell Formulas
Cell Formula Copied to
D6 5SUMPRODUCT(B6:C6,$B$5:$C$5) D9:D11
‡ ‡
‡ ‡ ˆ
Software Note
‚ ‡ Ÿ¡
¢ ‘ ˆ ˆ
‡ ‡
4.4 The Answer Report
† ž ‡ “ ‘‡ ‘
‡ ‡ ˆ ‡ £‡Ž
ˆ ‘ ‡ Ž
‡ ˆ Ž ‡ ˆ ‘
‡ ‡ ‘
‡
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144 Chapter 4 Sensitivity Analysis and the Simplex Method
FIGURE 4.2
‘ ‡ ‡ Œ
‡ ¤ ¥ ‡ ˆ
¦ ‡ ˆ
‘ † ‡‡
‡‡ ˆ ‘
… ˆ ‡ § ¦
‡‡
‡‡ ‡
‘ ‡ “ ‘
‡
† ˆ
“ˆ
‡ ‘
‡ ‡‡
›œ ‘
ˆ ˆ
‡
‘ ‡ ‡ ˆ
‡ ‡
ˆ ‡ ˆ Ž
‡ ‡ ‡
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The Sensitivity Report 145
Report Headings
‚ ‡ ‡ ˆ
‡
‡ ¨ ˆ
‡ ˆ‡
ˆ ˆ ˆ ‡ ‡
4.5 The Sensitivity Report
† ž ˆ ‡ “ ‘‡ ‘
‡ ‡ ˆ ‡
£‡ ˆ ˆ ‘ ‡
‘
‡
4.5.1 CHANGES IN THE OBJECTIVE
FUNCTION COEFFICIENTS
¤ ‡ Ž ‡‡ ‡ ‡
‡‡ “ ‘‡ ‘ ‡
‡ † ž ž †žŽž ‡
‘ ‡ † ž ž ˆ
–— —— Œ† ž –
FIGURE 4.3
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146 Chapter 4 Sensitivity Analysis and the Simplex Method
FIGURE 4.4
Original Level
Curve
Original
Optimal
Solutions
FIGURE 4.5
New Level
Curve
New Optimal
Solutions
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The Sensitivity Report 147
‡ ‡ ‡ ˆ
” 5 œ—” 5 — ‡ £ ˆ ˆ
‡
† ‡ “ ‘ ‡
‡ ˆ ‡
‡ ˆ ‡
‡ ‡
‡ … Ž ‡ ‰œ ˆ Ž
‡
‘ ‡
‡ ” 5 ” 5 ‰œ ‘
‡ ˆ ‡ † ž
‘
£ ¤ † ž ‘
† ‡
… Ž ‡ ” ˆ ©——
ˆ ©–— ‡
‹ ˆˆ ‡
… Ž ‡ ˆ © —— ©ž–— Ž
ˆ ˆ Ž ”
ˆ©–— ˆ ‡‡ ˆ©›› ›‰ ‡
ˆ ˆˆ Ž ‡ ˆ Ž
Software Note
‚ ‡ ‡ ‡ ˆ
ˆ ‡
‡
‘ ˆ ˆ
ˆ ˆ
‡ ˆ ‘ ‡
‡ ‡ ˆ ‡
4.5.2 A COMMENT ABOUT CONSTANCY
‘ ‡ € „ ‡
‡ ‡
ˆ ‡ ‡‡ ˆ ˆ
‘ … Ž ‡ ˆ © ——
©ž–— ‡ ’
” ˆ ˆ
© © –— ‡ ’
” ‡ ˆ
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148 Chapter 4 Sensitivity Analysis and the Simplex Method
‡
4.5.3 ALTERNATE OPTIMAL SOLUTIONS
… Œ ˆ
‡ ‹ ˆ
‡ ‡ ˆ ˆ
ˆ ‡
‡
‘ ‡‡ € „ ‡
‡ ‡ ˆ ‡
4.5.4 CHANGES IN THE RHS VALUES
‡
‡ “ ‡
‡ † ‡
‡ † ž ‡‡
‘ † ž ˆ ‡ † ¥
¤ ‘ † ¥
‡ ‡
† ¥ … ¤
‡ ˆ
† ‡
ª ‡ ‡‡
‘ † ž ‡
…
‘ ˆ
Œ ‡ ‡
‡
Œ ‡
‡ ‘
ˆ ˆ
‡ ‘ ‡ ˆ
‡
‘ ‡
‡‡ ˆ‡
ˆ ‡
† ‡ † ž ‡ › ›‰
‘ ˆ ˆ
— ž ‡ ˆ©› ›‰
Œ ˆ ˆ
— › ‡
ˆ2©› ›‰ ‡ ‡
‡‡ Œ ‡
‡‡ —— † ¥
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The Sensitivity Report 149
4.5.5 SHADOW PRICES FOR NONBINDING CONSTRAINTS
¦ ‡ ‘
‡ ˆ
›œ ‘
ˆ ˆ ‘
‡ “ ‡ ‡ ›œ
‡ †
‡ ›œ
ˆ›œ ‡
‡ ‡ ˆ
‘ ˆ ˆ
‡
4.5.6 A NOTE ABOUT SHADOW PRICES
£ ‡ ‡ ‡ ‘
‡ ‡‡ ‡
‡ ˆ› –›› ‰ œ
“
ˆ ‡ ‡
ˆ©› ›‰ 3 › 5 © ‰—— ‘ ‡
‡‡ ˆ©›œœ—— ©››—— 1 ©› ›‰ 3 › 5 ©›œœ—— † ž ›
Ž ˆ›
‰ œ
Œ† ž › ‡ ©›œœ—— ‡ “
‡ ‰› … Ž ‡ ž ˆ Ž ‘
FIGURE 4.6
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150 Chapter 4 Sensitivity Analysis and the Simplex Method
FIGURE 4.7
‡ ‡
‡ † ž ‘ ‡
‡ ‘
‡ ˆ† ž ‰
‡
ˆ ˆ
«
‡ … ˆ ‡‡ ‡
Ž
Another Interpretation
of Shadow Prices
¬ ˆ ˆ ‡ ˆ ‡
‡ Œ ‡ ‡
ˆ
‡ ˆ ˆ ‡
ˆ ‡ ‡ ‡ ‘ ‡
ˆ ˆ
‡ …
ˆ …
ˆ ‘ ‡
‡ ˆ
‡
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The Sensitivity Report 151
4.5.7 SHADOW PRICES AND THE VALUE
OF ADDITIONAL RESOURCES
Œ ‡ ‡ ›
‡ ˆ© ‰—— …
‡ ˆ … › ‘ … €Œ
‡ „
Œ
‡ ‡
ˆ‡ ‡ ˆ‡ © ‰——
ˆ‡ ˆ … › Œ
‡ ©››—— ©›œœ—— ‡ ˆ ‡ ‡
‡ ‘ ‡ ˆ ‡
‡ © ‰—— … › ©› ›‰‡
‡
› ‘ © ‡
‡ ˆ‡ © œ ›‰‡ … ›
£ ‡
ˆ ‡
‡ ‡
‡ Œ ‡ ˆ ©› ›‰‡
… ›
4.5.8 OTHER USES OF SHADOW PRICES
“ ‡ ‡ ‡
ˆ ‡ … †
‡ ‡‡ “ ‘
‘ˆ‡ Ž ‡‡ …
‡‡œ
‡ © — ‚ ‡ ‡ ƒ
“ “ ‘ ‡ ˆ‘ˆ‡ Ž
ˆ ‡
… Ž ‡ ˆ Ž ‡ ‘ˆ‡ Ž
‡‡ ‡ ˆ‡
‘ ‡ † ž ‡‡ ˆ
‡ ‡ ‡ ˆ© —— ˆ
ˆ ‡ ‡ ‡ ˆ
©› ›‰ ‘ ‡ ‡‡ ˆ
ˆ ‡
“ ‘ˆ‡ Ž … ‡‡œ
… ‡
‡ © —— 3 1 ©› ›‰ 3 œ 1 ©— 3 5 © ‘
‡ ˆ ˆ © — ‡ ˆ
‘ˆ‡ Ž ‘ ‡ ‘ˆ‡ Ž ©
‡ © — 2 © 5 2© ‘ ‡ ‘ˆ‡ Ž
‡ ‡ ˆ ‡
‘ˆ‡ Ž ‡ ‡‡
ˆ ‘ˆ‡ Ž ‡
‡ ‘
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152 Chapter 4 Sensitivity Analysis and the Simplex Method
FIGURE 4.8
Key Cell Formulas
Cell Formula Copied to
E6 5SUMPRODUCT(B6:D6,$B$5:$D$5) E9:E11
‡ ‡ ”” ” ‡
… Ž ‡ ˆ Ž ‘ˆ‡ Ž ‡ ‡ ˆ
• ” –—”1 ——” 1 —” ˜‡ ™
”1 ” 1 ” # —— ˜‡‡
š”1 ›” 1 œ” # –›› ˜
”1 ›” 1 ” # œœ— ˜
”” ” $ — ˜ ˆ
‘ ‡ ‡ † ž œ
†žŽœ ‡ ¦ ‡
‡ ‡ … Ž ‡ ” 5 ‰œ ˆ Ž
” 5 ‰œ ‘ˆ‡ Ž ” 5 — ‡ ‡
‡ ‘ˆ‡ Ž † ž š ˆ ‡
4.5.9 THE MEANING OF THE REDUCED COSTS
‘ ˆ ‡ † ž š ˆ
‡
‘ ‡ ˆ
‘ˆ‡ Ž ‡ ¦ ¤
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The Sensitivity Report 153
‘ˆ‡ Ž 2 ‘
‡
‡ ‡ ‘ˆ‡ Ž
‘ … ‡ Ž ‡
‡ ‡ Ž
‡ ‡ † ‡
‡
… Ž ‡ 5 –— 2 —— 3 2 › ›‰ 3 š 2 — 3 5 —
ˆ Ž 5 —— 2 —— 3 2 › ›‰ 3 › 2 — 3 › 5 —
‘ˆ‡ Ž 5 — 2 —— 3 2 › ›‰ 3 œ 2 — 3 5 2
‘ ‘ˆ‡ Ž
… ‘ ‡
‡ ‡ ‘ˆ‡ Ž …
© — 1 © 5© ‡ …
‡ ‘ˆ‡ Ž ©
‡ ‡ ‡ ‡ ‡
Œ ‡
… ˆ ‡ ‡ ‡ ˆ
‡ ‡‡ ‘ ˆ
Œ ‡ ‡
‡ ‡‡ ˆ Œ
‡ ‡ ‡ ‡ ‡‡ ‡
ˆ ‘ ‡ … ‡
… ‡
… ‡ ¥ ‡
… ‡ ‡‡
FIGURE 4.9
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154 Chapter 4 Sensitivity Analysis and the Simplex Method
FIGURE 4.10
Optimal Value of Optimal Value of
Type of Problem Decision Variable Reduced Cost
‡ #—
• ‡‡ 5—
‡ ‡‡ $—
‡ $—
• ‡‡ 5—
‡ ‡‡ #—
… ‡ …
‡ † ž — ‡
¨ ˆ ‡ ˆ ‡
… ‡ ‡‡ ‡‡
Œ ‡
‡ Œ ‡ Ž
‡
‡
‡
‡ ˆ
‡ Œ ‡ Ž
‡
Œ ‡
Key Points
£ ˆ ‡ ˆ‡ Ž
‡ ‡ ‘ ˆ‡
• ‘ ‡ …
‡
• ‡‡ ˆ ‡
• ‘ ‡ ‡
• ‡
… ‡ ‡ ‡
4.5.10 ANALYZING CHANGES IN CONSTRAINT COEFFICIENTS
¨ ‡ ˆ
‡ ‡ †
‡ ‡ “ ‘ ‘ˆ‡ Ž
… œ ‡‡
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The Sensitivity Report 155
‡ ‡ ˆ‰ ƒ‘ ‘ˆ‡ Ž Ž
© — 2 © —— 3 2 ©› ›‰ 3 ‰ 2 ©— 3 5 ©
“ ‡ ‡ ‘ˆ‡ Ž
‡ † ž œ ‡
‚ ˆ … ‘ˆ‡ Ž
‡ Ž ‡ Œ
‡ ‘ˆ‡ Ž … ˆ‰
‡ ‡‡
… ‘ˆ‡ Ž ‡‡ ˆ
‘ ‡ ‘ˆ‡ Ž ‡ ‡
‡ … Œ ‡
… ‡ ‘ˆ‡ Ž
‡ ‘ˆ‡ Ž … ‘
… ˆ
© — 2 © —— 3 2 ©› ›‰ 3 2 ©— 3 $ —
Œ … ˆ
—
# 5‰ —
› ›‰
‘ ‡ ‘ˆ‡ Ž ˆ ‡ Ž
… ‡ ‰ — ‡
ˆ‡ … ‡
‡ ‡ ˆ
4.5.11 SIMULTANEOUS CHANGES IN OBJECTIVE
FUNCTION COEFFICIENTS
¢ Œ «
ˆ ‡
ˆ
‡ ’
… ‘ ——Š
‡ ‘
‡‡ ˆ
Case 1. Ž
Case 2.
Œ ‡ ‡
Œ « ˆ ‡
¤ Œ ‡ ˆ
5 ”
D 5 ‡
Œ 5 ˆ ‡
« 5 ˆ ‡
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156 Chapter 4 Sensitivity Analysis and the Simplex Method
D
D $ —
5 2D
D —
¦ ‡
‡ Œ ˆ
‡ ‡ #
‡ ‡ … ——Š ˆ
‡ ‡ S # ¦ S .
‡
4.5.12 A WARNING ABOUT DEGENERACY
‘ ‡ ˆ
‘ ‡ ˆ
‘ ‡
ˆ‡ ‡ ˆ ‡
‡ ˆ
‚ Ž
‡ ‡
‚ ˆ
… ˆ
ˆ ‡ ˆ ‡
‡
‚
ˆ
ˆ ˆ
‡
ž ‚ ‡ ˆ
‡ ˆ ˆ ˆ … ‘
‡ ˆ ‡‡ ˆ ‡ ‡
…
‡ ˆ ‡ ˆ ˆ
‡
‡ ‡ ‡ ‡
ˆ ˆ ˆ ‡ ˆ
ˆ
‡ ‡ ‡ ‡
‡ ˆ ‡
‡
4.6 The Limits Report
‘ ‡ “ ‘‡ †
ž ‘ ‡ ‡ Œ ‡Ž
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Ad Hoc Sensitivity Analysis 157
FIGURE 4.11
€
‡‡ ‘
‘
¬‡‡
4.7 Ad Hoc Sensitivity Analysis
ˆ ‡ ‡ ‡ … ˆ
‡ ˆ ‡ ‡ ˆ…
‡ ‡
‡ ˆ ‡
‡ ˆ ˆ…
ˆ Œ … ‡
‘ ‡ ‡ ‡
‡ ‘
‡ ‡ ‡ ‡
‡ ‡ ‡
‡ ‡
‡
4.7.1 CREATING SPIDER PLOTS AND TABLES
‡ “ ‘‡
‡ … Ž ‡ ‰œ ˆ Ž ‡ ©››——
ˆ ——‡‡–›› œœ—
Œ ˆ‡‡
‡ ˆ ˆ
‡ ‡ ˆ ‡
‡ ‡ ‡
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158 Chapter 4 Sensitivity Analysis and the Simplex Method
FIGURE 4.12 ‚
Key Cell Formulas
Cell Formula Copied to
D6 5SUMPRODUCT(B6:C6,$B$5:$C$5) D9:D11
E9 5PsiOptParam(0.9*F9,1.1*F9,F9) E10:E11
‡ ‡ ‡
‡ ‡
‡ € „
Œ ‡ «› ‡ ‡
‘ ‡ ¢š¢— ¢ ‡ ‡ ˆ
ˆ ‡‡ † ž †žŽ
‡ ‡ ‡ ‡
‡
‘ ˆ† ž ˆ ˆ ˆ
‡‡ š—Š —Š
‘
‡ †š † † ‡
‡
‡ ‡ ‡
«› ‘ ˆ
“ ‘‡ Œ
‡ ‡‡
š—Š —Š Œ
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Ad Hoc Sensitivity Analysis 159
‡ š—Š —Š
† ˆ
‡ š—Š —Š
¤ ¢š ˆ ¢š š—Š
—Š †š
† ¢š®£‡ — š¯†š ¯†š†š
¤ ‡ˆ ¢—¢
¦ £‡ ‡ ˆ ‡ ˆ
‡
®£‡
¢— ¢ ˆ š—Š —Š
†— † ‡ ˆ
‘ ‡
ˆ ‡
‡ ‡
£ ˆ ¤ • ‡ £‡
ˆ ‘ † ž ‡‡
• † ž £°
FIGURE 4.13
‚
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160 Chapter 4 Sensitivity Analysis and the Simplex Method
ˆ ‡ …
ˆ ‡ ˆ ‡
† ±ž ž ± ± ˆ ˆ
¦ ‡ …
† ž ˆ± ‡ ‡
‡ ˆ ‡
… ˆ‡ š—Š —Š
‡ š—Šš ŠšžŠš›ŠšœŠ——Š— Š—žŠ
—›Š —œŠ —Š • ˆ ˆ
‡ ‡
‡ ‡ ‡ ‚ ˆ
‚ 5 1 2 ¯ 2 Ÿ 2
‘ ‡ † ž ž ‡
«› ‡ ‘ ‡ ‡
‡ ± ± ‡ ——Š ‡‡
¢ ‡ ‡ ‡
ˆ š—Š —Š
Œ † ž ž ‡ ˆ
ˆ ¢ ‘
ˆ † ž š ‘
‡ ‡ ‡‡
ˆ ‰ œœ—
‡ ˆ ˆ
›œ šž Š ˆ
… ˆ ‡
FIGURE 4.14
‚
ƒƒ
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Ad Hoc Sensitivity Analysis 161
FIGURE 4.15 „ ƒƒ
ˆ‡ ‡ ‘ ˆ
ˆ ‡ ˆ ‡ ‡ £
‡ ˆ ‡‡¢š
¢— ‡ ‡ ‡ ‡
‡
‘ ˆ ‡ ‡ ‘
ˆ ˆ ‘ ‡ ‘
‡ ‡
£ ˆ ‡ £‡ ˆŽ
‘ † ž ‡‡
• † ž £°
‘ ‡ ‘ † ž – ¦
ˆ ˆ ˆ ‡‡ ˆ
€ ‡„ˆ‡
‘ ‡ ¤ †
¤ ‘ ‡
‡
4.7.2 CREATING A SOLVER TABLE
‘ ‡ † ž ž ‡ Ž
‡‡ ˆ ‡‡ ‚ ‘
ˆ ‡ ‡‡
‘ ‡ ‡ ‡
‡ Œ ‡
¢š ‡ ‡‡ ‚
‡‡ ‡ ‡ … Ž
‡ ˆ Ž “– ¤– ‡ «›
‡‡ «š«— « † ž ›
†žŽ› ‡ ‡ ‘
‡
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162 Chapter 4 Sensitivity Analysis and the Simplex Method
FIGURE 4.16
1: Click These Constraints
2: Choose True
Key Cell Formulas
Cell Formula Copied to
D6 5SUMPRODUCT(B6:C6,$B$5:$C$5) D9:D11
E9 5PsiOptParam(170, 220, 200) E10:E11
Œ‡ ‡ ‡ ˆ
‡‡ ‰— — ‘
¢š €‡ „ ‡‡
‡
† ¢š®£‡ ‰— — ——
Œ† ž › €• ¥ „‡ ‡ ˆ ‘
©«©š©«©²®©¢©š©¢© ‘ ˆ
‡
«š«— « ‡ … ˆ ‡‡
‡ ‘ €• ¥ „‡ ‡ ˆ
‘ ˆ
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Ad Hoc Sensitivity Analysis 163
FIGURE 4.17
‘ ‡
ˆ ‡
‡ ‡
£ ˆ ‡ £‡ ˆŽ
‘ † ž ‰ ‡‡
• † ž ‰ £°
ˆ ‡ … ˆ
† ž œ ‘
ˆ ˆ ˆ ‡
… ˆ‡ ‰— —
‡ ‰—‰–œ—œ–š—š– —— —– — – — • ˆ
ˆ ‡
‡ ‡ ‡ … ˆ
… 5 1 2 ¯ 2 Ÿ 2
† ž œ † ‡
« ‡‡ ‰—‡ —– ˆ
ˆ ‚ ‰–‡‡
‡‡ — ˆ —‰
‡‡ ‡ ‘
‡ ˆ ‰
‡‡ Ÿ
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164 Chapter 4 Sensitivity Analysis and the Simplex Method
FIGURE 4.18 ƒ ƒ
–‡‡ ‡‡ ˆ
—— ‡ ¢ ˆ©——— ‘
‡ ˆ ——‡‡ ‡‡
© —— ©———Ÿ– 5 © —— £ … ‡‡
† ž š
† ˆ ˆ ‡‡ ‰–
—– –‡‡ ‡ … Ž ‡
ˆ— ‡ ˆ Ž ˆ– ‘
‘ ˆ ‡ ˆ ˆ
‡ ‡‡
ˆ ‡
4.7.3 COMMENTS
‘ ‡ Ÿ‘ ˆ
ˆ
… ³ ‡ ˆ ‡ ˆ
… ‡ ˆ † ‡ “
‘ ˆ ‡ “ ‡ ‡ ˆ
‡‡ ˆ ˆ
4.8 Robust Optimization
‡ ‡ ˆ
‚ ˆ‡ ˆ
ˆ
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Robust Optimization 165
‘ ‡ ‡
ˆ ˆ
ˆ Ž ‡ Ž
Œ ˆ ˆ
‡ ‡ ‡ ‡ Ž
‡
ˆ ˆ
¤ ˆ
‡ ‡
ˆ
‡
ˆ ‡ ˆ
‡ ‡ Œ ‡ ˆ
ˆ ¬
‘ “ ‘‡
… Ž ‡ … ‡‡š
ˆ Ž … ‡‡› › ‘
‡ ‡ … Ž ‡ ‰œ ˆ Ž
† ±ž ¤ ˆ … ‡‡ ˆ ˆ
ˆ
‡‡ … ‡
ˆ ˆ ˆ– –
… ˆˆ› — – ‘
… ‡ … Ž ‡ ˆ ‡
ˆ ˆ œ ‰– š – … ‡ ˆ Ž
‡ ˆ ˆ – ‰– › – ˆ
… ‡ … Ž ‡ ˆ ‡ ˆ ˆ
– – … ‡ ˆ Ž ‡ ˆ
ˆ – – › – † ž š †žŽš ‡
“ ‘‡
Œ† ž š ‡ “— ¤
‡ ˆ
† “—®¬ œ ‰–š –
† ¤—®¬ – ‰–› –
† “®¬ – –
† ¤®¬ – –› –
‘ ¬ ¬‡‡ ˆ
‡
‡‡ ‡ “
ˆ ˆ ‡ ˆ ‡
ˆ † ž š ˆ
ˆ ‡ ˆ‡ †š ˆ ‡
… Ž ‡ ‰œ ˆ Ž ˆ
† ž š ‡
‡ ˆ ‡ ˆ
‡ ˆ ˆ ‘ ‡
† ž š
‡ ˆ
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166 Chapter 4 Sensitivity Analysis and the Simplex Method
FIGURE 4.19 „
Key Cell Formulas
Cell Formula Copied to
D6 5SUMPRODUCT(B6:C6,$B$5:$C$5) D9:D11
B10 5PsiUniform(8.75, 9.25) --
C10 5PsiUniform(5.75, 6.25) --
B11 5PsiUniform(11.5, 12.5) --
C11 5PsiUniform(15.5, 16.5) --
Œ† ž š ‡‡
ˆ ‡‡ € „ ˆ
‡ • ‚
¬ ˆ‡ ‡ ˆ ¦
‡‡ ¤ ˆ ‡ • ‘
ˆ ‘
‡ ˆ ¨ ˆ‡
‚ ‡ ˆ ˆ
‡ ¬ Œ
‡ ‡
† ž — ˆ
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Robust Optimization 167
FIGURE 4.20
‡ ‘ ‡ —– … Ž ‡ šž ˆ Ž
‡ ©›žšž– Œ ˆ
‡ … Ž ‡ … š
ˆ Ž … › › ˆ
–—š –››
‰›ž œœ— £‡
ˆ ‡ € „
Œˆ £‡
ˆ ‡ ˆ ‡
† ž
‘ † ž ‡ – … Ž ‡ œ–
ˆ Ž ‡ ©›–‰›š Œˆ
‡ š … Ž ‡
› › ˆ Ž ˆ
–ž– –›› ‰ž—
œœ— ‘ ‡
† ž — ‡ ‡ ‡ ˆ
ˆ ‡ ˆ‡ … …
‡ ‡ ˆ
Ž ˆ ˆ
‡
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168 Chapter 4 Sensitivity Analysis and the Simplex Method
FIGURE 4.21
‡ ˆ ‡ ˆ ˆ
¬ •
‚ ‡ ‡ ˆ ‡
4.9 The Simplex Method
‚ ‡ ˆ ‡ ‡
‡ ‘ ‡ ‡
‡‡ ‡
ˆ ‡
4.9.1 CREATING EQUALITY CONSTRAINTS
USING SLACK VARIABLES
“ “ ‘‡
ˆ ” ” ˆ ‡
ˆ ‡ ˆ ‡
‡ ˆ ‡
… … …
ˆ ‡ …
‡ …
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The Simplex Method 169
‘ ‡ ‡ ‡ ˆ
… ˆ … ˆ ˆ
…
… ‘ … ˆ
† ‡ …
” 1 ” 1 c 1 ” #
… ˆ
” 1 ” 1 c 1 ” 1 5
‘ ‡ ˆ ” 1 ” 1 c 1 ”
¦ …
” 1 ” 1 c 1 ” $
… ˆ
” 1 ” 1 c 1 ” 2 5
Œ ‡ ˆ ” 1 ” 1 c 1 ”
‘ “ ‘‡ ‡
ˆ ‡
• ” –—”1 ——” ˜‡ ™
”1 ” 1 5 —— ˜‡‡
š”1 ›” 1 5 –›› ˜
”1 ›” 1 5 œœ— ˜
”” $ — ˜ ˆ
‚ ” ”
‡ ‡
ˆ ‡
‡ ‡ ‘ ˆ
‡ † ž ‘
‡ ‡ ‡
4.9.2 BASIC FEASIBLE SOLUTIONS
… ˆ ‡
… ˆ ‡‡ ‡
‡ ˆ … Œ
ˆ … ˆ ˆ
… ˆ ˆ
ˆ …
ˆ ‘ ˆ … ˆ
… ’ $
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170 Chapter 4 Sensitivity Analysis and the Simplex Method
‘ ˆ …
Œ ˆ …
…
¢ ˆ ‡
‡ ‡ ‡
‡ ‡
‡ ‡
‡ ‡ ‡
“ ‡
ˆ ‡
‡ † ž ‡
‘ † ž ‡
‡ ‘ ˆ
ˆ ‘ †
ž ‡ ‡ ‡ Œ‡ ””
FIGURE 4.22 Basic Nonbasic Objective
Variables Variables Solution Value
‚
”5—” 5—
”” —
5 —— 5–›› 5 œœ—
” ” ”5‰ž” 5— ›—š——
5 › 5— 5‰š
””
”5 ” 5‰œ ››——
5— 5— 5›œ
ž ””
”5œ—” 5 — ›ž———
5— 5 › 5—
– ” ” ”5—” 5œ— –ž———
5 — 5žœ› 5—
›¯ ”” ”5—œ” 5šš ›‰–——
52‰ 5— 5—
‰¯ ” ” ”5 ž—” 5— œž———
52ž— 52–šž 5—
œ¯ ” ”
”5 ——” 5— ‰————
5— 52 ž 5žœ—
š¯ ” ”
”5—” 5 —— ›————
5— 5 ›› 52 —
—¯ ” ” ”5—” 5 › ‰œ ——
52› 5— 52 š›
¦ ¯
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The Simplex Method 171
ˆ ”” ˆ
”1 ” 5 —— ˜‡‡
š”1 ›” 5–›› ˜
”1 ›” 1 5 œœ— ˜
¦ …
…
… ¬
‡ ” 5 ” 5 ‰œ 5 ›œ
ˆ … ‡
” 5 ” 5 ‰œ 5 — 5 — 5 ›œ † ž
‡ ©››—— ¦ ‡
‡ ‡
† ž «š«— « † ž
‡ † ž
‡ ‡
FIGURE 4.23
X2
Basic Feasible Solutions:
1: X1 5 0, X2 5 0, S1 5 200, S2 5 1,566, S3 5 2,880
250 2: X1 5 174, X2 5 0, S1 5 26, S2 5 0, S3 5 792
3: X1 5 122, X2 5 78, S1 5 0, S2 5 0, S3 5 168
4: X1 5 80, X2 5 120, S1 5 0, S2 5 126, S3 5 0
5: X1 5 0, X2 5 180, S1 5 20, S2 5 486, S3 5 0
200
5
150
4
100
50
1 2
0
X1
0 50 100 150 200 250
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172 Chapter 4 Sensitivity Analysis and the Simplex Method
4.9.3 FINDING THE BEST SOLUTION
‘ ‡ ‡ ˆ ˆ ˆ
‡ ‡ ‡
‡ ‚ ‡
‡ ‡ ‡
‘ ‡ ‡ ‡ ˆ
‡ ‡ † ‡
† ž ‡
‡ ”
ˆ ‡ ‡ ˆ Ž
‡ † ž ‡
‡ ‡ ‡ ˆ ‡
‡ ‡ – ž ‡ ‡ ‘
‡
‡ ‡ ‡ ˆ
‘ Ž
‡
‡ ˆ
¦
ˆ ‡ ˆ ‡
ˆ ‘‡
‡ ‡
4.10 Summary
‘ ‡
‡ ‘ ‡
ˆ ˆˆ Ž ‡ Ž
ˆ ˆ † ‡
ˆ ˆ ‡ ‡
“ ˆ ‡ ˆ ˆ
‡ ˆ ‡
‡ ‡ ‚
ˆ ‡ ‡ … ˆ
‡ ‡
… ‡ Ÿ‘ ‘ ‡ ‡ Ž
…
‘ ‡ ˆ ‡
ˆ ‡ Œ Ž
… ‘ ‡ ˆ Ž
ˆ ‡ ‡
‡ ‡
4.11 References
“ • ª ª € ‚ † ‡ ¦ ‹ ‚ ˆ ——š
ˆ ¢ ¤ ¦ª šœœ
‚ « € ‘‡ ‘ ‡ • Œ „ —
žšš—
‚ ‚ ‰ Š “ ¤ «ˆ ——
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Questions and Problems 173
THE WORLD OF MANAGEMENT SCIENCE
† ‡ ˆ
ˆ
ˆ ˆ
† ‡‡ ‡ ˆ
‡
‡ ˆ
‘ ¦
ˆ ‡
Œ‡ ¦ ‡ ‰–Š
‡
ˆ œ‰Š
‘ † • •
‡ ‘
ˆ ‡
‡ ˆ † • •
‡ ˆ Ž ‡
ˆ ‡ ‡
‡‡ ˆ‡ ‡‡ ˆ
Œ ‡ ‡
† ‡ ˆ ‡ ‡ … ˆ
‡ ‚ ‰œ— §‡‡ ˆ
‡
©— —ž‰œ‡ ‡ ‘
‡ ˆ ‡ ‡ ‡ –š š ¢
¦ £
‘ ‡ ‡ ‡
‡ ‚ ©— —‰ž ©— –œ
©— ‰— › ‘ ‡
« « ‚ ˆ ¤ ˆ €¦ † •
• „ ‰ † ˆš‰‰‡‡´›
Questions and Problems
ª ‡
… Ž ‡ ˆ Ž ‡‡ © – © ‡ Ž
© ‡ Œ ‡‡ ‡
… Ž ‡ ˆ Ž ‡ ˆ© ž © ž›‡
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174 Chapter 4 Sensitivity Analysis and the Simplex Method
‡‡ ˆ ¬ Ž
‡ … Ž ‡ ˆ Ž
Aqua-Spas Hydro-Luxes
©š–— ©œ‰–
‡¤ 2© – 2© –
¤ 2©—œ 2©‰
‘¤ 2© ž 2©
£ ¥ ¤ 2© ž 2© ž›
• ™ © –— © ——
† ‡‡ ˆ ‡ ©›
‡ … Ž ‡ … š
‡ ‡ ©žž ˆ
ˆ Ž … › ‡ ‡ ©š›
‚ ˆƒ
‡ ‡‡
‚ˆ ƒ ‚
ƒ‚ ‡ ˆ
ƒ
Œ‡ ‡ ‡ ¬
‡ ˆ ‡ ¬
…
• ” ž”1 ”
”1 ž” # —
”1 –” #–
” ” $ —
‚ ”
‡ ƒ
Œ ‡ ‡ … ‡
ƒ
”
‡ ˆ‡ ƒ
‚ ‡ ” … ƒ
‚ ‡
– –ƒ
Œ ‡ ”
– ƒ¢‡
ž Œ‡ ‡ ¬ ‡
ˆ ‡ ¬
…
• ” ”1ž”
2”1 ” # œ
”1 ” #
”1 ” $
” ” $ —
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Questions and Problems 175
‚ ‡ ƒ
Œ ‡ ‡ … ‡
ƒ
‚ ‡ ‡
” ƒ
”
‡ ƒ
¨ ‡
ˆ ˆ
ˆƒ
– Œ‡ ‡ ¬ ‡
ˆ ‡ ¬ …
•Œ¦ –”1 ” 1ž”
”1 ” 1 ” $
–”1 ” 1 ” $
” ” ” $—
‚ ”
‡ ƒ
‚ ‡
” 2ƒ ‘ …
ˆ ‡ ¤
‚ ‡
‰ƒ
‚ ‡
ˆƒ
‚ ‡
” ” ˆƒ
› ‘ ¤ ¤ ‡ ‡ ‡
‡ ¢ ¤ • £ ‘
¢ ‡ ‡ — ‘ ‡ ˆ
— • – £
— ‘ ‘ ‡ ‡‡ ˆ
‡ ‡
Miami Orlando Tallahassee
¢ © ›— © — © š—
¤ © — © ž— © —
‘ ‡ ˆ ˆ‡
† ‡
Œ‡ ‡
‚ ‡ ƒ
Œ ‡ ƒ
Œ ‡ … ƒŒ ˆ ‡
‡
‡ ¤
ˆ ‡ ‡ ˆƒ
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176 Chapter 4 Sensitivity Analysis and the Simplex Method
‚ ‡ ‡ ‡ ˆ
¢ ˆ ƒ
Œ ‡ ‡‡ ¢ •
‰ ¬ ˆ ‡ … ›
‡ …
‡ ˆ ‡ ƒ
‚ ‡ ˆ ‡ — ‡ ˆƒ
“ˆ ‡
‡ ƒ
« ‡ ‡
ˆ©–— ‡ ˆ©‰–ƒ
‡‡ ‡ ˆ© – ‚
‡ ‡ ƒ
‡‡ … –
« ‡ ƒ‚ˆ ˆ ƒ
œ ¬ ˆ ‡ …
‡ …
Œ ‡ © – ‡ ƒ
Œ ‡ µ © – ‡ ƒ
Œ ‡ ‡ ‡‡ ˆ ‡ ˆ
‚ˆ ‡ ©— ‡ ‡
‰——ƒ
‡‡ ‡ ˆ —— ‡ ƒ
‚ ‡ ‡ ƒ
š ¬ ˆ ‡ … ž
‡ …
‡ ‡ ‡
‡ ˆ ƒ
‡ ‡ ‡
ˆ ‡ ƒ
‡‡ ‡ ‡ ˆ ©›— ‡ ‡
‡ ˆ©–—‡ Œ ‡ ƒ
‡‡ ‡ —
‡ ‡ ˆ
‡ ˆ ƒ
— ¬ ˆ ‡ … –
‡ …
Œ ‡ ©‰—— ‡ ƒ
Œ ‡ © —— ‡ ƒ
¢‡ ‡ ‡
Œ — ‡ ˆ
‡ ‡ ˆ ƒ
‡‡ ‡ ˆ –
‡ ˆ ‡ ˆ©ž——‡ … ƒ
ƒ ˆ ‡ ˆ
– ‡ ˆƒ
¤ ˆ ‡ ¢ Ž ˆ ˆ‡ š
‡ …
Œ ƒ
‡
ˆ ƒ
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Questions and Problems 177
‡‡ ˆ ‡ ˆ©š‡ ‚
‡ ƒ
ˆ © ‡ –—Š
ˆ ¢ Ž ˆ ‡ ˆ
‡ ƒŒ ˆ ƒ
ˆ © ‡
–—Š ˆ ¢ Ž ˆ
‡ ˆ ‡ ƒŒ ˆ
ƒ
¤ ‡ ‡ ˆ
… “‰«œ š—Š ——Š
Š Œ¢ Ž ˆ
ˆ ‡
ƒ
¬ ˆ ‡ … ‡
…
‡ ˆ
‡ ƒ
Œ ©š—‡ ‡
ƒ
‡ ˆ ‡ ˆ … ‡ ˆ
ˆ ƒ¢‡
‡ ˆ ‡ ˆ … ‡ ˆ
‡ ƒ¢‡
‡ ‡ ˆ
ˆ ˆ š—Šš Š¶
—Š ‚ ƒ
‡‡ ‡ ‡ ˆ ˆ
š–—— —–—— ‡ ˆ——Ž
‡ ‡ ˆ ƒ
¬ ˆ ‡ … ž ‡
…
Œ ‡ ˆ –— ‡ ˆ ˆ ƒŒ
ˆ ‡ ˆ ƒ
Œ ‡ ˆ –— ‡ ˆ ˆ ƒŒ
ˆ ‡ ˆ ƒ
‡‡ ‡ ˆ –
‡ ‡ ˆ ‡ ˆ
‡ ˆƒ
¤ ‡ ˆ ©ž–— “ˆ ‡
‡ ‡ ˆ ƒ
« ƒ¢‡
¤ ‡ ‡ ‡ ˆ
ˆ š—Š —Š Š
« ˆ‡
ž ¬ ˆ ‡ … – ‡
…
Œ ƒ
Œ … ƒ
‡‡ ‡ ‡ ‡ ‘ ‡ ˆ©ž— ‚
‡ ƒ
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178 Chapter 4 Sensitivity Analysis and the Simplex Method
‡‡ ‡ ‡ ‡ ‡ ‡ ‡ˆ©ž— ‚ ‡
ƒ
‡ ˆ ‡ ˆ ———
‡ ‡ ˆƒ
‡‡ ‡ ˆ ˆ–———‡ ‡ ‡
© –— ‡ ƒ¢‡ ˆ
¤ ‡ ‡ ‡
ˆ š—Š —Š
¢‡ ‡ ‡ ‡
ˆ ‡
‡‡ ˆ ‡ ‡ ˆ
¤ ‘ ‡ ‡
‡ ‡ ‡ ˆ
–——— ‰——— –—— ‚ ‡
ˆ ‡ ‡ ‡
‡ ˆƒ
– ¬ ˆ ‡ … › ‡
…
Œ ƒ
Œ … ƒ
¢‡ ‘
‡ ˆ
ƒ
‡‡ ‡ ‡ † ˆ© ‚ ‡
ƒ‚ ‡ ƒ
Œ ‡ ˆ ˆ …
ˆ ˆƒ
Œ ‡ ˆ ˆ …
ˆ ˆƒ
‡‡ ˆ ˆ‡
‡ ‡ ˆ ‡ ‡ ˆ‡ ‡
©— – ©— —– ‡
‡ ‚
‡ ƒ
› ¬ ˆ ‡ … ‰ ‡
…
Œ ƒ
¢‡ ‡ •
Œ ‡ Ž ˆ ˆ
ƒ‚ˆƒ
‡‡ ‡ ‡ ‡
Œˆ ‡ ‡
ˆ ƒ‚ˆƒ
Œ š ‡ – ‡ ‡ ˆ
››– ‡‡
‡ ˆ
‡ ‘ ‡‡ ‡
‡ ‡ ›——
››– – ‚ ˆ
‡ ƒ
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Questions and Problems 179
‰ ¬ ˆ ‡ … œ ‡
…
Œ ƒ
‚ ‡ © œ—‡ ‡ ƒ
‚ ‡ ‡ © –‡ ‡ ƒ
Œˆ ˆ ƒ
‚ˆƒ
¤ ‡ ‡ ˆ
‡ ‡ š—Š —Š
Š ‚
‡ ƒ
œ ¬ ˆ ‡ … ‡
…
‚ ‡ ƒ
Œ ‡ ˆ ‡ ƒ
Œ ‡ ˆ ˆ——— ˆ‡
ˆ ƒŒ ‡ ƒ
‡‡ ˆ ˆ
‡ ‚‡ ˆ
‡ ‡
ƒ
¤ ‡ ˆ ‡ ‡
‡ ˆš—Šš Š¶—Š
‡ ‡ ‡ ƒ
š ¬ ˆ ‡ … ‡
…
Œ ‡ … ƒ ˆ ƒ
‚ ƒ
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… ‡ ˆƒ
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— ‡‡ – ›
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ˆ ‡ ˆ
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“ˆ ƒ
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…
‚ ‡ ‡ ƒ
‡ ‡ ƒŒ ˆ
–
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Œ ˆ … ——— ‡ ž
© ›–‡ ‡ ˆ ƒ‚ˆƒ
¤ ‡ ‡ ˆ
… š—Š —ŠŠ
Œ ‡ …
‡ ‡ ‡ ˆ ˆ ƒ
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180 Chapter 4 Sensitivity Analysis and the Simplex Method
¬ ˆ ‡ … š ‡
…
‡ ‡ ƒ¢‡
‚ ‡
‡ ˆ ‡ ƒ‚ ‡
ƒ
‚ ‡ ‡
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ƒ
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ˆ ‡ ˆ‡ ƒ‚ˆƒ
Œ ‡ ˆ ˆ –— ‡ ©‰‡
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ˆ ‡ š—Š —Š Š ‚
‡ ƒ
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…
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ž ¬ ˆ ‡ … – ‡
…
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ƒ¢‡
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ˆ ‡ ˆ œ—Š
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‚
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– ¬ ˆ ‡ … › ‡
…
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Œ … ƒ
ˆ ‡ ˆ … ƒ
Œ ˆ ˆ–— ‡ ‡ ©œ‡
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Questions and Problems 181
“ˆ ˆ ‡‡ ‡‡
‡‡ ƒ
¤ ‡ ‡ ‡ ˆ ‡
‡ ‡ ‡ ‡ ‡ ‡ ‡
© ©— — ‚
‡ ƒ
‡‡ ‡ ˆ Ž ˆ ˆ
‡ ˆ‡ –ŠŠ ¤ ‡ ‘
‡ Œ ‡ ˆ
ˆ ˆ–Š
ƒ
› ¬ ˆ ‡ … œ ‡
…
Œ ƒ
Œ … ƒ
‡ ‡ ˆ ‡
ƒ
¤ ‡ ‡ ˆ
‡ ‡ ˆ š–Š —–ŠŠ Œ
‡‡ ‡ ˆ ‡ ‡
‡ ƒ
‰ … ž– ‡ …
¤ ‡ ‡‡ ‡ ‡
‡ ˆ ————— ž—————————
‚ ‡ ˆ ‡ …
‡ ‡ ˆƒ
‡ ˆ ‡ ˆ
‡ ˆ –————ƒ
‡‡ ‡ ˆ ‡ ˆ –————
¦ ‡ –———— ‡ ˆ
— ˆ ˆ ‡ ˆ
‚ ˆ ‡ ˆ
‡ ‡ ˆƒ
œ ¤ ‡
• ” ž”1 ”
”1 ž” # —
”1 –” #–
” ” $—
¬ ‡ … Ž
Œ ˆ
‡
£ ‡
ƒ
¨ ‡ ‡
‡ ‡
‚ ƒ
‚ ‡ ‡ ƒ
‚ ‡ ƒ
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182 Chapter 4 Sensitivity Analysis and the Simplex Method
š ¤ ‡
• ” ”1ž”
2”1 ” #±œ
”1 ” #
”1±” $±
”” $—
¬ ‡ … Ž
Œ ˆ
‡
£ ‡
ƒ
¨ ‡ ‡
‡ ‡
‚ ƒ
‚ ‡ ‡ ƒ
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‡
£ ‡
ƒ
‚ ƒ
‚ ‡ ‡ ƒ
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¤
” 1 ž” 1 5 ›
‚ ƒ
‚ ‡
” 5 ” 5
” 5 œ” 5 —
” 5 ” 5
” 5 ž” 5
¤
” 1 ž” 2 5
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Case 4.1 183
‚ ƒ
‚ ‡
” 5 –” 5 —
” 5 ” 5
” 5 ‰” 5
” 5 ž” 5 —
A Nut Case CASE 4.1
‘ • ¦¤ ‡ ˆ•¦¤ ‡
Œ Ž ‚ Ž
¤ Ž ¤ ‡
‘ ‡ ˆ ˆ ‡‡
‡ ‡
‡ •¦¤ ‡
‡ ‘ •¦¤
‡ ———‡ ‚ ‡ ž—— –——
‡ ¤ ‡ –—‡ ¤‡
——‡ ‡
¢ ‡ ‚ ¤ ¤ ‡ ‡ ˆ
›—Šž—Š —Š ——Š ‡
‘ ‡ ˆ ——‡ œ——‡
‘ ‡
‡ ‡ ‘ … ˆ ‡
¢ ›—
Minutes Required per Pound
Machine Whole Cluster Crunch Roasted
—— —— —— ——
—— –— —— ‰–
¤ —— — ‰— — — — ——
–— ›— – ——
‘ ˆ ‡
ˆ •¦¤ ˆ ‡ ‡ … † ‡
‡ ˆ ‡ ¤
¤‡
Product
Whole Cluster Crunch Roasted Total
©– —ž —— ©œ—— —— ©–— —— ©š – —— ©œ– š ——
« © —— ©–›— —— ©žž —— © — —— © –– ——
« ©—š —— ©ž—— —— ©š› —— © — —— ©‰œ ——
• © —— ©ž— —— © › —— ©š— —— ©–šš ——
· ©–ž— —— ©œ— —— ©› —— © — —— ©š— ——
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184 Chapter 4 Sensitivity Analysis and the Simplex Method
Product
Whole Cluster Crunch Roasted Total
€
• ©›œ‰ œ © — ›š ©šš © œ © –— —
· ©–‰‰ ‰œ © ‰‰ ‰œ ©œ © ©—–— ——
©‰ž š 2©œœ ž‰ 2©— –ž © › ©››ž šš
‚ —ž— –—— –— —— œš—
‚ ©— ‰ œ 2©— ‰›š 2©— —‰— ©— —œ ©— –œ
« ˆ ƒ‚ˆ ˆ ƒ
† ‡
¤ ‡ ‡
ž ‚ ‡ ƒ
– ¤ ˆ ‡ …
› Œ ƒ
‰ Œ … ƒ
œ Œ•¦¤ ‡ ˆ‡ ˆ
ˆƒ
š Œ•¦¤ ‡ ˆ‡ ˆ
ˆƒ
— ‚ ‡ •¦ ˆƒŒ ˆ
… ˆ … ·
ˆ ‡ ˆ … ƒ
•¦¤ ‡ ˆ … ƒ
Œ ‡ ‡ ‚ ‡ ˆ
©— – ‡ ƒ
¤ ‡ ‡ ‡ ‡ ‡
… ‡ ‡ ‰—Š —Š
–Š Œ ‡
ž ¤ ‡ ‡ ‡ ‡ ˆ
‰—Š ——Š –Š
Œ ‡
CASE 4.2 Parket Sisters
€‚
¤ ‡ ‡ ˆ ˆ
‡ ˆ ‡ ‡
‡ ‡ ª ‡ ‡ ¤¢£
‡ ‡
‘ £
ˆ• “ ¤ “ ‚
‡ ‡ ‘ ‡ ‡
‡ ‡ ˆ ‡
“Œ¤ ˆ ‡
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Case 4.2 185
… ˆ ‡ ˆ ‘
‡ ‡ ‡
‡ ‡ ‡
Œ ‡
ª ‡
‡ ˆ Ž… ˆ ˆ
† ‡ ‡ ˆ
ª ‡ ‡ • “ •
‡ ‡ ‡
‡ ˆ ‘ ‡ ˆ
‡ ‡ ˆ
€ „
ˆ ’ ‡ ‡ ‡
‡ ˆ‡ ˆ
‡ ‘ ‡ Ž‡ © ——
‡ ‡ © —— ‡ ©– —— ‡ ‘
‡ … ˆ
‘ ‡ ˆˆ ‡ ‡ ª
‡ ˆ ˆ ‡ ‡ ‡ ‡
ˆ ˆ “
Ž ‡ ‡‡
Œ‡ ª ———
‡ —— ———
‡‡ ˆ “
ª ‡ ‡‡ ª ˆ ‡
… ‘ ‡‡ …
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‡ §
‡ ‡
¢ ‡ ‡ … ‡ — œ
¢ ‡ … ‰ ‡
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ž – ª ‡
ˆ‡
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ˆ ˆ
‡ ª ‡ ‡ ˆ
Ž‡
‡
‚ ˆ ª ‡ ˆ
• —” 1 —” 1 – —”
” 1 ‰” 1 ” # ———
— œ” 1 — —” 1 ” # ——
—” 1 —” 1 ž –” # ———
”” $ —
” 5 ‡ ‡
” 5 ‡
” 5 ‡
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186 Chapter 4 Sensitivity Analysis and the Simplex Method
ª ¢ ˆ
‡ …
… ‡
‚ ˆ‡ ˆ ‡ ƒ
Œ ‡ … ƒ¢‡ ˆ ‡
Œ ‡ … …
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– –——
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š ‡‡ ˆ ‡ ©› –—‡
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‘ ·« ‡ ‡
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— Œ ‡ ˆ
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‡
Œ ‡ Ž‡ ‡ ‡ © –— ‡
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‚ ‡ ‡
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ž ‚ ‡ Ž‡ ‡
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– • ‡ ˆ ‡ —
‡ ‡ ‡ ‚
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› Œ ‡ ‡ ©› ‰– ©– —— ‡ ‡
‡ ‡ ƒ
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Case 4.3 187
Kamm Industries CASE 4.3
Œˆ ‡ ‡ «
¨ ´ €¤ ‡ ¤ ‡ ‚ „•
« ‡ ‰—‡ ‡ ©š Ž
‡ ˆ ¤ ‡ ˆ ‡
ˆ Œ ‡
ˆ ˆ
° Œ ‡ ‡ « Œ
¨ ° ˆ ‡ ‡
… ‘ ‡ ˆ ˆ‡ ‡
‡ ˆ ‡ ˆ‡ «
‡ ‡ «
‡ ‡ ‡
‡ ‡ ‘
ˆ‡ ‡ ‡ …
‡ ˆ‡
¦ ž ‡ ‡ …
ˆ « ˆ‡
ˆ
Demand Dobbie Pantera Subcontract
Carpet Yds Yd/Hr Cost/Yd Yd/Hr Cost/Yd Cost/Yd
ž——— ž –— © ›› © ‰‰
– ——— ž ‰š› –– ‰
žž——— ž› š ›ž œ–
ž ———— ž –› –› ‰
– ‰‰–—— – ž– › –ž œ © ›— ‰›
› —š–—— œ—› › š – › ‰›
‰ ———— ž ›œ ›ž ž › › ‰›
œ ›———— – – žœ – –› ž‰ –š
š ‰–—— – –— – ‰‰ –— ‰
— ›š–—— – › žž – žš ž ›
›œ–—— ‰žž ›ž œ – ›ž œ—
œ ——— ž –‰ –‰ ž š –› ‰œ
———— žž žš ž ––œ žœ ›
ž œ——— – œ – – — žž
– ›ž——— ž – ž œœ –— ›š
° ˆ ‡ –« œ— ‘
ˆ ‡‡ ‡ ˆ ‡ ž
ˆ‰ ˆ ¢ ‡‡ ˆ
‡ ¤ ‡ ‡
‡ ‡ ‡ …
‚ ‡ ‡ ‡ ƒ
Œ ƒ
Œ … ƒ
ž ‚ ‡‡ «
… ƒ
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188 Chapter 4 Sensitivity Analysis and the Simplex Method
– ‚ ‡‡ « ‡
… ƒ
› ‚ ‡‡
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Chapter 5
Network Modeling
5.0 Introduction
5.1 The Transshipment Problem
’
€ ‚ €ƒ
„ … †
„ ‡ ‡ ˆ ˆ
‰ ‰
Š € ‹Š … Š Œ
Ž Š ‰ ‘ ’
€ “”” ‡ •””
ˆ €
Œ ’”” –” ’—” ˜” —” €
‡
ˆ
5.1.1 CHARACTERISTICS OF NETWORK FLOW PROBLEMS
‰ ‘ ’
‰ ‘ ’
189
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190 Chapter 5 Network Modeling
FIGURE 5.1
100
Boston
2 $30
Newark
$50 200
1
Columbus
60
3 $40
$40
$35 Richmond
$30 80
4
Atlanta
170
5
$25 $45 $50
$35
Mobile J‘ville
70 300
6 $50 7
€ €
1‚ƒ
‚ƒ„ ‚ƒ …†ƒƒ
†ƒƒ„
†ƒƒ
‡
ˆƒ
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The Transshipment Problem 191
5.1.2 THE DECISION VARIABLES FOR NETWORK
FLOW PROBLEMS
‡ ‰€
Š ‹
‡
‡ †
‰ Œ
Ž‘
’
“ 5
Ž‘ ‹ ’
“† 5 †‰
“” 5 ”
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“• 5 •€
“• 5 •€
“” 5 ”
“– 5 –
“– 5 –
“ˆ” 5 ˆ ”
“ˆ 5 ˆ
“ˆ– 5 ˆ –
5.1.3 THE OBJECTIVE FUNCTION FOR NETWORK
FLOW PROBLEMS
—
˜ ™
š
‡
›•ƒ
†‰ ‰“ † ‰
›•ƒ“ † š
‰‰€
™ ˜ ’
‡ ’ 1•ƒ“ † 1 ”ƒ“ ” 1 ƒ“†• 1 •“• 1 ”ƒ“• 1 •ƒ“”
1 •“– 1 †“– 1 ƒ“ˆ” 1 ”“ˆ 1 ƒ“ˆ–
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192 Chapter 5 Network Modeling
5.1.4 THE CONSTRAINTS FOR NETWORK FLOW PROBLEMS
Ž‘
‡
™ ’
For Minimum Cost Network Apply This Balance-of-Flow Rule
Flow Problems Where: at Each Node:
š . Š ‡œ 2žœ $š Š
š 5 Š ‡œ 2žœ 5š Š
š , Š ‡œ 2žœ #š Š
‡
…
…
„
‡
$
… …
‡
ƒƒ ”‚ƒ ‰
… …
’
‡ 2 ž $ š Š
“ †“ ” … …
’
€ ’2“ † 2 “ ” $ 2†ƒƒ
2†ƒƒ
‡ ‹ 2
‹ 1“ † 1 “ ” # 1†ƒƒ ‹ 2
‹
†ƒƒ š
†ƒƒ
†‰ ‰‰
ƒƒ … … ‹
‰ “ †
‰ € “†• ƒƒ ‰
’
€ †’1“ † 2 “†• $ 1 ƒƒ
‹
‰ †ƒƒ ‰ ƒ
ƒ ‰ Ÿ ˜ ™
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The Transshipment Problem 193
¡ … …
’
€ •’ 1 “†• 1 “• 2 “• $ 1 –ƒ
€ ”’ 1 “ ” 1 “” 1 “ˆ” $ 1 ‚ƒ
€ ’ 1 “• 1 “– 1 “ˆ 2 “• 2 “” 2 “– $ 1 ˆƒ
€ –’ 1 “– 1 “ˆ– 2 “– $ 1 ˆƒ
€ ˆ’ 2 “ˆ” 2 “ˆ 2 “ˆ– $ 2 •ƒƒ
‹
š
… …
ž
’
“ $ ƒ
5.1.5 IMPLEMENTING THE MODEL IN A SPREADSHEET
‰€ ™’
j
‡ ’ 1•ƒ“ †1”ƒ“ ”1ƒ“†•1•“•1”ƒ“•
1•ƒ“”1•“–1†“–1ƒ“ˆ”1”“ˆ
1ƒ“ˆ–
š ˜ ’
2“ † 2 “ ” $ 2†ƒƒ ¢
1“ † 2 “†• $ 1 ƒƒ ¢ †
1“†• 1 “• 2 “• $ 1–ƒ ¢ •
1“ ” 1 “” 1 “ˆ” $ 1‚ƒ ¢ ”
1“• 1 “– 1 “ˆ 2 “• 2 “” 2 “– $ 1 ˆƒ ¢
1“– 1 “ˆ– 2 “– $ 1ˆƒ ¢ –
2“ˆ” 2 “ˆ 2 “ˆ– $ 2•ƒƒ ¢ ˆ
“˜ $ ƒ ¢
†
…† ‡ ‰–
‰ –
£ ˜
£ ‚ ’
£ ‚’5š¡‘ žŠ¡€ ‰–’‰ –£–’£ –
ŽŸš
¤–
¤ † ’
¤–’ 5š¡‡›—›–’›—› –‡–›‰›–’›‰› –2
€ ¤ˆ ¤ † š¡‡›€›–’›€› –‡–›‰›–’›‰› –
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194 Chapter 5 Network Modeling
FIGURE 5.2
Variable Cells
Constraint Cells
Objective Cell
Key Cell Formulas
Cell Formula Copied to
D6 VLOOKUP(C6,$I$6:$J$12,2) D7:D16 and F6:F16
G18 SUMPRODUCT(B6:B16,G6:G16) --
K6 SUMIF($E$6:$E$16,I6,$B$6:$B$16) K7:K12
SUMIF($C$6:$C$16,I6,$B$6:$B$16)
š¡‡ —–
— – ‡–
‰– ‰ – ž
™
—– — – ‡– š¡‡
€– € – ‡–
‰– ‰ –
‹ ‰–
‰ˆ €
¤ˆ ¤ †
Ÿš
Ž– Ž †
¥Žžž¤¡‘ Š
‹
¦ §¦ §
€— Š–’
Š–’5¥Žžž¤¡‘€–›‡›–’› › ††
€ Šˆ Š –– –
¥Žžž¤¡‘ ¦ § €–
‡– †
† †
¥Žžž¤¡‘ š Š–¥Žžž¤¡‘
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The Transshipment Problem 195
€– ‡– †
‡ ¦ §
† ‡– † €
Šˆ Š –– –
¦ §¦ § ‰¥Žžž¤¡‘
‡¨
¥Žžž¤¡‘ ‰
• š ‹
”
FIGURE 5.3
Solver Settings:
Objective: G18 (Min)
Variable cells: B6:B16
Constraints:
K6:K12 L6:L12
B6:B16 0
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
FIGURE 5.4
5.1.6 ANALYZING THE SOLUTION
” ‰€¨
†ƒ ‰ “ † 5 †ƒ ‚ƒ
“ ” 5 ‚ƒ †ƒ ‰ € “†• 5 †ƒ
”ƒ € “• 5 ”ƒ † ƒ
“ˆ 5 † ƒ ˆƒ “ˆ– 5 ˆƒ €£ ‚
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196 Chapter 5 Network Modeling
›††•ƒ
¤–¤ † †ƒƒ
†‚ƒ •ƒƒ
¤ˆ ¤ Ÿš
Žˆ Ž
™
ƒ
‹
† ƒ
ˆƒ
”ƒ €
FIGURE 5.5
100
Boston
2 $30
Newark
$50 120 200
1
20
Columbus 80
60
3 $40
$40
40 Richmond
80
4
Atlanta
170
5
$45 210
Mobile 70 J‘ville
70 300
6 $50 7
5.2 The Shortest Path Problem
‡
™
‹ —
Š
‹
š
‹
‹ ‡
‹
‹
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The Shortest Path Problem 197
€ € …
€ ™ ¨
€
€ ¨
˜ … …
€ ˜
š ™ ž
€
€
–
‰ ¥ ‰¥
–
€ ¨
‹
FIGURE 5.6
0
3.3 hrs 1
L’burg 5 pts
9
Va Bch
11
5.0 hrs
9 pts
2.0 hrs
0 4.7 hrs 4 pts
2.7 hrs
9 pts 4 pts
K’ville 0 1.1 hrs
5 2.0 hrs G’boro 3 pts Raleigh
0
9 pts 8 10
1.7 hrs 3.0 hrs
5 pts A’ville 4 pts
0
6 1.5 hrs 2.3 hrs
3 pts 3 pts
Chatt. 2.8 hrs
0
3 7 pts Charl.
2.0 hrs 7
8 pts
1.7 hrs
3.0 hrs 0
4 pts 1.5 hrs
4 pts
G’ville 2 pts
4
Atlanta 2.5 hrs
B’ham 2
1 2.5 hrs 3 pts 0
3 pts 0
1
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198 Chapter 5 Network Modeling
š ‹
‡ – ‰
¥ ‰ ƒ
‡ ‹
˜
5.2.1 AN LP MODEL FOR THE EXAMPLE PROBLEM
¡ … … Ž‘ ™
’
‡ ’ 1† “ †1 •“ • 1 ˆ“†• 1 † “†”1 ˆ“•1 † ‚“•– 1 †“”– 1 “”ˆ1†“–
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š ˜ ’
2“ † 2“• 5 2 ¢
1“ † 2 “†• 2 “†” 5
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1“ • 1 “†• 2 “• 2 “•– 5
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1“•– 1 “”– 1 “– 2 “–‚ 2 “–© 5
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The Shortest Path Problem 199
FIGURE 5.7
Variable Cells
Constraint Cells
Objective Cell
Key Cell Formulas
Cell Formula Copied to
D7 5VLOOKUP(C7,$J$7:$K$17,2) D8:D24 and F7:F24
G26 5SUMPRODUCT(G7:G24,$B$7:$B$24) H26
L7 5SUMIF($E$7:$E$24,J7,$B$7:$B$24)2SUMIF($C$7:$C$24,J7,$B$7:$B$24) L8:L17
FIGURE 5.8
Solver Settings:
Objective: G26 (Min)
Variable cells: B7:B24
Constraints:
L7:L17 5 M7:M17
B7:B24 .5 0
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
ˆ‹
‰ † ”
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¥ ‰
€ ¨
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š ™ Ÿ†– ©
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
200 Chapter 5 Network Modeling
FIGURE 5.9
‰
€ ¤ Ž ¥ ‰
• € ¨
–
5.2.3 NETWORK FLOW MODELS
AND INTEGER SOLUTIONS
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
The Equipment Replacement Problem 201
FIGURE 5.10
5.3 The Equipment Replacement Problem
‹
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
202 Chapter 5 Network Modeling
FIGURE 5.11
0 0
$63,985
2 4
$28,520 $30,231 $33,968
$32,045
1 1 3 5 1
$60,363 $67,824
0
—
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•
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5›•ƒ†•
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5.3.1 THE SPREADSHEET MODEL AND SOLUTION
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
The Equipment Replacement Problem 203
FIGURE 5.12
Constraint Cells
Variable Cells
Objective Cell
Key Cell Formulas
Cell Formula Copied to
E19 SUMPRODUCT(E11:E17,B11:B17) --
I11 SUMIF($D$11:$D$17,G11,$B$11:$B$17) SUMIF($C$11:$C$17,G11,$B$11:$B$17) I12:I15
H12 H11*(1 $G$5) H13:H15
E11 VLOOKUP(D11,G$11:J$15,2) (IF(D11 C11 1,G$6,G$7)*VLOOKUP(C11,G$11:J$15,2)) E12:E17
FIGURE 5.13
Solver Settings:
Objective: E19 (Min)
Variable cells: B11:B17
Constraints:
I11:I15 J11:J15
B11:B17 0
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
› ‚©– ›–†ƒƒƒ
‹ †”
‹
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
204 Chapter 5 Network Modeling
FIGURE 5.14
… … …
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Summary of Shortest Path Problems
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5.4 Transportation/Assignment Problems
€ •
¬
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Generalized Network Flow Problems 205
FIGURE 5.15
Processing
Supply Groves Distances (in miles) Plants Capacity
Mt. Dora 21 Ocala
275,000 200,000
1 4
50
40
35
Eustis 30 Orlando
400,000 600,000
2 5
22
55
20
Clermont Leesburg
300,000 225,000
3 25 6
—
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•
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5.5 Generalized Network Flow Problems
‡
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
206 Chapter 5 Network Modeling
Ÿ
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£ € ‰ Ÿ
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Recycling Process 1 Recycling Process 2
Material Cost per Ton Yield Cost per Ton Yield
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Newsprint Pulp Packaging Paper Pulp Print Stock Pulp
Pulp Source Cost per Ton Yield Cost per Ton Yield Cost per Ton Yield
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Generalized Network Flow Problems 207
FIGURE 5.16
‚
70 Newspaper
1 $13 ƒ
„
Newsprint
95% pulp 60
$12 0
90% 7
$5
80% Recycling 90%
$11
50 Mixed paper Process 1 $6
2 95% 5
90%
$13 $8 Packing
75%
paper pulp 40
8
$9 95%
85%
White of ce $6
30 paper 85%
Recycling 90%
3 $10 $8
90% Process 2
6 $7 Print stock
85% 95% pulp 50
$13 9
0
Cardboard $14
40
4
5.5.1 FORMULATING AN LP MODEL
FOR THE RECYCLING PROBLEM
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208 Chapter 5 Network Modeling
… … –
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5.5.2 IMPLEMENTING THE MODEL
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Generalized Network Flow Problems 209
FIGURE 5.17 ƒ „
Variable Cells
Constraint Cells
Objective Cell
Key Cell Formulas
Cell Formula Copied to
C6 VLOOKUP(B6,$J$6:$K$14,2) C7:C19 and G6:G19
E6 D6*A6 E7:E19
H21 SUMPRODUCT(H6:H19,A6:A19) --
L6 SUMIF($F$6:$F$19,J6,$E$6:$E$19) L7:L14
SUMIF($B$6:$B$19,J6,$A$6:$A$19)
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
210 Chapter 5 Network Modeling
š¡‡ …
˜ — š¡‡
Ÿš –
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5.5.3 ANALYZING THE SOLUTION
š ‚
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ƒ ˆ –
ƒ © 3 ”• ” 1 ƒ ‚ 3 ƒ 1 ƒ © 3 •ƒ 5 ƒˆ – –• †
FIGURE 5.18
Solver Settings:
Objective: H21 (Min)
Variable cells: A6:A19
Constraints:
L6:L14 M6:M14
A6:A19 0
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
FIGURE 5.19 ƒ „
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Generalized Network Flow Problems 211
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“‚ 5 ”” ”
–ƒ ƒ © 3 –• † 5 –ƒ ”ƒ
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5.5.4 GENERALIZED NETWORK FLOW PROBLEMS
AND FEASIBILITY
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™
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
212 Chapter 5 Network Modeling
FIGURE 5.20
Solver Settings:
Objective: H21 (Min)
Variable cells: A6:A19
Constraints:
L6:L14 M6:M14
A6:A19 0
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
FIGURE 5.21 …
FIGURE 5.22
Solver Settings:
Objective: H26 (Min)
Variable cells: A6:A22
Constraints:
L6:L15 M6:M15
A6:A22 0
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
…
†† †•…†•
š
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Generalized Network Flow Problems 213
FIGURE 5.23
Key Cell Formulas
Cell Formula Copied to
C6 VLOOKUP(B6,$J$6:$K$15,2) C7:C22 and G6:G22
E6 D6*A6 E7:E22
L6 SUMIF($F$6:$F$22,J6,$E$6:$E$22) SUMIF($B$6:$B$22,J6,$A$6:$A$22) L7:L15
H24 SUMPRODUCT(H6:H19,A6:A19) --
H25 SUMPRODUCT(H20:H22,A20:A22) --
H26 H24 H25 --
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
214 Chapter 5 Network Modeling
Important Modeling Point
™ ¬
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5.6 Maximal Flow Problems
‡
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5.6.1 AN EXAMPLE OF A MAXIMAL FLOW PROBLEM
‘ €
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FIGURE 5.24
Pumping Pumping
Station 1 Station 3
3
† 2 4
6 6
2
Oil Field Re nery
1 6
2
4
4
3 5
5
Pumping Pumping
Station 2 Station 4
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Maximal Flow Problems 215
Ÿ
ƒ ™
†
FIGURE 5.25
Pumping Pumping
Station 1 Station 3
3 †
0 2 4 0
6 6
2
Oil Field Re nery
0 1 6 0
2
4
4
0 3 5 0
5
Pumping Pumping
Station 2 Station 4
†
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–
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1“ † 2 “†” 2 “† 5 ƒ
1“ • 2 “•” 2 “• 5 ƒ
1“†” 1 “•” 2 “”– 5 ƒ
1“† 1 “• 2 “– 5 ƒ
1“”– 1 “– 2 “– 5 ƒ
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
216 Chapter 5 Network Modeling
’
ƒ # ‡ † # – ƒ # ‡† # † ƒ # ‡”– # –
ƒ # “ • # ” ƒ # “•” # † ƒ # “– # ”
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5.6.2 THE SPREADSHEET MODEL AND SOLUTION
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FIGURE 5.26 †
Variable Cells
Constraint Cells
Objective Cell
Key Cell Formulas
Cell Formula Copied to
B16 B14 --
D6 VLOOKUP(C6,$I$6:$J$11,2) D7:D14 and F6:F14
K6 SUMIF($E$6:$E$14,I6,$B$6:$B$14) SUMIF($C$6:$C$14,I6,$B$6:$B$14) K7:K11
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Maximal Flow Problems 217
FIGURE 5.27
Solver Settings:
Objective: B16 (Max)
Variable cells: B6:B14
Constraints:
†
B6:B14 G6:G14
K6:K11 L6:L11
B6:B14 0
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
†ˆ
†–
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©
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”“†”
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FIGURE 5.28
Pumping Pumping
Station 1 Station 3
3
3
2 4
†
5 6 5
6
2 2
Oil Field Re nery
1 6
2 2
4
4
4
4
3 5
5
2
Pumping Pumping
Station 2 Station 4
†‚ ™
“†”“•”
‡ “†”
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
218 Chapter 5 Network Modeling
† ” – Ÿ “•”
•
5.7 Special Modeling Considerations
‹
Ÿ
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FIGURE 5.29
0
$3 $5
100 1 3 5 75
$4 $3
$4 $5
100 2 4 6 50
$5 $6
0
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• • – š
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•ƒ
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Special Modeling Considerations 219
FIGURE 5.30
0 0
„
$3 $0 $5
100 1 30 3 5 75
L.B. 50
ˆ ‰
$4 $3
$4 $5
$0
100 2 40 4 6 50
$5 L.B. 60 $6
0 0
FIGURE 5.31
$8
75 1 $6 2 50
U.B. 35
0
10
$0 $8
$6
75 1 2 50
U.B. 35
• †
›– † ›‚
“ †
† Ÿ “ †
°
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† ›‚ ƒ
„
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
220 Chapter 5 Network Modeling
FIGURE 5.32
$5, U.B. 40
100 1 3 75
$4, U.B. 30
$6, U.B. 35
100 2 4 80
$3, U.B. 35
100 $5, U.B. 40
1 3 75
$999, U.B. 100
$4, U.B. 30
200 0
$6, U.B. 35
$999, U.B. 100
2 4 80
100 $3, U.B. 35
… …
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’‡ 2 ž # š Š
ƒ•”
† Š †
š
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Minimal Spanning Tree Problems 221
•” †
ž
† ‰
Š
‹ ¦ §
5.8 Minimal Spanning Tree Problems
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2
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€
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— Ž …
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Ž — …
FIGURE 5.33
$150 4
2 Š
$85 $75
$100
$40 1 $80
5
$85
$90
$50
3
$65 6
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
222 Chapter 5 Network Modeling
••
¨
‰ 5 –
2 5
˜
5.8.1 AN ALGORITHM FOR THE MINIMAL
SPANNING TREE PROBLEM
Œ
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5.8.2 SOLVING THE EXAMPLE PROBLEM
Œ
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
References 223
FIGURE 5.34
4 Š
2
$75
$40 1 $80
5
$50
3
$65 6
•”
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5.9 Summary
¬ ™ ‡
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5.10 References
£ ¥ £ ¦ Ž ‘ ‘ §
† Œ ’ ²Ÿ ©ˆ‚
£ Š ¤ ¦ ‡ £ §‹‹ ©
” ©ˆˆ
£ Š ¤ ‘ † Œ ’
©©†
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
224 Chapter 5 Network Modeling
Ÿ‘ ¦ € §‹ † ©‚†
‘ Š Š™ Œ — € ’‘ Ÿ ©‚
¥ ¦ §Š š †ƒ ©‚©
THE WORLD OF BUSINESS ANALYTICS
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š§‹ ††’ ² ©©† ”ˆ² ˆ†
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Questions and Problems 225
Questions and Problems
˜ „
Ÿ … …
³
† … …
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• € € ‰ Ÿ š
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š
š ˆ… ˆ
‚ƒ ‹
Ÿ ³
Ÿ ³ ³
š ‹
Ÿ ³Ÿ
³ ³
³³
š †
‡
Ÿ
³
” € ™ • Ÿ
‹ ³Š
‹
FIGURE 5.35
‚
500 1 $10
$12 90%
90% 2 702
$11 90%
550 2
$9 105%
105%
3 608
$12 105%
475 3 $7
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226 Chapter 5 Network Modeling
Š
‡ ’1ˆ“ † 1 –“ ” 1 •“†• 1 ”“†” 1 “•† 1 ©“”• 1 ‚“† 1 “”
š ˜ ’2“ † 2 “ ” 5 2
1“ † 1 “† 1 “•† 2 “†• 2 “†” 5 1”
2“•† 1 “†• 1 “”• 5 1‚
1“ ” 1 “†” 1 “” 2 “”• 5 1ƒ
2“† 2 “” 5 2ˆ
“ $ ƒ
– Š
³
‡ ’1†“ • 1 –“ ” 1 “ 1 ”“†• 1 •“†” 1 ˆ“†
š ˜ ’2“ • 2 “ ” 2 “ 5 2‚
2“†• 2 “†” 2 “† 5 2ˆ
1“ • 1 “†• 5 1
1“ ” 1 “†” 5 1
1“ 1 “† 5 1
“ $ ƒ
ˆ ‹ š •
‡ € …
›†ƒƒƒ
³ ³
‚ š ´¨
S
™
1 2 3 4 5 6 7
† ´ ´
• ´
” ´ ´
´
–
ˆ
‚ ´
€
š ƒ
˜ Ÿ ‹ ³
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Questions and Problems 227
©
”
Month
1 2 3 4
Š ”†ƒ ‚ƒ • ƒ ”ƒ
‘ € ›”© ƒƒ ›” ƒƒ ›”– ƒƒ ›”ˆ ƒƒ
‘ € ƒƒ †ƒ ”ƒ ƒ
› ƒ
€ †ƒ
”ƒƒ
ƒ
”
Š
€ š
³
Ÿ
”ƒƒ ³
ƒ ‰€ ‰€ ¤£
‰€
¤
” ™
’
Big Sisters
Pledges 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
• † ”
† † ” •
• † • ”
” ” † •
• † ”
¤
š
‡¤
†
‰
†” ¤
™
€ ¤¨
³
€ ˜ ¤ ³
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
228 Chapter 5 Network Modeling
š š
™ ƒƒƒ
ƒƒƒ
Production Cost Carrying Cost per 1,000
Month Capacity Demand Per 1,000 First Month Other Months
– „ ›ˆ ƒƒ › ƒ ›
‚ „ ›ˆˆƒƒ › ƒ ›
†ƒ ” ›ˆ–ƒƒ › †ƒ ›
†‚ †ƒ ›ˆ‚ƒƒ › • ›
†© †– ›ˆ©ƒƒ › ƒ ›
•– •• ›ˆ”ƒƒ › ›
„ †‚ „ „ „
„ ƒ „ „ „
ƒƒƒ
›ˆ ƒƒ ›††ƒ
› ƒ › ›
Š
‡
³
† …
Ÿ ¥ ‰ €
Š ±€ ‡ ±Š € ± £
Ÿ ‰
•ƒƒƒ”ƒƒƒ ž
ƒ ™ ’
Shipping Cost per Container
Dallas Chicago Denver Atlanta
Ÿ › © › › ” › †
‰ › – › ‚ › › •
› ƒ
— ƒƒ ¨ ž
†ƒƒƒ ‡
ƒƒ ›†
‡
ž Ÿ ‰ › †
› – ‡
› ”
ž
Š
‡
³
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Questions and Problems 229
•
…
’
Age in Years
0–1 1–2 2–3 3–4 4–5
ž € ›‚ƒƒƒ ›© ƒƒ › ƒˆƒƒ ›©†ƒƒ › ƒƒƒ
…¥ › ”ƒƒƒ ›©ƒƒƒ ›–ƒƒƒ ›•ƒƒ ›†ƒƒƒ
›†ƒƒƒ ” ª
†… … ¡… ™
Š
‡
³
³
” ž € ƒƒ
šŠ Œ €
ƒƒ
’
To
From Los Angeles Denver St. Louis Memphis Chicago New York
šŠ • „ ” „ ƒ
Ž „ †ˆ © ƒ „ ©
Š „ „ ” •ƒ •† „
š Ž „ ” „ • †” „
„ „ • „ ‚ †
€ „ „ †” ‚ „ ˆ
Š
Ž‘
š š ‡
£ š
‰ €
š ‘ ¥
›–ƒ
٠ݠ
š ‰ ›†ƒ›††
ˆƒƒƒƒ š ‰
’
Claxton Millen Hinesville
›” ƒƒ ›• ƒƒ ›” ƒ
›• ƒ ›• ƒƒ ›• ƒ
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230 Chapter 5 Network Modeling
€ ˆƒƒ › ƒ
–ƒƒ › —
™ ’
Savannah Perry Valdosta
› ƒ › – ›
› † › ‚ › ˆ
š ‘ ¥ ”ƒƒ•ƒƒ”ƒ
Š
‡ —
³
–
‘ š €
š
•–
FIGURE 5.36
Pittsburgh 300 800
Charleston Richmond
1,300 1 3 5
3 9
Suffolk
4
6
7 7 3 7 400
Staunton 3 8
2
4 4
1,200 2 4 6
Roanoke Norfolk
200 700
€
³
š ƒƒƒ
³
ˆ †•
•ˆ ‹
†
•
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Questions and Problems 231
FIGURE 5.37
20
3
$20
$40
30 1 $20
$30 10
$30
4 6 40
$10
40 2 $50
$30
$20
5
30
‡
¡š
‚ •‚
Ž‘
FIGURE 5.38
2
10
5
7
8
8 9
9 9
1 3 7
7 6 11
9
4
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232 Chapter 5 Network Modeling
© —
•ƒ š †•” ‹ †ƒ†•ƒ•
’
Store
Warehouse 1 2 3 4
” –
† • – ” ”
• ” • • †
Š
³
Ž‘
š š
š †
† •
³
³
†ƒ … †
•© … ”
ƒ
ƒ
FIGURE 5.39
$15
215 1 4 120
$8 $6
$12 3 $12
10
$9 $7
215 2 5 110
$16
Ž‘
† †ƒ ”
ƒ
¡š
† Š ˜
šŠ Ÿ
’
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Questions and Problems 233
Leave Dallas Leave San Diego
† –
© †
ˆ †ƒ
†• †
… ŠšŠ ›ˆƒ Ÿ
†ª … ˆ
•ª … ƒ
”ª … †ƒ
” …
ŠšŠ
Š
‡
³Ÿ ”… …
³
†† € ž€ •ƒ
Š µ ‘ £ —
± ±‘ ‡
‹ – ©
µ ‘
› †ƒ› ”ƒ› • €
†ª
Š š™— ›ƒ •
š™€ ‘ š ›ƒ †ƒ ‘ š
‘ ›ƒ †ˆ›ƒ †‚›ƒ ©
Š š™
Š— ›ƒ – Š
‘ ›ƒ †›ƒ †ƒ›ƒ
Š
‡
³
†• ž Ž
Departs Arrives Departs Arrive
Flight Atlanta in L.A. Flight L.A. in Atlanta
– ‚ ©
† ‚ ƒ † – ƒ
• ƒ • ©
” † ” ”
” – † –
– – ‚ – ©
ˆ ˆ © ˆ ˆ
ž
‹
Ÿ
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234 Chapter 5 Network Modeling
ž
™
Š
‡
³
³
³‡
³
†” †
”ƒ
€
³
š
† ³
–©
Š
FIGURE 5.40
1 459
4
180 370
621
420
430
2 3 7
345 440
813 6
543
435 541
5 240
557
8 9
515
290
10
768
423
117
11 12
312
†
€
– ›•ƒƒƒƒƒ ¨ ‹
›ƒƒƒƒ
›†ƒƒƒƒƒ
± ™ ’
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Questions and Problems 235
Investment Available in Month Months to Maturity Yield at Maturity
†•”– †ª
‰ • † • ª
€ ” • ‚ª
Š – ƒª
–
†ª š €
¬ ” • ‚ª
‹ ˜ ž
™ ‹
Š
€
³
†– Œ Ž
’
Network Segments Calls (in 1,000s)
Š€ € ‚ƒƒ
Š€ ¤€ –ƒ
Š€ Š ˆƒƒ
€ Š ˆ†
€ Š ˆƒƒ
¤€ Š ˆƒ
¤€ Š –†
Š š ©ƒƒ
Š š ˆ†
Œ Ž —€
Š€ € š
Š
€
³
†ˆ ¡ — –ƒ ‰ Š
¡ —
’
Nightly Flight Segments Capacity (in tons)
‰ ‰ •ƒ
‰ ‘ †
‰ € •
‰ ƒ
‰ €
‘
‘ € †ƒ
€ €
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236 Chapter 5 Network Modeling
Nightly Flight Segments Capacity (in tons)
€
†
Š ƒ
€ †ƒ
€ Š
Š •ƒ
€
¡ — –ƒ ‰ Š ³
Š
€
³
†‚ …
…
€
” ™
¡ š
Ÿ™ €
š
‡
š
³
FIGURE 5.41
Fairbanks
„ 1
$33.8
$10.0
$20.0
Tok 2 5 Carmacks
$20.1 $19.6
$37.4 $45.3
$25.6
Whitehorse 4 Watson Lake
6
$10.3 $21.7
$20.1 $14.4 7 Fort Nelson
Skagway
$31.0
8
3 Boya Lake $24.7
$38.8
$6.6
$24.9
New Hazelton 9 10 Chetwynd
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Questions and Problems 237
†© —… ‡
š
”† ‡
š
ƒƒƒƒƒƒ
FIGURE 5.42
1 2
4
3
3
4
3
2
7
2
4
2 3
3
6 2
4 4 2
3 10
9
5 2
3
5
3 4
8 12
2 11 3
‡
†
³
•ƒ ‰ ¶š
…
‹
Minimum Maximum
Plant Manufacturing Cost Required Production Production Capacity
› • ƒ ”ƒƒ
† › ƒ •ƒƒ
• › † ƒ –ƒƒ
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238 Chapter 5 Network Modeling
’
Plant Warehouse 1 Warehouse 2
›” ›
† ›– ›”
• ›• ›
Warehouse Distributor 1 Distributor 2 Distributor 3
›– ›” ›•
† ›• › ›†
Š •ƒƒ –ƒƒ ƒƒ
— ƒƒ
Š
‡ —
³
•
”• †•
ˆ‚
FIGURE 5.43
100 4
2 150
100
150 100 7
100
100
200
1 5
100
150 100
100 100 8
150
3 6
150
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Questions and Problems 239
Ž‘
¡š
•† ¡ š Š Šž
Š € š €
™ ””
Š † €
‡ ‹
Š € Šž
FIGURE 5.44
†
1 2
4
3
3
1
3
2
7
2
4
2 3
3
6 2
4 1 2
3 10
9
5 2
3
5
3 1
8 12
2 11 3
Ž‘
¡š
••
… ” ™
† ©
‹
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
240 Chapter 5 Network Modeling
FIGURE 5.45
30
2 6
35
35 20
40
100
30
3 7
90
45
1 25 35
95 35
4 8
85 40
20 25
36
5 9
45
š
‹
•” Ÿ ‹
’
Day Monday Tuesday Wednesday Thursday Friday
”ƒƒ •ƒƒ †ƒ ”ƒƒ •ƒ
ƒƒ ‹ Ÿ
‹
‹ ›† †… ›
ݠ
›
Š ¨
†ƒ
Š ƒ ’—
‹
€
³
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Case 5.1 241
Hamilton & Jacobs CASE 5.1
Ÿ ¶ Ÿ¶ …
Š Ÿ¶
š › –
‘Œ ¡ š ¡šŠ ˆ š
‹ ƒ
‰ Ÿ¶ – — —¡ ž
•ƒ š €Ÿ Ÿ¶ ¨
¡ š
٦
™
¡š ¡šŠ
¡Š‰ £‰‘— — —¡ ž‡
‡ ‘Œš š£Šš €Ÿ
Transaction Fee Table
FROM\TO USD AUD GBP EUR INR JPY SGD CHF
„ ƒ ƒª ƒ ƒª ƒ ”ƒª ƒ ”ƒª ƒ ”ƒª ƒ †ª ƒ ƒª
€ ƒ ƒª „ ƒ ˆƒª ƒ ƒª ƒ •ƒª ƒ •ƒª ƒ ˆª ƒ ˆª
‚ ƒ ƒ ƒª ƒ ˆƒª „ ƒ ˆƒª ƒ ˆƒª ƒ ”ƒª ƒ ”ª ƒ ƒª
„ ƒ ”ƒª ƒ ƒª ƒ ˆƒª „ ƒ ƒª ƒ ƒª ƒ ƒª ƒ ƒª
…† ƒ ”ƒª ƒ •ƒª ƒ ˆƒª ƒ ƒª „ ƒ †ƒª ƒ ƒª ƒ ƒª
‡ƒˆ ƒ ”ƒª ƒ •ƒª ƒ ”ƒª ƒ ƒª ƒ †ƒª „ ƒ ƒª ƒ ƒª
‚ ƒ †ª ƒ ˆª ƒ ”ª ƒ ƒª ƒ ƒª ƒ ƒª „ ƒ ƒª
‰Š ƒ ƒª ƒ ˆª ƒ ƒª ƒ ƒª ƒ ƒª ƒ ƒª ƒ ƒª „
‰ Ÿ¶
¡š
‡
¡š
™
Exchange Rate Table
From\To USD AUD GBP EUR INR JPY SGD CHF
†©†”© ƒ ••ˆ ƒ ‚ƒ”† ”• ƒƒƒ ƒ© ©†ƒ –”ˆ©ƒ †”‚ˆƒ
€ ƒ ˆˆ•ˆƒ ƒ ”†‚ ƒ –††† •• ––ƒ ‚ ƒ” †ˆ”©‚ ƒ ©–– †
‚ ƒ ‚ƒˆ ƒ † ••–– ”•• ˆ‚ –ƒ‚‚ ©‚ –•– † ©ˆˆ©† † †–†
„ †”•”ƒ –ƒˆƒ‚ ƒ –‚‚ƒ– ” ƒ‚ˆ© •– –ˆ † ƒ”©ƒƒ †–•
…† ƒ ƒ††©© ƒ ƒ†©ˆ ƒ ƒ †ˆ† ƒ ƒ ‚”© † †–© ƒ ƒ•ˆ‚‚ ƒ ƒ†‚ˆ
‡ƒˆ ƒ ƒƒ© ƒ ƒ ƒ ˆ– ƒ ƒƒƒ• ƒ ƒƒˆ•† ƒ •©ˆ” ƒ ƒ ”©© ƒ ƒ •–
‚ ƒ –ƒ–‚• ƒ ˆ‚”•• ƒ ••‚ ƒ ”‚‚ƒ” †– •©ˆ† –– ˆƒ• ƒ ˆˆˆ
‰Š ƒ ‚ƒƒ‚• ƒ•ƒˆ ƒ ””• – ƒ –””ƒˆ •” ‚•–† ‚‚ ƒ†ˆ • ©–©
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242 Chapter 5 Network Modeling
ƒ ƒƒ© ƒ¡š š ƒƒƒƒƒ ›© ƒ¡š Ÿ
¨ƒ ”ƒª
›© ƒ3 2 ƒ ƒƒ” 5 ›©ƒ– •– š Ÿ¶
…¡š ¡š
Š
† €
• ³
” ‡Ÿ¶ …¡š ¡š
¡š ³
š Ÿ¶ ›
³
CASE 5.2 Old Dominion Energy
¡š
¡ š — ‡
—‡ ¡š †– ˆ †ƒ ”
š
©‚ƒ †ˆ‚ƒƒƒ
… ‹
†ƒ
‹
—
‰
£
‹
‰ Š žŠ — žŠ—‡
” žŠ—
‰ ƒƒƒƒƒ ¤ ‡
›” • •ƒƒƒ ‰ Ž
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Case 5.3 243
›” –• –ƒƒƒƒ €
‰ ‹
£
¤ Ž³ ¤ ³
Ÿ ‰ Ž ™
³
‡‰ ³‡ ³
‡‰
³
FIGURE 5.46
(.53, 25) ‚
(.52, 25) Maumee Leidy
11
10
Joliet Ž
8
(.45, 20) (.33, 15)
(.28, 15)
(.47, 30)
(.47, 25) Lebanon
(.22, 15)
Kiowa 9
6 (.35, 15)
(.48, 20)
(.28, 20) Carthage
4 (.52, 15)
(.35, 25)
(.30, 30) Perryville
7
Waha
2 (.42, 30)
(.51, 15) (.32, 20)
Henry
(.21, 10) 5
Katy (.39, 15)
3
Wharton (.28, 20)
1
Index: (cost, capacity)
US Express CASE 5.3
¡š— £
˜
¦ § ˜ Ÿ
„
… š
˜
˜
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244 Chapter 5 Network Modeling
™
¨ ™
‹
Minimum Fuel Used in Flight
Fuel Level Maximum Fuel with G Gallons
at Takeoff Level at Takeoff Cost per (in 1,000s) on Board
Segment Depart Arrive (in 1,000s) (in 1,000s) Gallon at Takeoff
š † • ›ƒ ©† • †ƒ 1 ƒ ” 3 £
† š Ž ˆ †ƒ ›ƒ ‚ † † 1 ƒ – 3 £
• Ž € ‚ • ›ƒ ‚ˆ ‚ƒ 1 ƒ • 3 £
” € – • › ƒ† † †ƒ 1 ƒ –ƒ 3 £
š †ƒƒƒ
š †2 • † 1 ƒ ” 3 † 5 ƒ
‹ ‰
ƒ ’¤
Š
‡
Ÿ ¡š—
³
CASE 5.4 The Major Electric Corporation
Ÿ Ž¥‘ ‘
˜ — € —€
Ÿ
—€¨ ¨ Ÿ
‹ —€¨˜ ‘ Š ‰
Ÿ ƒƒƒƒ†ƒƒƒƒ•ƒƒƒƒ†ƒƒƒ
† … …
—€ Ÿ ¤ ¤ š
—€ ‹
—€
™ ’
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Case 5.4 245
Monthly Purchasing Contract Provisions
Supplier Unit Cost Minimum Required Maximum Allowed
‰ ‹ ›•ˆ †ƒƒƒƒ •ƒƒƒƒ
‹ ›•©ƒ †ƒƒƒ ”ƒƒƒƒ
›•– ƒƒƒ •ƒƒƒƒ
—€
š šŠ
‹
’
Monthly Shipping Contract Provisions
San Francisco Shipping Requirements San Diego Shipping Requirements
Cost per Minimum Maximum Cost per Minimum Maximum
Supplier Container Containers Containers Container Containers Containers
‰ ‹ ›†ƒƒƒ †ƒ ›†•ƒƒ †ƒ
‹ › ‚ƒƒ ƒ •ƒ ›† ƒƒ ƒ •ƒ
›†”ƒƒ † ›††ƒƒ
¡ —€ †ƒ
– š •ƒ
ˆƒ šŠ
— ƒƒƒ
—€
™
Unit Shipping Cost per Container
Pittsburgh Denver Baltimore Houston
Š › ƒƒ ›‚ƒ › †ƒƒ › ƒƒƒ
› †ƒƒ › ƒƒƒ › ƒƒ ›©ƒƒ
˜ —€ ‹
™
Minimum Required and Maximum Allowable Number of Shipping
Containers per Month
Pittsburgh Denver Baltimore Houston
Min Max Min Max Min Max Min Max
Š • ˆ – † ƒ ‚
” – ” †ƒ ƒ †ƒ
Ÿ
¨ ‹
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
246 Chapter 5 Network Modeling
‰
©’ƒƒ
€ ƒ ’ €
‹
‡
³
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Chapter 6
Integer Linear Programming
6.0 Introduction
€ ‚ ƒ „„
… †
…
6.1 Integrality Conditions
… ‡
ˆ ‰ Š ‹ ˆ…
Œ Ž… ƒ‘
ˆ
’
ƒ‘ ‘ “ ” “Œ
• ‚„ ’ ˆ ‘ “ €
“€ • „„ ƒ Œ„„
“‚€€ Œ––„
—“ —Œ ƒ‘
ˆ ˜
ƒ—˜ ‚„—“1 „„—Œ ™ š
› ˜ “—“1“—Œ#Œ„„ ™
”—“œ1€—Œ #“‚€€ ™
“Œ—“1“€—Œ#Œ––„ ™
—“—Œ$„ ™
247
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248 Chapter 6 Integer Linear Programming
Š ‹ ˆ…
…
˜
—“ —Œ
ƒ
‘
ƒ
6.2 Relaxation
ž
…
Ÿ ˜
ƒ—˜ Œ—“1 —Œ
› ˜ —“1 —Œ#–Œ‚
Œ‚—“1œ—Œ#– ‚
—“—Œ$„
—“—Œ
… ˜
ƒ—˜Œ—“1 —Œ
› ˜—“1 —Œ#–Œ‚
Œ‚—“1—Œ#– ‚
—“—Œ$„
…
ˆ
€“
ƒ €“ ““
ž
…
…
ƒ
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Solving the Relaxed Problem 249
FIGURE 6.1
X2
Feasible Integer Solutions
3
0
0 1 2 3 4 X1
6.3 Solving the Relaxed Problem
…
ƒ Œ
…
… Œ
€Œ € Œ
…
—“ 5 “ŒŒ —Œ 5 –
ˆ
Š ‹ ˆ… “‚Œ„
Œ€‚„ …
˜
ƒ—˜ ‚„—“1 „„—Œ™ š
› ˜ “—“1“—Œ#Œ„„™
”—“1€—Œ#“‚Œ„™
“Œ—“1“€—Œ#Œ€‚„™
—“—Œœ$„™
—“—Œ ™
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250 Chapter 6 Integer Linear Programming
FIGURE 6.2
Variable Cells
Objective Cell
Constraint Cells
Key Cell Formulas
Cell Formula Copied to
D6 B6*$B$5 C6*$C$5 D9:D11
€ … ““€”ŽŽŽƒ‘
”“€ ˆ •€Ž „€Š
ƒ
‘
…
‚
¡
6.4 Bounds
Š
˜… ›
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Bounds 251
›
€
•€Ž „€ ““€”ŽŽŽƒ‘ ”“€ ˆ ¢
›
†
† ›
FIGURE 6.3
ƒ
›
Key Concept
›
›
›
›
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252 Chapter 6 Integer Linear Programming
•€Ž „€… ‘
6.5 Rounding
ƒ
‡
Š
£ž ‘ ‘
¤
€
€Ž …
““ ƒ‘ –ˆ
FIGURE 6.4
Š
ƒ
€‚ ““€ƒ‘ ˆ
•€ „„ˆ
€€
ƒ
œ€‚
•€ „„ˆ €
““–ƒ‘ €ˆ
•€Ž“„„
ƒ
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Rounding 253
FIGURE 6.5
FIGURE 6.6
X2
3
Optimal relaxed solution
Infeasible solution obtained
by rounding down
0
X1
0 1 2 3 4
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254 Chapter 6 Integer Linear Programming
FIGURE 6.7
ƒ
…
¥
…
… Š¦Š
Š¦Š
6.6 Stopping Rules
‘
‘
—§ —
Š¦Š —§
…
ƒ
† › ›
Š ‹ ˆ…
€ › •€Ž „€…
›
•€Ž „€¢ Š ‹ ˆ
…
‚§ ”‚§•€Ž „€
•€“„”„ „”‚ 3 •€Ž „€ 5 •€“„”„ … ›
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Solving ILP Problems Using Solver 255
•€“„”„ ‚§
ˆ Š¦Š
6.7 Solving ILP Problems Using Solver
¢ ‘
…
Š ‹ ˆ…
€– ‘ Š ‹ ˆ
… ˆ
Š‚ Ÿ‚
…
€”
FIGURE 6.8
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256 Chapter 6 Integer Linear Programming
FIGURE 6.9
€” Š‚ Ÿ‚
Š
¨ © €” žª
€“„ Š‚ Ÿ‚
… ƒ
… ¨ ©
…
““ ƒ‘ ˆ •€Ž„‚„
ˆ €
““–ƒ‘ €ˆ
•€Ž“„„
•€Ž„‚„ £… ‡
Š ‚§
› •€Ž„‚„ œ€“„
‚§
ƒ €“„¨
©…
’
ƒ … …
€““
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Solving ILP Problems Using Solver 257
FIGURE 6.10
FIGURE 6.11
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258 Chapter 6 Integer Linear Programming
ƒ €““ ‡
… … ‡
…
„„‚„
€“Œ…
FIGURE 6.12
6.8 Other ILP Problems
ƒ
Š ‹ ˆ…
‘
ˆ
…
‘
† ‘
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An Employee Scheduling Problem 259
6.9 An Employee Scheduling Problem
ƒ
…
ˆ
ƒ
ƒ ’
¤ …
›
… ƒ ’ Š
…
¤
˜
Day of Week Workers Required
“–
Œ
ŒŒ
Œ€
Œ‚
Œ“
“”
… ƒ ’ †
…
•€‚‚ Š
•Œ‚
… ˜
Shift Days Off Wage
•€–„
… • „‚
… • „‚
… • „‚
… • „‚
•€–„
•€‚‚
…
£
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260 Chapter 6 Integer Linear Programming
6.9.1 DEFINING THE DECISION VARIABLES
Š ˜
—“ 5 “
—Œ 5 Œ
— 5
—Ž 5 Ž
—‚ 5 ‚
—€ 5 €
— 5
6.9.2 DEFINING THE OBJECTIVE FUNCTION
… › † ’
“ € •€–„ •€‚‚ƒ
• „‚ … › †
˜
¢˜ €–„—“ 1 „‚—Œ 1 „‚— 1 „‚—Ž 1 „‚—‚ 1 €–„—€ 1 €‚‚— ™
6.9.3 DEFINING THE CONSTRAINTS
… “–
Œ
… “–
Š “
Œ € …
“– ˜
„—“ 1 “—Œ 1 “— 1 “—Ž 1 “—‚ 1 “—€ 1 „— $ “– ™ ‘
Š “ Œ
Œ … ˜
„—“ 1 „—Œ 1 “— 1 “—Ž 1 “—‚ 1 “—€ 1 “— $ Œ ™ ‘
Ÿ
…
˜
“—“1„—Œ1„— 1“—Ž1“—‚1“—€1“— $ŒŒ ™ ‘ …
“—“1“—Œ1„— 1„—Ž1“—‚1“—€1“— $Œ€ ™ ‘
“—“1“—Œ1“— 1„—Ž1„—‚1“—€1“— $Œ‚ ™ ‘ …
“—“1“—Œ1“— 1“—Ž1„—‚1„—€1“— $Œ“ ™ ‘
“—“1“—Œ1“— 1“—Ž1“—‚1„—€1„— $“” ™ ‘
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An Employee Scheduling Problem 261
…
˜
—“—Œ— —Ž—‚—€— $ „
ƒ—
6.9.4 A NOTE ABOUT THE CONSTRAINTS
ƒ
‘ ‘ ƒ ’ “”
“”
£… ‘
‘ …
˜“ Œ
‘
‘ Š
›
› ‘
‘
‘
…
‘
‘
… ‘
‘
6.9.5 IMPLEMENTING THE MODEL
… ƒ ’ † ˜
¢˜€–„—“1 „‚—Œ1 „‚— 1 „‚—Ž1 „‚—‚1€–„—€1€‚‚— ™
› ˜
„—“1“—Œ1“— 1“—Ž1“—‚1“—€1„— $“– ™ ‘
„—“1„—Œ1“— 1“—Ž1“—‚1“—€1“— $Œ ™ ‘
“—“1„—Œ1„— 1“—Ž1“—‚1“—€1“— $ŒŒ ™ ‘ …
“—“1“—Œ1„— 1„—Ž1“—‚1“—€1“— $Œ€ ™ ‘
“—“1“—Œ1“— 1„—Ž1„—‚1“—€1“— $Œ‚ ™ ‘ …
“—“1“—Œ1“— 1“—Ž1„—‚1„—€1“— $Œ“ ™ ‘
“—“1“—Œ1“— 1“—Ž1“—‚1„—€1„— $“” ™ ‘
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262 Chapter 6 Integer Linear Programming
—“—Œ— —Ž—‚—€— $„
ƒ—
ƒ €“
€ “ ’
“
¢ €“
… ‘ Š“
ˆ“ ‹ˆ …
‰‚ ‰““
›
FIGURE 6.13 €
Variable Cells
Constraint Cells
Objective Cell
Key Cell Formulas
Cell Formula Copied to
B12 SUMPRODUCT(B5:B11,$I$5:$I$11) C12:H12 and J12
Ÿ ‚ ““
—“ —
… ˆ
¤ ‹ž«¤Ÿ… Š“Œ ˆ
˜
Š“Œ˜5¤ ‹ž«¤Ÿ…Š‚˜Š““••‚˜••““
Ÿ Ÿ“Œ ˆ“Œ ‰“Œ
… Ÿ“Œ ˆ“Œ ˆ
›
‰‚ ‰““ ‰“Œ
›
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An Employee Scheduling Problem 263
6.9.6 SOLVING THE MODEL
€“Ž ‘ …
€“‚
FIGURE 6.14
Solver Settings:
Objective: J12 (Min)
Variable cells: I5:I11 €
Constraints:
B12:H12 B13:H13
I5:I11 integer
I5:I11 0
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
Integer Tolerance 0
FIGURE 6.15 €
6.9.7 ANALYZING THE SOLUTION
… €“‚
‘ …
•ŒŒ‚Ž„…
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264 Chapter 6 Integer Linear Programming
6.10 Binary Variables
ƒ
† ƒ ’
Š
…
˜„ “Š
6.11 A Capital Budgeting Problem
› ›
… › ‘
‘
œ … ›
¢ ¥… ›
¢ ¥Ÿ
‹¦«Ÿ‹……
† ‹¦«
› … † ‹¦«
›
‡ ˆ
› › …
‘ › †
¢ ¥ ›
Capital (in $1,000s) Required in
Expected NPV
Project (in $1,000s) Year 1 Year 2 Year 3 Year 4 Year 5
“ •“Ž“ • ‚ •Œ‚ •Œ„ •“‚ •“„
Œ •“– •”„ • ‚ •„ •„ • „
•“Œ“ •€„ •“‚ •“‚ •“‚ •“‚
Ž •– • „ •Œ„ •“„ •‚ •‚
‚ •Œ€‚ •“„„ •Œ‚ •Œ„ •Œ„ •Œ„
€ •“Œ •‚„ •Œ„ •“„ • „ •Ž„
… •Œ‚„„„„ ›
• ‚„„„ › Œ •‚„„„„
Ž ‚
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A Capital Budgeting Problem 265
6.11.1 DEFINING THE DECISION VARIABLES
› …
—“—Œ c—€
˜
“ ›
— 5 œ 5 “Œ c€
„
’ “
› „ ›
¨ ¡ ©
›
6.11.2 DEFINING THE OBJECTIVE FUNCTION
… › † ¢ ¥ › …
˜
ƒ—˜“Ž“—“ 1 “– —Œ 1 “Œ“— 1 – —Ž 1 Œ€‚—‚ 1 “Œ —€
¢ › ¢ ¥ ›
6.11.3 DEFINING THE CONSTRAINTS
›
‘ … ˜
‚—“1”„—Œ1€„— 1 „—Ž1“„„—‚1‚„—€#œŒ‚„ ™ “
Œ‚—“1 ‚—Œ1“‚— 1Œ„—Ž1Œ‚—‚1Œ„—€#œ ‚ ™ Œ
Œ„—“1„—Œ1“‚— 1“„—Ž1Œ„—‚1“„—€#œ ‚„ ™
“‚—“1 „—Œ1“‚— 1‚—Ž1Œ„—‚1 „—€#œ ‚„ ™ Ž
“„—“1 „—Œ1“‚— 1‚—Ž1Œ„—‚1Ž„—€#œ ‚„ ™ ‚
6.11.4 SETTING UP THE BINARY VARIABLES
˜
ƒ—
6.11.5 IMPLEMENTING THE MODEL
… Ÿ‹…… › † ˜
ƒ—˜ “Ž“—“1“– —Œ1“Œ“— 1– —Ž1Œ€‚—‚1“Œ —€
› ˜ ‚—“1”„—Œ1€„— 1 „—Ž1“„„—‚1‚„—€#Œ‚„
Œ‚—“1 ‚—Œ1“‚— 1Œ„—Ž1Œ‚—‚1Œ„—€# ‚
Œ„—“1„—Œ1“‚— 1“„—Ž1Œ„—‚1“„—€#‚„
“‚—“1„—Œ1“‚— 1‚—Ž1Œ„—‚1 „—€#‚„
“„—“1 „—Œ1“‚— 1‚—Ž1Œ„—‚1Ž„—€#‚„
ƒ—
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266 Chapter 6 Integer Linear Programming
… €“€
€ “€ ›
FIGURE 6.16 ‚
Variable Cells
Constraint Cells
Objective Cell
Key Cell Formulas
Cell Formula Copied to
D12 SUMPRODUCT(D6:D11,$B$6:$B$11) E12:H12
D15 SUMPRODUCT(C6:C11,$B$6:$B$11) --
Ÿ Š€ Š““ „
… ˆ
«“Œ ’“Œ
ˆ“Œ˜
«“Œ˜5¤ ‹ž«¤Ÿ…«€˜«““•Š•€˜•Š•““
Ÿ ’“Œ ˆ“Œ
… ‹ˆ «“ ˆ“
› «“‚˜
«“‚˜¬¤ ‹ž«¤Ÿ…Ÿ€˜Ÿ““•Š•€˜•Š•““
6.11.6 SOLVING THE MODEL
… ›
…
€“ › «“‚
Š€ Š““ƒ
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A Capital Budgeting Problem 267
FIGURE 6.17
Solver Settings:
Objective: D15 (Max)
Variable cells: B6:B11
Constraints: ‚
B6:B11 binary
D12:H12 D13:H13
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
Integer Tolerance 0
FIGURE 6.18 ‚
… Š€ Š““
¨ ©
ƒŸ €”…
«“Œ ˆ“Œ ‘
«“ ˆ“ …
Š
Œ€ 5 €Ž
… „
€“–
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268 Chapter 6 Integer Linear Programming
6.11.7 COMPARING THE OPTIMAL SOLUTION
TO A HEURISTIC SOLUTION
… €“– Ÿ‹……
› “Ž ‚ ¢ ¥•Ž–”„„„ƒ
ƒ ›
¢ ¥ ›
ƒ €“”
› ‚ Œ ›
‚… ¢ ¥•Ž‚Œ„„„ƒ
† ‘ ‘
FIGURE 6.19
‚
6.12 Binary Variables and Logical
Conditions
Š
Ÿ‹……
› › “ €
…
…
˜
—“ 1 — 1 —€ # “
Š —“— —€
“
˜
—“ 1 — 1 —€ 5 “
ƒ › Ž
› ‚ › Ž
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The Line Balancing Problem 269
› ‚…
˜
—Ž 2 —‚ # „
… —Ž —‚
† ˜
Value of
X4 X5 Meaning Feasible?
„ „ « › ®
“ “ › ®
„ “ ‚ Ž ®
“ „ Ž ‚ ¢
ƒ
› Ž › ‚
ƒ
6.13 The Line Balancing Problem
ƒ
‘ …
«
Š
‘ …
Ÿ Ÿ «
Ÿ
‘ €Œ„ †
‘
ƒ Š Ÿ
…
‘ „‚
6.13.1 DEFINING THE DECISION VARIABLES
…
‘ …
…
˜
“ ‚
ƒ ‚ 5 5 ƒŠ cˆ‚ 5 “Œ c–
„
ž ‘
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270 Chapter 6 Integer Linear Programming
FIGURE 6.20
„ 0.27
0.18
B
E
0.20 0.21 0.19 0.29 0.26
A C F G H
0.18
6.13.2 DEFINING THE CONSTRAINTS
ƒ
…
˜
—ƒ“1—ƒŒ1—ƒ 1—ƒŽ1—ƒ‚1—ƒ€1—ƒ 1—ƒ–5“ ™ … ƒ
—Š“1—ŠŒ1—Š 1—ŠŽ1—Š‚1—Š€1—Š 1—Š–5“ ™… Š
¯
—ˆ“1—ˆŒ1—ˆ 1—ˆŽ1—ˆ‚1—ˆ€1—ˆ 1—ˆ–5“ ™… ˆ
¢ ‘
„‚ …
˜
„Œ—ƒ“ 1 „Œ —Š“ 1 „Œ“—Ÿ“ 1 „“–—«“ 1 „“–—’“ 1 „“”—“ 1 „Œ”—°“ …
1 „Œ€—ˆ“ # „‚ “
„Œ—ƒŒ 1 „Œ —ŠŒ 1 „Œ“—ŸŒ 1 „“–—«Œ 1 „“–—’Œ 1 „“”—Œ 1 „Œ”—°Œ …
1 „Œ€—ˆŒ # „‚ Œ
¯
„Œ—ƒ– 1 „Œ —Š– 1 „Œ“—Ÿ– 1 „“–—«– 1 „“–—’– 1 „“”—– 1 „Œ”—°– …
1 „Œ€— # „‚ –
ˆ–
… €Œ„ † ‘
ƒ Š…
ƒ
Š ƒ
ƒ Š
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The Line Balancing Problem 271
“Œ c–
˜
5 “— “ 1 Œ— Œ 1 — 1 Ž— Ž 1 ‚— ‚ 1 €— € 1 — 1 –— –
Ÿ —Ÿ 5 “ Ÿ 5 —Ÿ 5
¤ ˜
ƒ # Š ƒ 2 Š # „ ™… Š ƒ
ƒ # Ÿ ƒ 2 Ÿ # „ ™… Ÿ ƒ
ƒ # « ƒ 2 « # „ ™… « ƒ
Š # ’ Š 2 ’ # „ ™… ’ Š
Ÿ # Ÿ 2 # „ ™… Ÿ
« # « 2 # „ ™… «
’ # ° ’ 2 ° # „ ™… ° ’
# ° 2 ° # „ ™… °
° # ˆ ° 2 ˆ # „ ™… ˆ °
¢ Š
ƒ ƒ 5 Š ƒ , Š
6.13.3 DEFINING THE OBJECTIVE
‹ ›
‘ „‚ Š
†
… › ˜
¢˜ƒ— ƒ Š Ÿ « ’ ° ˆ
¤ ›
ˆ ›
± ˜
¢˜ ±
ƒ # ±
Š # ±
¯
ˆ # ±
Š ± ‘
† ±
‘ ƒ ›
± … ‘
† †
¢ ‘ †
†
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272 Chapter 6 Integer Linear Programming
6.13.4 IMPLEMENTING THE MODEL
… Ÿ Ÿ «
† ˜
¢˜ ±
› ˜
—ƒ“ 1 —ƒŒ 1 —ƒ 1 —ƒŽ1 —ƒ‚1 —ƒ€1 —ƒ 1 —ƒ–5 “ ™ƒ ƒ
—Š“ 1 —ŠŒ 1 —Š 1 —ŠŽ 1 —Š‚ 1 —Š€ 1 —Š 1 —Š– 5 “ ™ƒ Š
¯
—ˆ“ 1 —ˆŒ 1 —ˆ 1 —ˆŽ 1 —ˆ‚ 1 —ˆ€ 1 —ˆ 1 —ˆ– 5 “ ƒ
ˆ
„Œ—ƒ“ 1 „Œ —Š“ 1 „Œ“—Ÿ“ 1 „“–—«“ 1 „“–—’“ 1 „“”—“ 1 „Œ”—°“ …
1 „Œ€—ˆ“ # „‚ “
„Œ—ƒŒ 1 „Œ —ŠŒ 1 „Œ“—ŸŒ 1 „“–—«Œ 1 „“–—’Œ 1 „“”—Œ 1 „Œ”—°Œ …
1 „Œ€—ˆŒ # „‚ Œ
¯
„Œ—ƒ– 1 „Œ —Š– 1 „Œ“—Ÿ– 1 „“–—«– 1 „“–—’– 1 „“”—– 1 „Œ”—°– …
1 „Œ€—ˆ– # „‚ –
ƒ # ± ™ž› ƒ‡
Š # ± ™ž› Š‡
¯
ˆ # ± ™ž› ˆ‡
ƒ 2 Š # „ ™… Š ƒ
ƒ 2 Ÿ # „ ™… Ÿ ƒ
ƒ 2 « # „ ™… « ƒ
Š 2 ’ # „ ™… ’ Š
Ÿ 2 # „ ™… Ÿ
« 2 # „ ™… «
’ 2 ° # „ ™… ° ’
2 ° # „ ™… °
° 2 ˆ # „ ™… ˆ °
˜
ƒ 5 “—ƒ“ 1 Œ—ƒŒ 1 —ƒ 1 Ž—ƒŽ 1 ‚—ƒ‚ 1 €—ƒ€ 1 —ƒ 1 –—ƒ– … ƒ‡
œ
Š 5 “—Š“ 1 Œ—ŠŒ 1 —Š 1 Ž—ŠŽ 1 ‚—Š‚ 1 €—Š€ 1 —ƒ 1 –—Š– … Š‡
¯
ˆ 5 “—ˆ“ 1 Œ—ˆŒ 1 —ˆ 1 Ž—ˆŽ 1 ‚—ˆ‚ 1 €—ˆ€ 1 —ˆ 1 –—ˆ– … ˆ‡
ƒ—›
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The Line Balancing Problem 273
ƒ €Œ“
€ Œ“ Ÿ «€ ª“
ƒ €Œ“
‘
… ˆ €
“
’ ‘ “
€˜ ¬¤«€˜ª€
Ÿ “
«“Ž ª“Ž
“€
«“Ž˜ ¬¤ ‹ž«¤Ÿ…«€˜«“ •Ÿ•€˜•Ÿ•“
Ÿ ’“Ž ª“Ž
… €
“ ˜
€˜ ¬¤ ‹ž«¤Ÿ…«€˜ª€•«•‚˜•ª•‚
Ÿ “
FIGURE 6.21
Variable Cells
Objective And Variable Cell
Constraint Cells
Key Cell Formulas
Cell Formula Copied to
D14 SUMPRODUCT(D6:D13,$C$6:$C$13) E14:K14
L6 SUM(D6:K6) L7:L13
M6 SUMPRODUCT(D6:K6,$D$5:$K$5) M7:M13
D18 VLOOKUP(B18,$B$6:$M$13,12) – D19:D26
VLOOKUP(C18,$B$6:$M$13,12)
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274 Chapter 6 Integer Linear Programming
… ‘
Š“– ŸŒ€‹
… ˆ
«“– «Œ€ ‘ †
«“–˜¬¥ žžª¤ Š“–•Š•€˜••“ “Œ ¥ žžª¤ Ÿ“–•Š•€˜••“ “Œ
Ÿ «“” «Œ€
… ¥ žžª¤ ¨ © Š“–
Š€ “
“Œ “Œ
¥ žžª¤ «“– ¥ žžª¤
ƒŠ“– Š€
“ “
“Œ € Š€ “ …
¥ žžª¤ Ÿ“– Š
Œ Ÿ «“” «Œ€
Š ¥ žžª¤
‡
¥ žžª¤
Š
› “Ž
ƒ—€˜“
“Ž
› ƒ
… – “Ž €Œ“
† “Ž
‘ € “ …
† ‘
6.13.5 ANALYZING THE SOLUTION
… €ŒŒ
ƒ “Ž ›
† … €Œ
FIGURE 6.22
Solver Settings:
Objective: M14 (Min)
Variable cells: D6:K13, M14
Constraints:
D14:K14 M16
D18:D26 0
L6:L13 1
M6:M13 M14
D6:K13 binary
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
Integer Tolerance 0
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The Line Balancing Problem 275
FIGURE 6.23
… ‘ … ƒ Ÿ
“ Š « Œ ’
° Ž ˆ ‚¢
‘ „‚
6.13.6 EXTENSION
¤
‘
ƒ
“ – ²
› ‘
„Œ” ³ Š
Œ Ž‚€ £
£
† † ‘
€ŒŽ € ŒŽ
‘ “€
› † ƒ
“Ž ‹ˆ € “
€ŒŽ
ˆ
“Ž ¨ † ©
“Ž˜¬ ž “–
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276 Chapter 6 Integer Linear Programming
FIGURE 6.24
Variable Cells
Constraint Cells
Objective And
Variable Cell
Key Cell Formulas
Cell Formula Copied to
M14 PsiOptParam(1,8) --
D14 SUMPRODUCT(D6:D13,$C$6:$C$13) E14:K14
L6 SUM(D6:K6) L7:L13
M6 SUMPRODUCT(D6:K6,$D$5:$K$5) M7:M13
D18 VLOOKUP(B18,$B$6:$M$13,12) – D19:D26
VLOOKUP(C18,$B$6:$M$13,12)
… ž “Ž ƒ
“ – …
ž
ž
ƒ €Œ‚ ƒ
– †
€Œ€ƒ
† “Ž“– ‘
ƒ €Œ †
ƒ ¢
„‚‚ ƒ
‘
ƒ
† † ƒ
ƒ €Œ
› † † …
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The Line Balancing Problem 277
FIGURE 6.25
FIGURE 6.26
Solver Settings:
Objective: M16 (Min)
Variable cells: D6:K13, M16
Constraints:
L6:L13 = 1
D14:K14 <= M16
D18:D26 <= 0
M6:M13 <= M14
D6:K13 = binary
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
Integer Tolerance = 0
Optimizations to Run = 8
… €Œ † †
ƒ †
€Œ ˜
“Ÿ Ÿ ƒ
Œ ž † Ÿ
’ ž› ••“€ ¨´©
ŽŸ žª
ƒ †
†
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278 Chapter 6 Integer Linear Programming
FIGURE 6.27 €
6.14 The Fixed-Charge Problem
›
† †
›
ˆ
…
€ …
˜
• ‘
‘
• ‘
• ‘
• ‘
‚
ž
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The Fixed-Charge Problem 279
…
‹ …
… †
‘
Hours Required By
Operation Product 1 Product 2 Product 3 Total Hours Available
Œ € €„„
° € Ž „„
ƒ ‚ € Œ Ž„„
… “
•Ž– Œ
•‚‚ •‚„ ˆ “
‘ •“„„„
‘ Œ •–„„ •”„„ …
…
‹
6.14.1 DEFINING THE DECISION VARIABLES
ƒ
˜
— 5 5 “Œ
“ƒ . „
® 5 5 “Œ
„ƒ 5 „
—“ƒŒ — “Œ
’ — ®
‘ “— ‘ „— „
— ®
6.14.2 DEFINING THE OBJECTIVE FUNCTION
° ›
˜
ƒ—˜ Ž–—“ 1 ‚‚—Œ 1 ‚„— 2 “„„„®“ 2 –„„®Œ 2 ”„„®
…
“Œ …
—“
® ®“ ‘ “ƒ ®“ 5 “
› •“„„„
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280 Chapter 6 Integer Linear Programming
ž —“ 5 „ ®“ 5 „…
—“ “ ›
—Œ ®Œ — ®
6.14.3 DEFINING THE CONSTRAINTS
Ÿ
…
˜
Œ—“ 1 —Œ 1 €— # €„„ ™
€—“ 1 —Œ 1 Ž— # „„ ™
‚—“ 1 €—Œ 1 Œ— # Ž„„ ™
— ˜
— $ „ 5 “Œ
… ®
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Ĩ
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— ® ®
— … „
® — …
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—“ # “®“
—Œ # Œ®Œ
— #®
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5 “„„„„…
— ® —
„ ®
“ ž —
‘ „ ® ‘ „“
ˆ ›
® ‘ „ “
› … —
‘ „ ® ‘ „
›
6.14.4 DETERMINING VALUES FOR “BIG M”
… ¨Š©
ˆ
ƒ
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The Fixed-Charge Problem 281
—
€„ —“ “ 5 €„ˆ
—
‡ —“ ‹
—“ £‹
„ —Œ —
€„„¡Œ 5 „„ —“
„„¡€ 5 ‚„ —“
Ž„„¡‚ 5 –„ —“…
—“ ‚„¤
—Œ ¢€„„¡ „„¡
Ž„„¡€ 5 €€€ — ¢ €„„¡€ „„¡ŽŽ„„¡Œ 5 ‚
… —“—Œ —
“ 5 ‚„Œ 5 €€€ 5 ‚ ¢
£
ˆ
6.14.5 IMPLEMENTING THE MODEL
¤ ‹ ‡
† ˜
ƒ—˜ Ž–—“1‚‚—Œ1‚„— 2“„„„®“2–„„®Œ2”„„®
› ˜ Œ—“1 —Œ1€— #€„„œœœœœ™
€—“1 —Œ1Ž— # „„ ™
‚—“1€—Œ1Œ— #Ž„„ ™
—“2‚„®“#„ ™
—Œ2€ ®Œ#„ ™
— 2 ‚® #„ ™
ƒ® ™
ƒ— ™
— $„ 5“Œ ™
…
‘
ˆ ‘ ‹ˆ…
€Œ– € Œ–
€Œ– Š‚Ÿ‚ «‚ —“—Œ
— Š“‚Ÿ“‚ «“‚ ®“®Œ ® …
› Š «–… ›
– ˜
–˜ ¬¤ ‹ž«¤Ÿ…Š ˜« Š‚˜«‚²
¤ ‹ž«¤Ÿ…Š–˜«–Š“‚˜«“‚
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282 Chapter 6 Integer Linear Programming
FIGURE 6.28
…
†
Variable Cells
Objective Cell
Constraint Cells
Key Cell Formulas
Cell Formula Copied to
B16 B5-MIN($F$11/B11,$F$12/B12,$F$13/B13)*B15 C16:D16
E11 SUMPRODUCT(B11:D11,$B$5:$D$5) C23:E23
F8 SUMPRODUCT(B7:D7,B5:D5) --
SUMPRODUCT(B8:D8,B15:D15)
Ÿ Š““ «“
… ˆ
’““ ’“ ““ “ ‹ˆ
ˆ Š“€
«“€˜
Š“€˜ ¬Š‚ ¢••““¡Š““••“Œ¡Š“Œ••“ ¡Š“ µŠ“‚
Ÿ Ÿ“€ «“€
‹ˆ
6.14.6 SOLVING THE MODEL
… ‘ €Œ”
¢ Š‚ «‚ Š“‚ «“‚ —
® ƒ
Š“‚ «“‚
Š
… „
€ „
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The Fixed-Charge Problem 283
FIGURE 6.29
Solver Settings:
Objective: F8 (Max)
Variable cells: B5:D5, B15:D15 …†
Constraints:
E11:E13 <= F11:F13
B16:D16 <= 0
B5:D5 >= 0
B5:D5 = integer
B15:D15 = binary
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
Integer Tolerance = 0
FIGURE 6.30 …
6.14.7 ANALYZING THE SOLUTION
… € „
„ “ ‚€ Œ Œ
—“ 5 „—Œ 5 ‚€ — 5 Œ „“ “
Š“‚Ÿ“‚ «“‚ ®“ 5 „®Œ 5 “ ® 5 “ …
— ®
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284 Chapter 6 Integer Linear Programming
… Š“€Ÿ“€ «“€ —“—Œ
— Š‚Ÿ‚ «‚
… —Œ “„€
€€€ — Ž ‚
Š ®“† —“ ®“
„ —“… Š“€
—“„ „
6.14.8 A COMMENT ON IF( ) FUNCTIONS
€ „ Š“‚Ÿ“‚ «“‚
®“®Œ ® ›
„
› †
‡› ¨ ©
›
Š‚Ÿ‚ «‚ —“—Œ —
€ “ € “
› – ˜
–˜¬¤ ‹ž«¤Ÿ…Š ˜« Š‚˜«‚ Š‚´„Š–„
Ÿ‚´„Ÿ–„ «‚´„«–„
FIGURE 6.31 … ‡ˆ
„
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Minimum Order/Purchase Size 285
ƒ
¤
’ ‡
ž † ƒ
‘
ž
ƒ
¨ Ÿ ©
¢
ƒ ¢
€ “ € „
¥ «
ƒ € “
€ „… ƒ ‡
€ “ ” ŒŒ
‚“ € „
€ Œ“
… ‘ ƒ
ˆ
† ƒ
ƒ
…
ƒ ‡
ƒ ¨¢ … ©
¨¢ ©
6.15 Minimum Order/Purchase Size
† ‘
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ž ‘
“„
†
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‹
— Ž„
… ˜
— #®
— $ Ž„®
…
— ®
— ® ‘ “— . „
® 5 “ˆ ® ‘ “ —
‘ Ž„® 5 “ — $ Ž„ž — ‘ „
® ‘ „ …
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286 Chapter 6 Integer Linear Programming
— Ž„…
6.16 Quantity Discounts
›
Š ‹ ˆ… ˜
ƒ—˜ ‚„—“1 „„—Œ ™ š
› ˜ “—“1“—Œ#Œ„„ ™
”—“1€—Œ#“‚Œ„ ™
“Œ—“1“€—Œ#Œ€‚„ ™
—“—Œ$„ ™
—“—Œ ™
… ƒ‘ —“
• ‚„ ˆ
—Œ • „„ ˆ
‘
‚ƒ‘
‘
• ‚ ‚
‚„ˆ
• Œ‚ ‚„…
‚ —“ ‚„ —Œ • ‚„
• „„ —“ —Œ
• ‚ • Œ‚ ˆ £
6.16.1 FORMULATING THE MODEL
… ƒ‘
ˆ
—““ 5 ƒ‘ • ‚„
—“Œ 5 ƒ‘ • ‚
—Œ“ 5 ˆ • „„
—ŒŒ 5 ˆ • Œ‚
¤ ˜
ƒ—˜ ‚„—““1 ‚—“Œ1 „„—Œ“1 Œ‚—ŒŒ
› ˜ “—““1“—“Œ1“—Œ“1“—ŒŒ#Œ„„™
”—““1”—“Œ1€—Œ“1€—ŒŒ#“‚Œ„ ™
“Œ—““1“Œ—“Œ1“€—Œ“1“€—ŒŒ#Œ€‚„ ™
ƒ— ‚$„ ™
ƒ— ‚ ™
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A Contract Award Problem 287
… ¢ —“Œ
—““ —“Œ ‘ —““
… —ŒŒ —Œ“…
—““ 5 „—“Œ 5 ““–—Œ“ 5 „ —ŒŒ 5 €ˆ
—“Œ
‚ —““ —ŒŒ
‚„ —Œ“…
6.16.2 THE MISSING CONSTRAINTS
… —“Œ
‚ —““ ˜
—“Œ # “Œ®“
—““ $ ‚®“
“Œ
®“ … ‘ ®“ 5 “
—“Œ —“Œ . „ ®“ 5 “ˆ ®“ 5 “
‘ —““ ‚ƒ
‚ —““ ®“ 5 „
—“Œ 5 „… —“Œ
‚ —““ …
—ŒŒ
‚„ —Œ“˜
—ŒŒ # ŒŒ®Œ
—Œ“ $ ‚„®Œ
®“ ®Œ
…
—““ 5 ‚—“Œ 5 Ž —Œ“ 5 ‚„—ŒŒ 5 Œ€
6.17 A Contract Award Problem
ž
…
Š¦°Ÿ …
…
’ › ‘
ƒŠ¦°‡ ‘
›
… †
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288 Chapter 6 Integer Linear Programming
Cost per Delivered Ton of Cement
Project 1 Project 2 Project 3 Project 4 Max. Supply
Ÿ “ •“Œ„ •““‚ •“ „ •“Œ‚ ‚Œ‚
Ÿ Œ •“„„ •“‚„ •““„ •“„‚ Ž‚„
Ÿ •“Ž„ •”‚ •“Ž‚ •“€‚ ‚‚„
…… ¢ Ž‚„ Œ ‚ „„ ‚„
“ ‚Œ‚
› “Œ Ž •“Œ„•““‚•“ „ •“Œ‚
…
…
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“
“‚„ › Ÿ Œ
Œ„„ ›
Ÿ Œ„„ Ž„„
‚‚„
Š¦° ‘
› …
›
…
› › ˆ
‘
‡
› … ‡
‘
6.17.1 FORMULATING THE MODEL: THE OBJECTIVE
FUNCTION AND TRANSPORTATION CONSTRAINTS
… ˜
— ‚ 5 › ‚
… › † ˜
¢˜“Œ„—““1““‚—“Œ1“ „—“ 1“Œ‚—“Ž
1“„„—Œ“1“‚„—ŒŒ1““„—Œ 1“„‚—ŒŽ
1“Ž„— “1”‚— Œ1“Ž‚— 1“€‚— Ž
…
˜
—““1—“Œ1—“ 1—“Ž#‚Œ‚™ “
—Œ“1—ŒŒ1—Œ 1—ŒŽ#Ž‚„™ Œ
— “1— Œ1— 1— Ž#‚‚„™
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A Contract Award Problem 289
… ‘ ›
˜
—““ 1 —Œ“ 1— “ 5 Ž‚„™ › “
—“Œ 1 —ŒŒ 1— Œ 5 Œ ‚™ › Œ
—“ 1 —Œ 1— 5 „„™ ›
—“Ž 1 —ŒŽ 1— Ž 5 ‚„™ › Ž
6.17.2 IMPLEMENTING THE TRANSPORTATION
CONSTRAINTS
… ›
€ Œ € Œ
FIGURE 6.32 ‰Š…
Variable Cells
Constraint Cells
Objective Cell
Key Cell Formulas
Cell Formula Copied to
B15 5SUM(B12:B14) C15:E15
F12 5SUM(B12:E12) F13:F14
G17 5SUMPRODUCT(B6:E8,B12:E14) --
Š€ ’–Ÿ Š“Œ
’“Ž … › °“ ˜
°“ ˜ ¬¤ ‹ž«¤Ÿ…Š€˜’–Š“Œ˜’“Ž
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290 Chapter 6 Integer Linear Programming
… ˆ “Œ “Ž˜
“Œ˜5¤Š“Œ˜’“Œ
Ÿ “ “Ž
Ÿ °“Œ °“Ž ‹ˆ … ˆ
Š“‚ ’“‚˜
Š“‚˜5¤Š“Œ˜Š“Ž
Ÿ Ÿ“‚ ’“‚
Ÿ Š“€ ’“€ ‹ˆ
6.17.3 FORMULATING THE MODEL: THE SIDE CONSTRAINTS
Ÿ “ “‚„
› … †
® ‚ ˜
—““ # ‚Œ‚®““ —““ 2 ‚Œ‚®““ # „
—“Œ # ‚Œ‚®“Œ —“Œ 2 ‚Œ‚®“Œ # „
—“ # ‚Œ‚®“ —“ 2 ‚Œ‚®“ # „
—“Ž # ‚Œ‚®“Ž —“Ž 2 ‚Œ‚®“Ž # „
—““ $ “‚„®““ —““ 2 “‚„®““ $ „
—“Œ $ “‚„®“Œ —“Œ 2 “‚„®“Œ $ „
—“ $ “‚„®“ —“ 2 “‚„®“ $ „
—“Ž $ “‚„®“Ž —“Ž 2 “‚„®“Ž $ „
’ ‘
…
—““—“Œ—“ —“Ž „
®““®“Œ®“ ®“Ž ‘ “…
‚Œ‚ —““—“Œ—“ —“Ž
… —““—“Œ—“ —“Ž „
“‚„
“ “‚„
Ÿ Œ Œ„„
› …
® ‚ ˜
—Œ“ # Œ„„ 1 Œ‚„‹Œ“ —Œ“ 2 Œ„„ 2 Œ‚„®Œ“ # „
—ŒŒ # Œ„„ 1 Œ‚„®ŒŒ —ŒŒ 2 Œ„„ 2 Œ‚„®ŒŒ # „
—Œ # Œ„„ 1 Œ‚„®Œ —Œ 2 Œ„„ 2 Œ‚„®Œ # „
—ŒŽ # Œ„„ 1 Œ‚„®ŒŽ —ŒŽ 2 Œ„„ 2 Œ‚„®ŒŽ # „
®Œ“ 1 ®ŒŒ 1 ®Œ 1 ®ŒŽ # “
… Œ › “
Œ„„®Œ“ 5 „ Ž‚„ Œ
®Œ“ 5 “…
Œ › Œ Ž …
®Œ“®ŒŒ®Œ ®ŒŽ ‘ “… ›
Œ„„ Œ
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A Contract Award Problem 291
… ‡
Œ„„Ž„„‚‚„ …
® ‚ ˜
— “ 1 — Œ 1 — 1 — Ž 5 Œ„„® “ 1 Ž„„® Œ 1 ‚‚„®
— “ 1 — Œ 1 — 1 — Ž 2 Œ„„® “ 2 Ž„„® Œ 2 ‚‚„® 5 „
® “ 1 ® Œ 1 ® # “
…
® “ 5 ® Œ 5 ® 5 „
® “ 5 “ Œ„„ ® Œ 5 “ Ž„„
® 5 “ ‚‚„ …
6.17.4 IMPLEMENTING THE SIDE CONSTRAINTS
ƒ
¨ ©
³ ³ …
€
… “ †
“‚„ ŠŒ„ ŠŒ“ ’Œ“
®““®“Œ®“ ®“Ž… ˆ “
ŠŒŒ ’ŒŒ˜
ŠŒŒ˜5Š“Œ2•°•“ŒµŠŒ“
Ÿ ŸŒŒ ’ŒŒ
Ÿ ŒŒ
‘ „… ˆ † “
ŠŒ ’Œ ˜
ŠŒ ˜5Š“Œ2•Š•Œ„µŠŒ“
Ÿ ŸŒ ’Œ
Ÿ Œ
‘ „
… Œ
Œ„„ ŠŒ‚ ŠŒ€ ’Œ€
®Œ“®ŒŒ®Œ ®ŒŽ… ˆ
ŠŒ ’Œ ˜
ŠŒ ˜5Š“ 2•Š•Œ‚2•°•“ 2•Š•Œ‚µŠŒ€
Ÿ ŸŒ ’Œ
Ÿ Œ ‘ „ƒ
Œ Œ„„
Œ “… ˆ
’Œ–˜
’Œ–˜¬¤ŠŒ€˜’Œ€
Ÿ Œ– ‘ “
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292 Chapter 6 Integer Linear Programming
FIGURE 6.33 ‰Š…
Variable Cells
Constraint Cells
Key Cell Formulas
Cell Formula Copied to
B22 5B122$G$12*B21 C22:E22
B23 5B122$B$20*B21 C23:E23
B27 5B132$B$252($G$132$B$25)*B26 C27:E27
E28 5SUM(B26:E26) --
D32 5SUM(B14:E14)2SUMPRODUCT(B30:D30,B31:D31) --
D33 5SUM(B31:D31) --
…
Š „ « „Ÿ Š “ « “
® “® Œ ® … ˆ ‡
« Œ˜
« Œ˜¬¤Š“Ž˜’“Ž²¤ ‹ž«¤Ÿ…Š „˜« „Š “˜« “
Ÿ ’ Œ « Œ ‘ „
‘ “
« ˜
« ˜¬¤Š “˜« “
Ÿ ’ ‘ “
6.17.5 SOLVING THE MODEL
… ‘ € Ž¢
„“
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The Branch-and-Bound Algorithm (Optional) 293
FIGURE 6.34
Solver Settings:
Objective: G17 (Min)
‰Š…
Variable cells: B12:E14, B21:E21, B26:E26, B31:D31
Constraints:
B12:E14 $ 0
B21:E21 5 binary
B26:E26 5 binary
B31:D31 5 binary
F12:F14 # G12:G14
B15:E15 5 B16:E16
B22:E22 # 0
B23:E23 $ 0
B27:E27 # 0
E28 # 1
D32 5 0
D33 # 1
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
Integer Tolerance 5 0
6.17.6 ANALYZING THE SOLUTION
ƒ € ‚
‘
› ƒ
“
“‚„ Œ
Œ„„ ‘
Ž„„
6.18 The Branch-and-Bound
Algorithm (Optional)
ƒ Š¦Š
‘ ƒ
‘ ‘ ‡
Š¦Š …
Š¦Š ‡
… Š¦Š
ƒ
³
ˆ
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294 Chapter 6 Integer Linear Programming
FIGURE 6.35 ‰Š…
€“
€ €˜
ƒ—˜ Œ—“1 —Œ
› ˜ —“1 —Œ#–Œ‚
Œ‚—“1—Œ#– ‚
—“—Œ$„
—“—Œ
—“ 5 Œ €”—Œ 5 “–Œ€ € €…
…
…
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The Branch-and-Bound Algorithm (Optional) 295
FIGURE 6.36
X2
Feasible integer solutions
3
Optimal relaxed solution
2
(X1 5 2.769, X2 5 1.826)
0
X1
0 1 2 3 4
6.18.1 BRANCHING
ƒ
—“ —Œ
—“ 5 Œ €” —Œ 5 “–Œ€
’
‡ —“ Š
—“
… —“ ‘ Œ —“ # Œ
‘ —“ $
… —“ Œ
—“ 5 Œ €”
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296 Chapter 6 Integer Linear Programming
Š —“
˜
˜ ƒ—˜ Œ—“1 —Œ
› ˜ —“1 —Œ#–Œ‚
Œ ‚—“1—Œ#– ‚
—“#Œ
— “—Œ$„
—“—Œ
˜ ƒ—˜ Œ—“1 —Œ
› ˜ —“1 —Œ#–Œ‚
Œ‚—“1—Œ#– ‚
—“$
— “—Œ$„
—“—Œ
…
€ ¢ € €
€
€ € …
Š¦Š ƒ
€
—“ 5 Œ—Œ 5 „
ˆ
6.18.2 BOUNDING
… Š¦Š
‡
—“ 5 Œ—Œ 5 Œ„–
› “„Œ‚…
…
ˆ ›
“„Œ‚ƒ
‘
6.18.3 BRANCHING AGAIN
Š Š¦Š
—Œ
… ˜
˜ ƒ—˜ Œ—“1 —Œ
› ˜ —“1 —Œ#–Œ‚
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The Branch-and-Bound Algorithm (Optional) 297
FIGURE 6.37
X2
3
Problem I
Problem II
0
X1
0 1 2 3 4
Œ‚—“1—Œ#– ‚
—“#Œ
—Œ#Œ
—“—Œ$„
—“—Œ
¥˜ ƒ—˜ Œ—“1 —Œ
› ˜ —“1 —Œ#–Œ‚
Œ‚—“1—Œ#– ‚
—“#Œ
—Œ$
—“—Œ$„
—“—Œ
—Œ # Œ ¥
—Œ $ …
—Œ 5 Œ„–
¥
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298 Chapter 6 Integer Linear Programming
FIGURE 6.38
X2
3
Problem III
2
Problem II
0
X1
0 1 2 3 4
¥ —Œ $
… †
€ –
ƒ
…
…
—“ 5 Œ—Œ 5 Œ ›
“„
6.18.4 BOUNDING AGAIN
ƒ ‡
—“ 5 —Œ 5 “Œ‚ ›
” ‚
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The Branch-and-Bound Algorithm (Optional) 299
Š
—Œ
ˆ ’
›
›
…
›
” ‚ƒ ” ‚ ›
…
Š
—“ 5 Œ—Œ 5 Œ
› “„
6.18.5 SUMMARY OF B&B EXAMPLE
…
€ ”ƒ
€ € ““
… Š¦Š
“„“Œ‚ Š¦Š
› “„
FIGURE 6.39
Original problem
X1 5 2.769
X2 5 1.826
Obj 5 11.019
X1 # 2 X1 $ 3
Problem I Problem II
X1 5 2 X1 5 3
X2 5 2.083 X2 5 1.25
Obj 5 10.25 Obj 5 9.75
X2 # 2 X2 $ 3
Problem III Problem IV
X1 5 2
X2 5 2 Infeasible
Obj 5 10
Optimal
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300 Chapter 6 Integer Linear Programming
FIGURE 6.40
ΠTHE BRANCH-AND-BOUND ALGORITHM
“ ‹
‰
œ
2 ž
Œ
Œ † ¶ 5 2 š
œ † ¶ 51 š ¶
›
—‚
‚
¢…‚
œ‚Ÿ ˜
—‚œ#œ¢…‚
—‚$œ¢…‚1 “
Ž ”ž
‚
Žž ¶ ›
€ ¶ ¶ † ¶ # ¶
† ¶ $¶ Ž
–
… ¶ 5 ¶
… Ž
” … ›
¶
¥
›
…
Š¦Š ƒ
Š¦Š €Ž„
6.19 Summary
…
ˆ
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References 301
…
… Š¦Š ‘ ƒ
Š¦Š ‘ Š
ˆ
‘ ‘
6.20 References
Š ‰ ¨ … © “– Œ“”––
Š ‰ ‰« ¨ ˆ ¤ ƒ ž ‹
… © Œ ŒŒ„„Œ
Ÿ ‹Ÿ ‰ ¨ Š ˜ƒ
’ … ©Œ Œ“ Ž“””„
¢ ‹ ‹ ¨… ƒ ž † Š
ƒ ©Ž Œ –“”–“
¢ ° ¢ ® ˜ “”––
‹ ƒ ¨ ‹ ’ © “ ““”–
… ¨ ƒ ƒ © Œ
“””
‰ ¨ƒ ž Ÿ ¡Ÿ °
‘ © Ž “Ž Œ“”–‚
… ƒ Ÿ ¨ ’¥
¢Ÿ© ‰ “Œ„„Ž
THE WORLD OF BUSINESS ANALYTICS
¢ Š ¢ŠŠ ‚„„„„„
•Œ‚„„„„„„„ … ¢Š
‹
¨ ©
Š †
³ ‘
Š
¨ ©
‹
‹ ‹ ¨ ©
‡ ¨
©…
¢Š
‡ ˆ
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302 Chapter 6 Integer Linear Programming
… ›
‹
Ÿ
¤
•“„„„„„
˜ ‹ ’ ‹ ¢ ¨ … Ÿ Ÿ ž
¢ Š © ‘“ “ “”– “ ”
Questions and Problems
“ƒ €“
£
Œ “Œ ŒŒ ‘
€“€Œ
Ÿ † ˜
¢˜—“1—Œ
› ˜
2Ž—“1Ž—Œ#“
2–—“1“„—Œ$“‚
—“—Œ$„
£
¢ —“ —Œ £
‘ £
Ž… ‘ Ÿ‹…… ›
ž › “ŒŽ €Ÿ‹…‡
›
› Œ ›
› ‚ › Ž
› Œ Ž › ‚
‚ Ÿ‹…… ›
£
€… ‘ Š ‹ ˆ…
ˆ ‰ ‘ •“„„„
ƒ‘ ˆ ˆ
£
ˆ ‘ •”„„
ƒ‘ ‘ •–„„
ˆ ˆ £
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Questions and Problems 303
Ÿ Ÿ «
‘ £
Ÿ ‡
“Œ Ž‚€ –
€Œ
’
€Œ
–Š …
† ƒ
… †
Marginal Cost to Pick Up and Deliver
Car 1 Car 2 Car 3 Car 4 Capacity
‚ •Œ € •Ž” •Œ‚“ • €Ž Œ
‚ •“ ” • ‚ •Œ”– •“”„ “
‚ •“‚„ •Ž ‚ • ŽŽ •Ž”Œ “
‚ •” •“€ •Œ–‚ •“–‚ “
‚ • „‚ •“‚„ •ŒŒ‚ •“€‚ Œ
Š •€„„
‚„§
£
”’Š ˆ
’
‡
…
†
¢ “˜‹ “Œ‚ Ÿ˜• „„
¢ Œ˜‹ € Ÿ•€„„
¢ ˜‹ Œ ” Ÿ•”„„
¢ Ž˜‹ “ €“„ Ÿ•“Œ‚„
¢ ‚˜‹ ŒŽ€– Ÿ•–‚„
¢ €˜‹ Ž‚–“„ Ÿ•“„„„
¢ ˜‹ “‚ –” Ÿ•“„„
£
“„° ŸŠ
’
° Ÿ‡
ˆ ‡ ‘
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304 Chapter 6 Integer Linear Programming
˜
Minimum Number of Lifeguards Required Each Day
Sunday Monday Tuesday Wednesday Thursday Friday Saturday
“– “ “€ “€ “€ “Ž “”
…
£
‘ £
““‰ °‹ Ÿ ¢ ž ›
… †
‰
“„§
ˆ
Machine Type Units on Floor Avg Daily Profit per Unit
•„„“‹ ŒŽ •“Œ
•„„‚‹ ” •Ž€
•„Œ‚‹ Ž‚ •–Œ
•„‚„‹ “€ • €
•“„„‹ Ž„ •–”
•‚„„‹ “Œ •Œ„‚
•„„“¥ €‚– • “€
•„„‚¥ – •“„–
•„„“¥ – •Œ„
•„„‚¥ € •“
•„Œ‚¥ –Ž •“
•“„„¥ € •““‚
•„„“ ° ‚ •““
•„„‚ ° Œ‚ • „
•„Œ‚ ° Œ Œ •”„
•“„„ ° “– •Œ€€
•‚„„ ° – •““Ž
•“„„„ ° € • €
•„„‚¥ ª „ •Ž
ˆ £
Ÿ † ‰ ‡
£
“Œ ‹ –˜„„“„˜„„ Š
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Questions and Problems 305
…
˜
Shift Daily Pay Rate
˜„„²““˜„„ • Œ
˜„„² ˜„„ •–„
““˜„„² ˜„„ • Œ
““˜„„² ˜„„ •–„
˜„„ ² ˜„„ • Œ
˜„„ ²““˜„„ •–„
˜„„ ²““˜„„ • Œ
…
Hours Workers Needed
˜„„²““˜„„ ““
““˜„„²“˜„„ ŒŽ
“˜„„ ² ˜„„ “€
˜„„ ²‚˜„„ “„
‚˜„„ ² ˜„„ ŒŒ
˜„„ ²”˜„„ “
”˜„„ ²““˜„„ €
ƒ
ƒ „§
– ‡ ““˜„„²“˜„„
‚˜„„ ² ˜„„
› †
£
“ ƒ
‡ ˜
Customer 1 2 3 4 5 6 7 8 9 10
•““ •“„€ •–Ž •‚Œ •“‚‚ •“„ •– •”“ •“Œ– •“ “
•“„„„„„„
…
‘ ’
…
†
£
’
£
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306 Chapter 6 Integer Linear Programming
“Žƒ
Ÿ ‚„
›
˜
Year
1 2 3 4 5
ƒ„ –„ –€„ ”‚„ “„€„ ““–„
… †
…
˜“„ Œ‚ ‚„ ¡“„„ … ‘
† ˜
Cost of Generator (in $1,000s) in Year
Generator Size 1 2 3 4 5
‡ • „„ •Œ‚„ •Œ„„ •“ „ •“Ž‚
•Ž€„ • ‚ • ‚„ •Œ–„ •Œ ‚
‡ •€ „ •‚‚– •Ž€‚ • –„ • Œ„
‡‡ •”‚„ • ”„ •€ „ •‚‚„ •Ž€„
‡ ‘
£
“‚ˆ Ÿ ˆŸ
ˆŸ
…
…
— ˜
Possible Building Sites
Region Sanford Altamonte Apopka Casselberry Maitland
“ — —
Œ — — — —
— —
Ž — —
‚ — —
€ — —
— —
ƒ ˆ‰‡‡‡ •Ž‚„ •€‚„ •‚‚„ •‚„„ •‚Œ‚
£
“€Ÿ ª ‘ …
Š “‚“ Ÿ
‘
‘ ƒ
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Questions and Problems 307
Ÿ Œ„ •“Œ
‘
Ÿ † Ÿ ‡
Ÿ ‘
¢ ¥ £
“ ‹Ÿ …
†
“–„„
£
Machine Fixed Cost Variable Cost Capacity
“ •“„„„ •Œ“ ‚„„
Œ •”‚„ •Œ €„„
•– ‚ •Œ‚ ‚„
Ž •–‚„ •ŒŽ Ž„„
‚ •–„„ •Œ„ €„„
€ • „„ •Œ€ –„„
Ÿ
£
“–…
‡ ‹
ƒ
‡ •“„„„
Year 1 Year 2 Year 3 Year 4 Year 5
ƒ • ‚ • • ” •ŽŒ •Ž‚
•“€ •“ •“– •“” •Œ„
Š ‚ •“Œ‚ •“ „ •“ € •“ ” •“ŽŽ
‹ ‚ •Œ‚ •Œ •Œ” • „ •
Œƒ •Ž„ •Ž •Ž€ •‚„ •‚Œ
Ž •‚ • •– •“„ •““
ª ‡
†
• „„„„
Ÿ
£
“”ƒ ¤
› •”‚„„„„ Œ„ ›
… ‘ ‘
› † › Œ € ‘
† Š
›
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308 Chapter 6 Integer Linear Programming
› ¢ ˜ƒ
Project Programmers Required Capital Required Estimated NPV
“ •Œ‚„ •€‚„
Œ € •“ ‚ •‚‚„
” • „„ •€„„
Ž ‚ •“‚„ •Ž‚„
‚ € •“Ž‚ • ‚
€ Ž •“€„ •‚Œ‚
– • Œ‚ • ‚„
Ÿ
£
Œ„…
«’
Ÿ … Œ ‚„„„
«Ž„„„„„ ’ „„„„„ Ÿ
… žž
Œ„„„„„€„„„„„ ŒŒ‚„„„
…
… •–
…
† ˜
Distances (in Miles) Between Groves and Plants
Processing Plant
Grove Ocala Orlando Leesburg
« Œ“ ‚„ Ž„
’ ‚ „ ŒŒ
Ÿ ‚‚ Œ„ Œ‚
…
†
Ÿ
£
Œ“ƒ
› ›
˜
’ ‘ ‚„„‘
‘ „„‘ ‘ –„„
‘ ‘ “„„„‘ …
“‚
ŒŒ “„ †
Ž„
Ž„„„„‘ …
‚ –
¨ ©
• ‚„ •Ž‚„
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Questions and Problems 309
•‚‚„ • ‚„ ˆ
† £
Ÿ
£
‡
£
ŒŒŠ ® Œ‚
ƒ ›
‚„„„ “Œ„„” „„““ …
Œ‚ …
†
Number of Boards Produced
Cutting Pattern 7 ft 9 ft 11 ft
“ „ „
Œ Œ “ „
Œ „ “
Ž “ Œ „
‚ „ “ “
€ „ „ Œ
ž “ Œ‚
” ““ ¢ “
Œ“ Ž ƒ
Ž Œ‚ ”
Œ‚ …
…
Œ‚ …
Œ‚
Ÿ
£
† £
Œ ˆ ‡Ÿ ›
… Ž„„„ Ž Œ„„„„ ”
”„„„ “Œ ˆ
ž “Ž
“„„ •“„„„ “– “„„
•“Ž„„ ˆ
ˆ
Ÿ
£
ˆ † £
ŒŽƒ
…
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310 Chapter 6 Integer Linear Programming
… †
˜
Net Cost per Unit
to Supply Customer
Plant X Y Z
“ ‚ „ Ž‚
Œ Ž‚ Ž„ ‚„
„ €‚ ‚„
Ž Œ„ Ž‚ Œ‚
‚ €‚ Ž‚ Ž‚
… —® ¶
Ž„„„„Œ‚„„„ ‚„„„ …
˜
Plant Production Capacity Construction Cost (in $1,000s)
“ Ž„„„„ •“ Œ‚
Œ „„„„ •““„„
‚„„„„ •“‚„„
Ž Œ„„„„ •“Œ„„
‚ Ž„„„„ •“Ž„„
…
Ÿ
£
Œ‚‹ ‘ “ Œ
Ž ‚
‘ £
‹
£
Œ€° ˆ
Œ„› ¤ ° ˆ
° ˆ
Œ„ ‚„„
… ƒ
†
Ÿ
° ˆ‡›
° ˆ £
Œ ƒ ˜ƒŠ Ÿ…
ƒ Š Ž Ÿ
… ƒ ‘
…
† ˜
Cost of Producing a Unit of Product
Machine A B C
“ •“ •” •“„
Œ •““ •“Œ •–
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Questions and Problems 311
… ‘ †
˜
Time (Hours) Needed to
Produce a Unit of Product
Machine A B C
“ „Ž ““ „”
Œ „‚ “Œ “
ƒ “ – Œ €
’
ƒ
…
† ˜
Setup Costs for Producing
Machine A B C
“ •‚‚ •” •€„
Œ •€‚ •‚– • ‚
£
Œ–Ÿ ž … …—ž
žª ƒ ƒƒ
˜ Š
‘
ƒ
… †
… Œ
Œ– “ ŒŽ
’ ‘ ‚„„
Raw Material Characteristics
Possible Production per Barrel
Crude Barrels Cost Trucking
Oils Available Gas Kero. Heat Asphalt per Barrel Cost
…— “‚„„ Œ„„ Œ–„ “ „ ŒŽ„ •ŒŒ •“‚„„
žª Œ„„„ “–„ Œ „ “ ‚ “”„ •Œ“ •“ „„
ƒ “‚„„ Œ „ ŒŒ„ “€„ Œ€„ •ŒŒ •“‚„„
ƒ “–„„ Œ“„ Œ€„ “”„ ŒŽ„ •Œ •“Ž„„
…
… Œ„„„ …
¨… Ÿ©
… ‡ ‚„
–„„ “„„„ „„
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312 Chapter 6 Integer Linear Programming
£
Œ”… Ÿ žŸ
…
Œ‚„„Œ„„„“‚„„“–„„ Œ „„ …
Œ „„ ‚„„
ŽŒ„„
Ÿ ž £
†
˜Ÿ
£
„« Š •“„„„„„
…
† ˜
Summary of Cash In-Flows and Out-Flows
(at Beginning of Year)
A B C D E
‘ 2“„„ „„„ 2“„„ „„„ 2“„„
‘ 1„Ž‚ 2“„„ „„„ „„„ „„„
‘ 1“„‚ „„„ „„„ 2“„„ “Œ‚
‘ „„„ 1“ „ 1“€‚ 1“ „ „„„
« •“ ƒ “
•„Ž‚ Œ •“„‚
ƒ •“ Š Œ
•“ „ Ž’ ¨„„„©
… ‘
•‚„„„„ƒ
«
‚§ ˆ «
†
Ž£
Ÿ
£
“Š Ÿ ŠŸ ¤¥ ’
¤ ŠŸ Œ„„
“Ž„¤¥ ¢ ¢‰ „„ “–„¤¥ ‰ …
ŠŸ
† ˜
Vehicles
Needed
City Cars SUVs
Š “„„ ‚
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Questions and Problems 313
FIGURE 6.41
Boston Ž …
2 $1,080
$980
Newark
1
Columbus
3
$1,020
$930
$900
Richmond
$860
Atlanta 4
5
$910 $1,110 $990
$850
Mobile $1,220 J’ville
6 7
Ÿ €„ Ž„
‹ –„ ‚‚
ƒ “ „ ”‚
„ ‚„
ŠŸ ’
“Œ ‘ …
†
€Ž“
£
Œ… Š Ÿ
Žœ —³
˜
Forecasted Demand of Compound X
Week 1 2 3 4
‹ Ž„„ “‚„ Œ„„ ‚„
… — …
† “„„ „“„„Œ„„ „„
… •“Œ‚ “„„ «
•‚„ Š •“‚
“„„ — ƒ
Š ‚„ —
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314 Chapter 6 Integer Linear Programming
Ž
£
Ÿ
£
ƒ
Ž„„
« “„
…
† ˜
Design Change
1 2 3 4 5 6 7 8 9 10
‚„ ‚ Œ‚ “‚„ €„ ”‚ Œ„„ Ž„ –„ „
ƒ ˆ‰‡‡‡ •“‚„ • ‚„ •‚„ •Ž‚„ •”„ • ‚ •€‚„ • ‚ •““„ • „
Ÿ Ž
…
Ž„„
Ÿ
£
Ž« ‹
‹ ž ° …
ž … “„
… † ¢ ¥
“‚
Red Snapper Olive Grove Other Sites within
Site NPV NPV 15 miles
“ •““– •“€Œ Œ Ž
Œ “ “ – “ ‚
“”„ “Ž€ “ŒŽ‚
Ž “ – “ŒŽ “
‚ “„„ “ Œ ”
€ “€“ “”„
“ “„– €–
– “–– “‚Œ
” “ Œ “‚” ‚“„
“„ “ŽŽ “€– ”
“‚ ‹
“‚ ž °
“‚ Ÿ
† ¢ ¥
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Questions and Problems 315
£
¢ ‹
ž ° “‚
† ¢ ¥
£
‚ Š ŸŸ
ŸŸ ¢ ¢ ¥
ŸŸ ° ƒ
Amount Available Volume per Ton Profit per Ton
Commodity (Tons) (cubic feet) ($)
“ Ž–„„ Ž„ „
Œ Œ‚„„ Œ‚ ‚„
“Œ„„ €„ €„
Ž “ „„ ‚‚ –„
¡ ˆ
˜
Cargo Hold Weight capacity (tons) Volume Capacity (cubic Feet)
„„„ “Ž‚„„„
Ÿ €„„„ “–„„„„
‹ Ž„„„ “‚‚„„„
ž ˆ
“„§
Ž„§
€„§
Ÿ
£
€ª Ÿ
ƒ ¤ ª ƒ
‚‚…
•“„„„ª
Expected Annual Revenue By Area (in $1,000s)
• Ž •Ž •€Œ •ŽŒ • Ž
•€Ž •Ž • “ •Ž– •€‚
•‚ •‚ •‚“ •€“ • „
• Œ • – • „ •‚€ •Ž„
•€– • • „ •‚€ •ŽŽ
ª •“‚„„„„
’ ›
Š › Š
› ª
†
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316 Chapter 6 Integer Linear Programming
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Questions and Problems 317
State Mailing Pieces
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318 Chapter 6 Integer Linear Programming
Ÿ
Ÿƒ £
£
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Pittsburgh Charleston Richmond
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Questions and Problems 319
‹ Ÿ
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6
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320 Chapter 6 Integer Linear Programming
FIGURE 6.44 ‚
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Case 6.1 321
Optimizing a Timber Harvest CASE 6.1
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322 Chapter 6 Integer Linear Programming
CASE 6.2 Power Dispatching at Old Dominion
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Case 6.3 323
£
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324 Chapter 6 Integer Linear Programming
… ˜
Average Daily Payments
(in $1,000s) by Region
Payments
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Case 6.4 325
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Sector 1 2 3 4 5
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Chapter 7
Goal Programming and Multiple
Objective Optimization
7.0 Introduction
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326
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A Goal Programming Example 327
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Balancing Objectives for
Enlightened Self-Interest
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7.2 A Goal Programming Example
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328 Chapter 7 Goal Programming and Multiple Objective Optimization
ˆ †£ŒŒ ‰‡Œ†¤ˆŒ
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7.2.2 DEFINING THE GOALS
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A Goal Programming Example 329
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330 Chapter 7 Goal Programming and Multiple Objective Optimization
7.2.5 GP OBJECTIVE FUNCTIONS
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A Goal Programming Example 331
€
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332 Chapter 7 Goal Programming and Multiple Objective Optimization
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A Goal Programming Example 333
FIGURE 7.1
Variable Cells
Constraint Cells
Objective Cell
Key Cell Formulas
Cell Formula Copied to
B12 B9 B10 B11 C12:F12
B16 B10/B$13 B16:F17
E9 SUMPRODUCT(B9:D9,B5:D5) --
F9 SUMPRODUCT(B9:D9,B6:D6) --
B23 SUMPRODUCT(B16:F17,B20:F21) --
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334 Chapter 7 Goal Programming and Multiple Objective Optimization
FIGURE 7.2
Solver Settings:
Objective: B23 (Min)
Variable cells: B10:F11, B9:D9
Constraints:
B12:F12 B13:F13
B9:D9 integer
B9:D9 0
B10:F11 0
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
Integer Tolerance 0
FIGURE 7.3
7.2.9 ANALYZING THE SOLUTION
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A Goal Programming Example 335
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336 Chapter 7 Goal Programming and Multiple Objective Optimization
FIGURE 7.5
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Comments about Goal Programming 337
FIGURE 7.6
SUMMARY OF GOAL PROGRAMMING
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338 Chapter 7 Goal Programming and Multiple Objective Optimization
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Multiple Objective Optimization 339
FIGURE 7.7
C
Pro t
B
A
Toxic Waste
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340 Chapter 7 Goal Programming and Multiple Objective Optimization
7.5 An MOLP Example
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7.5.2 DEFINING THE OBJECTIVES
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An MOLP Example 341
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7.5.4 IMPLEMENTING THE MODEL
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342 Chapter 7 Goal Programming and Multiple Objective Optimization
FIGURE 7.8
Variable Cells
Objective Cells
Constraint Cells
Key Cell Formulas
Cell Formula Copied to
D8 SUMPRODUCT(B8:C8,$B$5:$C$5) D9:D10 and D13:D15
7.5.5 DETERMINING TARGET VALUES FOR THE OBJECTIVES
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An MOLP Example 343
FIGURE 7.9
Solver Settings:
Objective: D8 (Min)
Variable cells: B5:C5 €
Constraints:
D13:D15 E13:E15
B5:C5 0
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
FIGURE 7.10 €
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344 Chapter 7 Goal Programming and Multiple Objective Optimization
FIGURE 7.11 €
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7.5.6 SUMMARIZING THE TARGET SOLUTIONS
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An MOLP Example 345
FIGURE 7.12 €
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7.5.7 DETERMINING A GP OBJECTIVE
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346 Chapter 7 Goal Programming and Multiple Objective Optimization
FIGURE 7.13
X2
12
€
11
10
9
Feasible Region
8
6
Solution 1
5
(minimum production cost)
4
Solution 2
3 (minimum toxic water production)
1 Solution 3
(minimum accidents)
X1
1 2 3 4 5 6 7 8 9 10 11 12
Months of Months of Expected Number of
Operation at Operation at Production Gallons of Toxic Life-Threatening
Solution Wythe Mine (X1) Giles Mine (X2) Cost Pollutants Produced Accidents
1 2.5 4.5 $244 7,625 2.53
2 4.0 3.0 $256 6,950 2.15
3 10.0 0.0 $400 8,000 2.00
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An MOLP Example 347
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348 Chapter 7 Goal Programming and Multiple Objective Optimization
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7.5.9 IMPLEMENTING THE REVISED MODEL
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An MOLP Example 349
FIGURE 7.14 €
Variable Cells
Constraint Cells
Objective and
Variable Cell
Key Cell Formulas
Cell Formula Copied to
D8 SUMPRODUCT(B8:C8,$B$5:$C$5) D9:D10 and D13:D15
F8 (D8 E8)/E8 F9:F10
H8 F8*G8 H9:H10
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FIGURE 7.15
Solver Settings:
Objective: B18 (Min)
Variable cells: B18, B5:C5
Constraints:
H8:H10 B18
D13:D15 E13:E15
B5:C5 0
Solver Options:
Standard LP/Quadratic Engine (Simplex LP)
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350 Chapter 7 Goal Programming and Multiple Objective Optimization
FIGURE 7.16
FIGURE 7.17
X2
12
‚ ƒ„ 11
10
8 Feasible Region
7
5
w1 10, w2 1, w3 1, x1 3.08, x2 3.92
4
w1 1, w2 10, w3 1, x1 4.23, x2 2.88
3
1
w1 1, w2 1, w3 10, x1 7.14, x2 1.43
X1
1 2 3 4 5 6 7 8 9 10 11 12
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Comments on MOLP 351
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FIGURE 7.18
SUMMARY OF MULTIPLE OBJECTIVE OPTIMIZATION
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352 Chapter 7 Goal Programming and Multiple Objective Optimization
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Questions and Problems 353
THE WORLD OF BUSINESS ANALYTICS
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354 Chapter 7 Goal Programming and Multiple Objective Optimization
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Questions and Problems 355
Excess Production of
Solution Shown In: High-Grade Coal Medium-Grade Coal Low-Grade Coal
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356 Chapter 7 Goal Programming and Multiple Objective Optimization
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Questions and Problems 357
˜ ‡œŒŒŒŒŒ Š‡œŒŒŒ
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Revenues (in $1,000s) per 1% Tax Rate
Income Group Sales Property Food Utility
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Prime Time Soap Operas Evening News
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358 Chapter 7 Goal Programming and Multiple Objective Optimization
Š‡œŒŒŒŒ
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Questions and Problems 359
„ Ÿ
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Type 1 Type 2 Type 3 Type 4 Type 5
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Average Distance (in Miles) between Counties
Orange Seminole Osceola Volusia
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360 Chapter 7 Goal Programming and Multiple Objective Optimization
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Questions and Problems 361
Œ‡ŒŒ†
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362 Chapter 7 Goal Programming and Multiple Objective Optimization
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Questions and Problems 363
Sludge (lbs.)
Newsprint Packaging Print Stock
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364 Chapter 7 Goal Programming and Multiple Objective Optimization
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Questions and Problems 365
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366 Chapter 7 Goal Programming and Multiple Objective Optimization
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Case 7.1 367
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368 Chapter 7 Goal Programming and Multiple Objective Optimization
Planning Diets for the Food
CASE 7.2 Stamp Program
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Case 7.3 369
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Sales Territory Planning at Caro-Life
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370 Chapter 7 Goal Programming and Multiple Objective Optimization
FIGURE 7.21 †
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Chapter 8
Nonlinear Programming &
Evolutionary Optimization
8.0 Introduction
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372 Chapter 8 Nonlinear Programming & Evolutionary Optimization
FIGURE 8.1
X2 X2
Objective function
level curve
Objective function
level curve
Optimal
solution
Optimal
solution
Feasible Feasible
region region
X1 X1
(a) Linear objective, nonlinear constraints (b) Nonlinear objective, linear constraints
X2 X2
Objective function
level curve
Objective function
level curves
Optimal
solution
Optimal
solution
Feasible
region
Feasible
region
X1 X1
(c) Nonlinear objective, nonlinear constraints (d) Nonlinear objective, linear constraints
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Solution Strategies for NLP Problems 373
8.2 Solution Strategies for NLP Problems
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X2
Objective function level curves
D
E
C
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region
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374 Chapter 8 Nonlinear Programming & Evolutionary Optimization
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Local vs. Global Optimal Solutions 375
FIGURE 8.3
X2
Objective function
level curves
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solution
C
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376 Chapter 8 Nonlinear Programming & Evolutionary Optimization
A Note About “Optimal”
Solutions
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Economic Order Quantity Models 377
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Order size 25 Avg inventory 12.5
50
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0
0 1 2 3 4 5 6 7 8 9 10 11 12
Month
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378 Chapter 8 Nonlinear Programming & Evolutionary Optimization
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Economic Order Quantity Models 379
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380 Chapter 8 Nonlinear Programming & Evolutionary Optimization
FIGURE 8.6
Variable Cell
Objective Cell
Key Cell Formulas
Cell Formula Copied to
D11 D5*D4 --
D12 D4/D9*D6 --
D13 D9/2*D5*D7 --
D14 SUM(D11:D13) --
FIGURE 8.7 Solver Settings:
Objective: D14 (Min)
Variable cells: D9
Constraints:
B9:D9 1
Solver Options:
Standard LSGRG Nonlinear Engine
A Note About Engine Options
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Economic Order Quantity Models 381
8.4.3 ANALYZING THE SOLUTION
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Variable Cell
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382 Chapter 8 Nonlinear Programming & Evolutionary Optimization
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Location Problems 383
FIGURE 8.9
Y
50 €
Cleveland
x 5, y 45
40
30
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x 12, y 21 x 52, y 21
20
10 Canton
x 17, y 5
X
10 20 30 40 50 60
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384 Chapter 8 Nonlinear Programming & Evolutionary Optimization
8.5.3 DEFINING THE CONSTRAINTS
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Location Problems 385
FIGURE 8.10
Variable Cells
Constraint Cells
Objective Cell
Key Cell Formulas
Cell Formula Copied to
E7 SQRT((C7 $C$6)^2 (D7 $D$6)^2) E8:E10
E11 SUM(E7:E10) --
8.5.5 SOLVING THE MODEL AND ANALYZING
THE SOLUTION
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Objective: E11 (Min)
Variable cells: C6:D6
Constraints:
E7:E10 F7:F10
Solver Options:
Standard LSGRG Nonlinear Engine
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386 Chapter 8 Nonlinear Programming & Evolutionary Optimization
FIGURE 8.12
8.5.6 ANOTHER SOLUTION TO THE PROBLEM
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Location Problems 387
FIGURE 8.13 ‚ ƒ
Key Cell Formulas
Cell Formula Copied to
E7 SQRT((C7 $C$6)^2 (D7 $D$6)^2) E8:E10
E11 SUM(E7:E10) --
E12 MAX(E7:E10)
A Note About Non-Smooth
Optimization Problems
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388 Chapter 8 Nonlinear Programming & Evolutionary Optimization
8.5.7 SOME COMMENTS ABOUT THE SOLUTION TO
LOCATION PROBLEMS
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Nonlinear Network Flow Problem 389
FIGURE 8.14
Albuquerque
0.001
0.001 8
Las Vegas Amarillo …
0.006
2 Flagstaff 10
6
0.003 0.009
0.010
0.006
0.006
Los Angeles 0.004
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1
Phoenix 0.010
4
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9
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3 7
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390 Chapter 8 Nonlinear Programming & Evolutionary Optimization
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Nonlinear Network Flow Problem 391
FIGURE 8.15 …
Variable Cells
Constraint Cells
Objective Cell
Key Cell Formulas
Cell Formula Copied to
C6 VLOOKUP(B6,$I$6:$J$15,2) C7:C23 and E6:E23
G6 1 A6*F6 G7:G23
G24 PRODUCT(G6:G23) --
K6 SUMIF($D$6:$D$23,I6,$A$6:$A$23) K7:K15
SUMIF($B$6:$B$23,I6,$A$6:$A$23)
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392 Chapter 8 Nonlinear Programming & Evolutionary Optimization
FIGURE 8.16 Solver Settings:
Objective: G24 (Max)
…
Variable cells: A6:A23
Constraints:
K6:K15 L6:L15
A6:A23 binary
Solver Options:
Standard LSGRG Nonlinear Engine
Integer Tolerance 0
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Project Selection Problems 393
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e —‡ Œ£ ¢£ £¦ †Œ †£
™ ¤‡‘‘‘
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8.7.1 DEFINING THE DECISION VARIABLES
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‰ ™
‡
© 5 5 ‡ Œ — ¦
‘
€
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˜ 5 5 ‡ Œ — ¦
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394 Chapter 8 Nonlinear Programming & Evolutionary Optimization
FIGURE 8.18
Selected probability functions
‡
1.0000
„
… € 0.9000 2.5 Project 2
0.8000 5.6 Project 4
0.7000
8.5 Project 6
Prob. of success
0.6000
0.5000
0.4000
0.3000
0.2000
0.1000
0.0000
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Engineers assigned
8.7.2 DEFINING THE OBJECTIVE FUNCTION
œ“› ƒ ƒ ¯
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§£‘˜‡ ‡Œ‘˜Œ Ž‘‘˜— ¢‘‘˜¢ ‡‡‘‘˜£ †‘‘˜¦
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˜‡ 1 —‡ ˜Œ 1 Œ£ ˜— 1 ¢£ ˜¢ 1 £¦ ˜£ 1 †Œ ˜¦ 1 †£
8.7.3 DEFINING THE CONSTRAINTS
€ ‰
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… ‚
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™
˜ 2 Œ£© # ‘ 5 ‡ Œ — ¦ªª ‚
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Project Selection Problems 395
‚ ˜ ‘
© ‡
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™
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8.7.4 IMPLEMENTING THE MODEL
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œ ˜™ 1 1 1 1 1
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€ ™
—Œ£©‡ 1 Œ‘‘©Œ 1 ¢Ž‘©— 1 ‡Œ£©¢ 1 §‡‘©£ 1 Œ¢‘©¦ # ‡§‘‘ “
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˜ $ ‘
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… ‡—™ ªªªªª 5€ œ ‹• “ ’§™’‡Œ§™‡Œ
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
396 Chapter 8 Nonlinear Programming & Evolutionary Optimization
FIGURE 8.19
… €„
Variable Cells
Objective Cell
Constraint Cells
Key Cell Formulas
Cell Formula Copied to
C13 SUM(C7:C12) H13
D7 C7 B7*$C$14 D8:D12
F7 C7/(C7 E7) F8:F12
H7 F7*G7 H8:H12
I13 SUMPRODUCT(B7:B12,I7:I12) --
… ™
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8.7.5 SOLVING THE MODEL
… †‡Ž …
€ … †Œ‡
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Project Selection Problems 397
FIGURE 8.20
Solver Settings:
Objective: H13 (Max)
… €„
Variable cells: B7:C12
Constraints:
C13 C14
I13 I14
D7:D12 0
C7:C12 0
B7:B12 binary
C7:C12 integer
Solver Options:
Standard LSGRG Nonlinear Engine
Integer Tolerance 0
FIGURE 8.21 … €„
ƒ ¯ ƒ ¤‡§£§
¢ ‘—¢†† ¢ ‚
£‘¥ ƒ ‚
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
398 Chapter 8 Nonlinear Programming & Evolutionary Optimization
8.8 Optimizing Existing Financial
Spreadsheet Models
€
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›
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Year 1 2 3 4 5 6 7 8 9 10
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8.8.1 IMPLEMENTING THE MODEL
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ƒ
ƒ
… †ŒŒ •¢ •£
› ƒ “ •¦ ƒ
ࣴ
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Optimizing Existing Financial Spreadsheet Models 399
FIGURE 8.22
…
Variable Cell
Constraint Cells
Key Cell Formulas
Cell Formula Copied to
B10 D4 --
B11 F10 B12:B19
C10 B10*(1 $D$6/4)^4 B10 C11:C19
D10 (1 $D$5)*C10 D11:D19
F10 B10 D10 E10 F11:F19
’‡‘
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•¦ “‡‡
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§Œ¥ “ ‡‘‘¥ 2 Œ†¥ 5 §Œ¥
– ’ ƒ
8.8.2 OPTIMIZING THE SPREADSHEET MODEL
™
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400 Chapter 8 Nonlinear Programming & Evolutionary Optimization
ƒ
•¦ •¦
… ƒ
•‡‘
•‡Ž –‡‘ –‡Ž … †Œ—
€ … †Œ¢
FIGURE 8.23 Solver Settings:
Objective: D6 (Min)
Variable cells: D6
Constraints:
D10:D19 E10:E19
Solver Options:
Standard LSGRG Nonlinear Engine
FIGURE 8.24
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
The Portfolio Selection Problem 401
8.8.3 ANALYZING THE SOLUTION
… †Œ¢
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8.8.4 COMMENTS ON OPTIMIZING
EXISTING SPREADSHEETS
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€
€
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… ƒ ¦
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… €
ƒ €
€
‚
‰
8.9 The Portfolio Selection Problem
ƒ
‚
‚
‚
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
402 Chapter 8 Nonlinear Programming & Evolutionary Optimization
‚
ƒ
‹ •
‹ ‹›
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… †Œ£
… †Œ£ œ“
‡—¢—¥ ‡Œ ’€
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FIGURE 8.25
ˆ
Key Cell Formulas
Cell Formula Copied to
B18 AVERAGE(B6:B17) C18:D18
G6 COVAR(B6:B17,$B$6:$B$17) H6:I6
G7 COVAR(B6:B17,$C$6:$C$17) H7:I7
G8 COVAR(B6:B17,$D$6:$D$17) H8:I8
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
The Portfolio Selection Problem 403
ƒ
ƒ ‚ … ƒ
ƒ ’“ œ“
’€ ‘‘‘Œ£† ‘‘‘Œ§¦ ‘‘—¦§§
‚ … ƒ
’“ œ“ ƒ 2‘‘‘‘Œ£
’“ ’€ ƒ ‘‘‘¢¢‘ œ“
’€ ƒ 2‘‘‘£¢Œ
‹ ›
‚ ƒ ‡Œ¥
8.9.1 DEFINING THE DECISION VARIABLES
‚
™
‡ 5 ’“
Œ 5 œ“
— 5 ’€
’
‘ ‡ ‡‘‘¥ ‰
8.9.2 DEFINING THE OBJECTIVE
‚
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5 a sŒ Œ 1 Œ a a s „ „
2‡
5‡ 5‡ „5 1‡
5
sΠ5
s „ 5 s„ 5 „
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5
5 ‡ Œ
sŒ‡ s‡Œ c s‡
s sŒŒ c sŒ
5 3 ƒ 5 Œ‡
( ( f (
s ‡ s Œ c sŒ
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
404 Chapter 8 Nonlinear Programming & Evolutionary Optimization
‡‘‘¥
sŒ ˆ
ƒ ™
sŒ‡ 5 ‘‘‘Œ£†ªsŒŒ 5 ‘‘‘Œ§¦ªsŒ— 5 ‘‘—¦§§
s‡Œ 5 2‘‘‘‘Œ£ s‡— 5 ‘‘‘¢¢‘ªsŒ— 5 2‘‘‘£¢Œ
€ ™
œ ™ ‘‘‘Œ£†Œ‡ 1 ‘‘‘Œ§¦ŒŒ 1 ‘‘—¦§§Œ— 1 Œ 2‘‘‘‘Œ£‡Œ 1 ‘‘‘¢¢‡— 2 ‘‘‘£¢ŒŒ—
ƒ ²¡ ³
8.9.3 DEFINING THE CONSTRAINTS
‡‘‘¥ ™
‡ 1 Œ 1 — 5 ‡
‰ ƒ
ƒ ‡Œ¥ ƒ ™
‘‘§¦¢ ‡ 1 ‘‡—¢— Œ 1 ‘‡¢Ž— — $ ‘‡Œ
€ ƒ
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…
™
‡ Œ — $ ‘
‡ Œ — # ‡
‡
‡
8.9.4 IMPLEMENTING THE MODEL
™
œ ™ªªªª‘‘‘Œ£†Œ‡ 1 ‘‘‘Œ§¦ŒŒ 1 ‘‘—¦§§Œ—
1 Œ 2‘‘‘‘Œ£‡Œ 1 ‘‘‘¢¢‡— 2 ‘‘‘£¢ŒŒ—
€ ™
‡ 1 Œ 1 — 5 ‡
‘‘§¦¢ ‡ 1 ‘‡—¢— Œ 1 ‘‡¢Ž— — $ ‘‡Œ
‡ Œ — $ ‘
‡ Œ — # ‡
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
The Portfolio Selection Problem 405
FIGURE 8.26
Constraint Cells
Objective Cell
Variable Cells
Key Cell Formulas
Cell Formula Copied to
J11 SUM(G11:I11) --
H13 SUMPRODUCT(B18:D18,G11:I11) --
H16 SUMPRODUCT(MMULT(G11:I11,G6:I8),G11:I11) --
… †Œ¦
…†Œ¦ƒ ‚ Š‡‡
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› ‚
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‰
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™
… ‡¦™ªªªª 5Š¦¨Š‡‡¬Œ 1 §¨‡‡¬Œ 1 †¨‡‡¬Œ 1 Œ¨
¦¨Š‡‡¨‡‡ 1 ¦¨Š‡‡¨‡‡ 1 †¨‡‡¨‡‡
–
ƒ ‚
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ƒ œœ
‘‘‘Œ£† ‡¦ … †Œ¦ ‡‘‘¥
’“ ‚
’“ ‚
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
406 Chapter 8 Nonlinear Programming & Evolutionary Optimization
€ ´‡‡ ‡— ™
… ´‡‡™ª 5€ œ Š‡‡™‡‡
… ‡—™ª 5€ œ ‹• “ ’‡†™•‡†Š‡‡™‡‡
… †Œ§ €
… †Œ†
8.9.5 ANALYZING THE SOLUTION
… †Œ¦
… †Œ† Œ§Œ¥
FIGURE 8.27 Solver Settings:
Objective: H16 (Min)
Variable cells: G11:I11
Constraints:
G11:I11 1
G11:I11 0
H13 H14
J11 1
Solver Options:
Standard LSGRG Nonlinear Engine
FIGURE 8.28
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The Portfolio Selection Problem 407
› ’“ ¦—¢¥ œ“ Ž¢¥ ’€ “ ‡—
ƒ ‡Œ¥ ƒ ‡¦
‘‘‘‡‡Œ
ƒ
ƒ ‚
›
‚ ‚
‚
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‚
‚ … †ŒŽ …†ŒŽƒ
‚ ƒ
FIGURE 8.29
Key Cell Formulas
Cell Formula Copied to
J11 SUM(G11:I11) --
H13 SUMPRODUCT(B18:D18,G11:I11) --
H14 PsiOptParam(B18, D18) --
H16 SUMPRODUCT(MMULT(G11:I11,G6:I8),G11:I11) --
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
408 Chapter 8 Nonlinear Programming & Evolutionary Optimization
‚ ‡£
§¦¢¥ ‡¢Ž—¥
ƒ
ࢪ
… ‡¢™ªªªªª 5 ’‡† •‡†
‡¢ §¦¢¥ ’‡†
‡¢Ž—¥ •‡† €
ž ‹Ÿ € ‚
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‰ ‚
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… ƒ
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‚
8.9.6 HANDLING CONFLICTING
OBJECTIVES IN PORTFOLIO PROBLEMS
™ ‚ ƒ
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€ ™ª a 5 ‡
$ ‘
‚
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€
… †—‘ …†—‘ƒ ‚
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
The Portfolio Selection Problem 409
FIGURE 8.30
Variable Cells
Constraint Cell
Objective Cell
Key Cell Formulas
Cell Formula Copied to
J11 SUM(G11:I11) --
H13 SUMPRODUCT(B18:D18,G11:I11) --
H14 SUMPRODUCT(MMULT(G11:I11,G6:I8),G11:I11) --
H16 (1 H15)*H13 H15*H14 --
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‡‘‘¥ › ’€
… ‘ ‡ € ‚ ƒ
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’
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
410 Chapter 8 Nonlinear Programming & Evolutionary Optimization
FIGURE 8.31
‚
ƒ 5 ‘¦¦§ ‡ 2 5 ‘———
› ‚ ‘ŽŽŒ§£
… †Œ†
8.10 Sensitivity Analysis
¢
‰
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¢
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€ ™ ‡˜‡ 1 ‡˜Œ 1 ‡˜— # Œ‘‘
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ª ‡Œ˜‡ 1 ‡¦˜Œ 1 ‡—˜— # Œ††‘
˜‡ ˜Œ ˜— $ ‘
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Sensitivity Analysis 411
… †—Œ
…†—Œƒ ‚ … †—— € ‹
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€ ‹ € ›
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FIGURE 8.32 ‰…
Objective Cell
Variable Cells Constraint Cells
Key Cell Formulas
Cell Formula Copied to
E6 SUMPRODUCT(B6:D6,$B$5:$D$5) E9:E11
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412 Chapter 8 Nonlinear Programming & Evolutionary Optimization
FIGURE 8.33
FIGURE 8.34 ‡‡ ƒ
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Solver Options for Solving NLPs 413
8.10.1 LAGRANGE MULTIPLIERS
¢
ˆ
‹€
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¢ … †——
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› ‹€
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8.10.2 REDUCED GRADIENTS
¢
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… †—Œ
… †—— … †—¢
8.11 Solver Options for Solving NLPs
€ ˆ
– • € ˆ – €
‚ … †—£ ‚
€
‚
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414 Chapter 8 Nonlinear Programming & Evolutionary Optimization
FIGURE 8.35
€
‚ € ‚
… †—£
– €
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‚
€ ’ … Š € ¡
“ €
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… †—£ €
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Evolutionary Algorithms 415
€ €
€
8.12 Evolutionary Algorithms
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• ›
š ›
Š
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Š‹Š €
€
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
416 Chapter 8 Nonlinear Programming & Evolutionary Optimization
FIGURE 8.36 Initial Population
Chromosome X1 X2 X3 X4 Fitness
1 §†¢ Œ¢—Ž Œ†Ž£ ¦¦Œ Œ†Œ‘†
2 ‡‘Œ¦ ‡¦—¦ —‡Œ¦ —££ ŒŽ——†
3 —†† Œ—‘— Œ£ŽŒ ¦§¦ ŒŒ——‡
4 Ž£‡ ‡Ž£‡ Œ¦Œ— Œ¦¢ ——‡Œ†
5 £Ž¦ ‡Ž£Œ ——†— ¦†Ž ¢£—£§
6 ¢§§ ‡†—‡ Œ¦Œ‡ ££Ž ŒŒŽ¢Ž
7 †§Œ ŒŒ‡Œ ŒŽ†£ Œ—‘ ¢‘Ž¦†
Crossover & Mutation Crossover
Chromosome X1 X2 X3 X4 Fitness
1 §†¢ Œ¢—Ž —‡Œ¦ —££ ——¢Œ†
2 ‡‘Œ¦ ‡¦—¦ Œ†Ž£ ¦¦Œ ŒŒ§‘¢
Mutation
3 —†† ‡Ž§£ Œ£ŽŒ ¦§¦ —‘‡¢¢
4 Ž£‡ ‡Ž£‡ —ŒŒ— Œ¦¢ ¢Ž££Œ
5 ¢§§ ‡†—‡ ——†— ¦†Ž ——Œ—†
6 £Ž¦ ‡Ž£Œ Œ¦Œ‡ ££Ž ¢¢¢Œ‡
7 †§Œ ŒŒ‡Œ ŒŽ†£ ¢¦‘ ¢§†Ž—
Crossover
New Population
Chromosome X1 X2 X3 X4 Fitness
1 §†¢ Œ¢—Ž —‡Œ¦ —££ ——¢Œ†
2 ‡‘Œ¦ ‡¦—¦ —‡Œ¦ —££ ŒŽ——†
3 —†† ‡Ž§£ Œ£ŽŒ ¦§¦ —‘‡¢¢
4 Ž£‡ ‡Ž£‡ —ŒŒ— Œ¦¢ ¢Ž££Œ
5 £Ž¦ ‡Ž£Œ ——†— ¦†Ž ¢£—£§
6 £Ž¦ ‡Ž£Œ Œ¦Œ‡ ££Ž ¢¢¢Œ‡
7 †§Œ ŒŒ‡Œ ŒŽ†£ ¢¦‘ ¢§†Ž—
8.13 Forming Fair Teams
ƒ „
‚
€ € œ’ “ “ –
œ’ € ‚
‚
‚ —¢ ƒ €
‚ ‚
Šœ
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Forming Fair Teams 417
8.13.1 A SPREADSHEET MODEL FOR THE PROBLEM
… †—§ Šœ —¢ œ’
“ “ ‡§ Œ¦
“ •£ •—†
‰ € ‡ §
“ Š£ Š‡‡ Šœ
™
… Š£™ ªªªªª 5 ¯–‹ Š–… ¤•¤£™¤•¤—† …£ ¤“¤£™¤“¤—†
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£ Š£ ¯–‹ Š–
… ¤•¤£™¤•¤—† …£ ¤“¤£™¤“¤—† ‡
•£ •—† ‡ …£
Šœ “£ “—†
FIGURE 8.37
‚
Constraint Cells
Objective Cell
Variable Cells
Key Cell Formulas
Cell Formula Copied to
G5 AVERAGEIF($D$5:$D$38,F5,$C$5:$C$38) G6:G11
H5 COUNTIF($D$5:$D$38,F5) H6:H11
G12 IFERROR(VAR(G5:G11),999999999) --
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418 Chapter 8 Nonlinear Programming & Evolutionary Optimization
“ Š‡Œ Šœ
… Š‡Œ™ ªªªª 5…–‹‹‹ ¯ ‹ Š£™Š‡‡ ŽŽŽŽŽŽŽŽŽ
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Š£ Š‡‡ € €
… €
¯–‹ Š–…
² “ ‚ ³
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Variable cells: D5:D38
‚
Constraints:
H5:H11 5
D5:D38 7
D5:D38 1
D5:D38 integer
Solver Options:
Standard Evolutionary Engine
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The Traveling Salesperson Problem 419
FIGURE 8.39 ‚
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8.14 The Traveling Salesperson Problem
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420 Chapter 8 Nonlinear Programming & Evolutionary Optimization
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The Traveling Salesperson Problem 421
FIGURE 8.40
Š
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Variable Cells
Objective Cell
Key Cell Formulas
Cell Formula Copied to
E19 F18 E20:F26
G18 INDEX($C$6:$K$14,E18 1,F18 1) G19:G26
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422 Chapter 8 Nonlinear Programming & Evolutionary Optimization
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Objective: G27 (Min)
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Constraints:
F18:F25 alldifferent
Solver Options:
Standard Evolutionary Engine
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The Traveling Salesperson Problem 423
FIGURE 8.42 ‚ Š …
8.14.3 ANALYZING THE SOLUTION
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424 Chapter 8 Nonlinear Programming & Evolutionary Optimization
8.15 Summary
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THE WORLD OF BUSINESS ANALYTICS
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Questions and Problems 425
‰
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426 Chapter 8 Nonlinear Programming & Evolutionary Optimization
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Questions and Problems 427
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428 Chapter 8 Nonlinear Programming & Evolutionary Optimization
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Questions and Problems 429
Distances Between Cities in Miles
Home A B C D E
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430 Chapter 8 Nonlinear Programming & Evolutionary Optimization
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Questions and Problems 431
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432 Chapter 8 Nonlinear Programming & Evolutionary Optimization
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County 1 2 3 4 5 6 7 8 9 10
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Questions and Problems 433
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434 Chapter 8 Nonlinear Programming & Evolutionary Optimization
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Questions and Problems 435
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436 Chapter 8 Nonlinear Programming & Evolutionary Optimization
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Questions and Problems 437
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438 Chapter 8 Nonlinear Programming & Evolutionary Optimization
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Questions and Problems 439
Mortgage
1 2 3 4 5 6 7 8 9 10
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440 Chapter 8 Nonlinear Programming & Evolutionary Optimization
Part Row Column
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Questions and Problems 441
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442 Chapter 8 Nonlinear Programming & Evolutionary Optimization
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CASE 8.1 Tour de Europe
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60 30
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30 60 70
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50 40 90 50
30 80
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Case 8.2 443
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Electing the Next President CASE 8.2
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444 Chapter 8 Nonlinear Programming & Evolutionary Optimization
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Case 8.4 445
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446 Chapter 8 Nonlinear Programming & Evolutionary Optimization
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Chapter 9
Regression Analysis
9.0 Introduction
c
9.1 An Example
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448 Chapter 9 Regression Analysis
FIGURE 9.1
FIGURE 9.2
Š‹ˆˆˆˆ
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Regression Models 449
†
Creating a Scatter Plot
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450 Chapter 9 Regression Analysis
FIGURE 9.3
Y
Regression
curve
Probability distributions for
Y at different levels of X
—
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e ‡ ˆ
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9.3 Simple Linear Regression Analysis
‡ ‰
‡
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Defining “Best Fit” 451
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452 Chapter 9 Regression Analysis
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Solving the Problem Using Solver 453
FIGURE 9.4
Yi
Xi
Ŷi
b1
b0
Yi Ŷi
(Yi Ŷi )2
(Yi Ŷi)2
Key Cell Formulas
Cell Formula Copied to
D4 $C$15 $C$16*B4 D5:D13
E4 C4 D4 E5:E13
F4 E4^2 F5:F13
F15 SUM(F4:F13) --
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454 Chapter 9 Regression Analysis
FIGURE 9.5
Solver Settings:
Objective: F15 (Min)
Variable cells: C15:C16
Constraints:
None
Solver Options:
Standard GRG Nonlinear Engine
FIGURE 9.6
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9.6 Solving the Problem Using
the Regression Tool
† •
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Solving the Problem Using the Regression Tool 455
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FIGURE 9.7
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456 Chapter 9 Regression Analysis
FIGURE 9.8
† ‡ ‹
9.7 Evaluating the Fit
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Evaluating the Fit 457
FIGURE 9.9
Key Cell Formulas
Cell Formula Copied to
D4 TREND($C$4:$C$13,$B$4:$B$13,B4) D5:D13
A Note on the TREND( ) Function
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458 Chapter 9 Regression Analysis
FIGURE 9.10
‘ † ™– š ™– … š
ž ’ ’
9.8 The R2 Statistic
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The R 2 Statistic 459
FIGURE 9.11
Y Yi
*
Yi 2Ŷi
Yi Y
Ŷi
Ŷi Y
Ŷ b0 b1X
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460 Chapter 9 Regression Analysis
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Making Predictions 461
^ ‡žª
Šœžˆˆˆ ‡žª
Š“žœžˆ Š‘“‹‡“‘ ^ 6
9.9.2 PREDICTION INTERVALS FOR NEW VALUES OF Y
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575
Prediction intervals created
using standard error Se
525
475
425
Sales
375
325 Regression line
275
225 Prediction intervals created using
standard prediction error Sp
175
125
25 35 45 55 65 75 85 95
Advertising expenditures
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462 Chapter 9 Regression Analysis
‡
‡ “
‡ “ • ‡ “ ‡žª
Šœžˆˆˆ
…•„–
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FIGURE 9.13
Key Cell Formulas
Cell Formula Copied to
D17 TREND($C$4:$C$13,$B$4:$B$13,B17) --
B19 Results!B7 --
B20 B19*SQRT(1 1/10 (B17 AVERAGE(B4:B13))^2/(10*VARP(B4:B13))) --
B21 TINV(1 0.95,8) --
E17 D17 B21*B20 --
F17 D17 B21*B20 --
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Making Predictions 463
‚ˆ Ž
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9.9.3 CONFIDENCE INTERVALS FOR MEAN VALUES OF Y
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464 Chapter 9 Regression Analysis
9.10 Statistical Tests for Population
Parameters
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Statistical Tests for Population Parameters 465
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466 Chapter 9 Regression Analysis
FIGURE 9.14
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9.10.3 STATISTICAL TESTS
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Introduction to Multiple Regression 467
FIGURE 9.15
Yi Ŷi
(a) Residuals are not randomly scattered around zero X
Yi Ŷi
(b) Residual variance is non-constant X
€
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9.11 Introduction to Multiple Regression
€
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5 c 1 e
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468 Chapter 9 Regression Analysis
‡ ‹
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c
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FIGURE 9.16
Y
X2 X1
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A Multiple Regression Example 469
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†
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FIGURE 9.17
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470 Chapter 9 Regression Analysis
FIGURE 9.18
“
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9.13 Selecting the Model
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Selecting the Model 471
9.13.1 MODELS WITH ONE INDEPENDENT VARIABLE
€
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FIGURE 9.19
Independent Variable
in the Model R2 Adjusted-R2 Se Parameter Estimates
X1 0.870 0.855 10.299 b0 109.503, b1 56.394
X2 0.759 0.731 14.030 b0 178.290, b2 28.382
X3 0.793 0.770 12.982 b0 116.250, b3 27.607
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^ 5 ˆ 1 1 ““
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472 Chapter 9 Regression Analysis
‡ “
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FIGURE 9.20
FIGURE 9.21
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Selecting the Model 473
… “
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FIGURE 9.22
Independent Variables
in the Model R2 Adjusted-R2 Se Parameter Estimates
X1 0.870 0.855 10.299 b0 109.503, b1 56.394
X1 and X2 0.939 0.924 7.471 b0 127.684, b1 38.576, b2 12.875
X1 and X3 0.877 0.847 10.609 b0 108.311, b1 44.313, b3 6.743
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474 Chapter 9 Regression Analysis
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Selecting the Model 475
9.13.5 THE BEST MODEL WITH TWO INDEPENDENT
VARIABLES
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476 Chapter 9 Regression Analysis
FIGURE 9.23
FIGURE 9.24
Independent Variables
in the Model R2 Adjusted-R2 Se Parameter Estimates
X1 0.870 0.855 10.299 b0 109.503, b1 56.394
X1 and X2 0.939 0.924 7.471 b0 127.684, b1 38.576,
b2 12.875
X1, X2, and X3 0.943 0.918 7.762 b0 126.440, b1 30.803,
b2 12.567, b3 4.576
Œ …
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Making Predictions 477
9.14 Making Predictions
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478 Chapter 9 Regression Analysis
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Polynomial Regression 479
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480 Chapter 9 Regression Analysis
FIGURE 9.25
FIGURE 9.26
9.17.1 EXPRESSING NONLINEAR RELATIONSHIPS
USING LINEAR MODELS
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Polynomial Regression 481
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482 Chapter 9 Regression Analysis
FIGURE 9.28
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Polynomial Regression 483
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Key Cell Formulas
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484 Chapter 9 Regression Analysis
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References 485
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486 Chapter 9 Regression Analysis
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Questions and Problems 487
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488 Chapter 9 Regression Analysis
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Questions and Problems 489
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490 Chapter 9 Regression Analysis
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Questions and Problems 491
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492 Chapter 9 Regression Analysis
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Questions and Problems 493
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494 Chapter 9 Regression Analysis
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Case 9.1 495
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496 Chapter 9 Regression Analysis
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Case 9.3 497
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498 Chapter 9 Regression Analysis
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Chapter 10
Data Mining
10.0 Introduction
10.1 Data Mining Overview
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500 Chapter 10 Data Mining
FIGURE 10.1
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Data Mining Overview 501
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502 Chapter 10 Data Mining
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Classification 503
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504 Chapter 10 Data Mining
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Classification 505
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506 Chapter 10 Data Mining
FIGURE 10.5
Key Cell Formulas
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Classification 507
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508 Chapter 10 Data Mining
FIGURE 10.8
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Classification 509
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510 Chapter 10 Data Mining
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Classification Data Partitioning 511
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512 Chapter 10 Data Mining
10.4 Discriminant Analysis
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Discriminant Analysis 513
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514 Chapter 10 Data Mining
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Discriminant Analysis 515
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516 Chapter 10 Data Mining
FIGURE 10.18
FIGURE 10.19
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Discriminant Analysis 517
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518 Chapter 10 Data Mining
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Discriminant Analysis 519
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520 Chapter 10 Data Mining
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Logistic Regression 521
FIGURE 10.24
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522 Chapter 10 Data Mining
FIGURE 10.25
1.00
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Logistic Regression 523
FIGURE 10.26
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524 Chapter 10 Data Mining
FIGURE 10.28
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k -Nearest Neighbor 525
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FIGURE 10.30
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526 Chapter 10 Data Mining
FIGURE 10.31
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k -Nearest Neighbor 527
10.6.1 k -NEAREST NEIGHBOR EXAMPLE
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528 Chapter 10 Data Mining
FIGURE 10.33 ‡„ „ Œ Ž
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Classification Trees 529
FIGURE 10.34
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530 Chapter 10 Data Mining
FIGURE 10.36
65
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Classification Trees 531
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532 Chapter 10 Data Mining
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Classification Trees 533
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534 Chapter 10 Data Mining
FIGURE 10.39
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Classification Trees 535
FIGURE 10.40
FIGURE 10.41
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536 Chapter 10 Data Mining
10.8 Neural Networks
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Neural Networks 537
FIGURE 10.42
Input Layer Hidden Layer (s) Output Layer
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538 Chapter 10 Data Mining
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Naïve Bayes 539
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540 Chapter 10 Data Mining
FIGURE 10.45
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Naïve Bayes 541
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542 Chapter 10 Data Mining
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Naïve Bayes 543
10.9.1 NAÏVE BAYES EXAMPLE
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544 Chapter 10 Data Mining
FIGURE 10.49
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Naïve Bayes 545
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546 Chapter 10 Data Mining
FIGURE 10.52
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Comments on Classification 547
FIGURE 10.53
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548 Chapter 10 Data Mining
10.11 Prediction
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Association Rules (Affinity Analysis) 549
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550 Chapter 10 Data Mining
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Cluster Analysis 551
FIGURE 10.54
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552 Chapter 10 Data Mining
FIGURE 10.56
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Cluster Analysis 553
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554 Chapter 10 Data Mining
FIGURE 10.57
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Cluster Analysis 555
FIGURE 10.59 ‡ Œ Ž
FIGURE 10.60 ‡
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556 Chapter 10 Data Mining
‚ ƒ„¤„
‚
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Time Series 557
FIGURE 10.62 † Œ Ž
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ª £ ¡ ‘ ¤ ƒ„ ƒ© “œ ƒ“ ƒœ “¤ “ª “¡
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‰
… ƒƒ
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558 Chapter 10 Data Mining
FIGURE 10.63
†
FIGURE 10.64
10.14 Summary
—
žŠ
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References 559
˜
™ ˜ ™
‚
10.15 References
†Š † –‚‹ € ” ƒ
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THE WORLD OF BUSINESS ANALYTICS
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560 Chapter 10 Data Mining
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Questions and Problems
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Questions and Problems 561
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š
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562 Chapter 10 Data Mining
• Ž
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Questions and Problems 563
• Ž
š
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š
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¤„Ÿ ˆ ‡ £„Ÿ ˆ
ƒ“œ£‘› žŠ
Ž š
€
š
‹
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Company Liquidity Profitability Activity
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… „¤ª „œœ ƒ£œ
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564 Chapter 10 Data Mining
• £ ‡
ƒ„„ ˆ
Ž š
Ž š
› ‡ €” ˆ
š
€ š
CASE 10.1 Detecting Management Fraud
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Case 10.1 565
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Chapter 11
Time Series Forecasting
11.0 Introduction
—
€
‚
ƒ „
566
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Measuring Accuracy 567
On the Importance of Forecasting…
…
†
‡ €—ˆ
‰ … † Š ‹ Œ Ž‚‚‘ ’Ž“’’
11.1 Time Series Methods
”
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…^ 1Ž
1 Ž … …2Ž
2 Ž
ƒ „ ŽŽ Ž
‡ Š–
–
Š–
11.2 Measuring Accuracy
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568 Chapter 11 Time Series Forecasting
Š
ƒ
€„
ƒ „ ƒ ˆ „
ƒ Œ „ ƒ— Œ „
†
a
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5 … 2 …^
a
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ˆ 5
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a
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— Œ 5 Œ
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Œ — Œ
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11.3 Stationary Models
™
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ŽŽ Ž „ š—
’› ”
ŽŽ Ž
š— ‰
š—
œ˜ ›˜ ’
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Moving Averages 569
FIGURE 11.1
Creating a Line Graph
ŽŽ Ž†
Ž Œ Ž ’‘
’ ™
œ ™ Œ ™
› ™ Œ Œ ž
‡ —
11.4 Moving Averages
Š
1 Ž ƒ …^ 1Ž„
Ÿ
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570 Chapter 11 Time Series Forecasting
†
… 1 …2Ž 1 c1 …2 1Ž
…^ 1Ž 5
ŽŽ ’
‰
ŽŽ ’ ƒ ŽŽ ’
„ š—
™ ’ ›
Š ŽŽ ’ š — ¡ ƒ¢„
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ƒ™ ™‘ ™’‘ „
›
¤ ¥ ’‘†
¤† 5 š — ¡ œ† ‘
ƒ™ ¥ ’‘ „
š— ŽŽ ’
FIGURE 11.2
Key Cell Formulas
Cell Formula Copied to
C5 5AVERAGE(B3:B4) C6:C26
D7 5AVERAGE(B3:B6) D8:D26
C28 5SUMXMY2($B$7:$B$26,C7:C26)/COUNT(C7:C26) D28
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Moving Averages 571
ƒ
„
Š
Œ ™’¥
’¥ ŽŽ ’ Œ †
™’¥† 5Œ¦ § …’ ¨ ¨¤†¨ ¨’‘™¤†™’‘ ©™•¦‰ ™¤†™’‘
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› Œ ‘ ’œ ’
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11.4.1 FORECASTING WITH THE MOVING AVERAGE MODEL
ƒ „ ™
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…’› 1 …’œ œ‘ 1 œ£
…^ ’£ 5 5 5 œ£ £
’ ’
œ£ £
ƒ „
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572 Chapter 11 Time Series Forecasting
FIGURE 11.3
Key Cell Formulas
Cell Formula Copied to
C27 5AVERAGE(B25:B26) --
C28 5C27 C29:C30
D27 5AVERAGE(B23:B26) --
D28 5D27 D29:D30
I29 5SUMXMY2($B15:$B26,C15:C26)/COUNT(C15:C26) J29
I30 5SUMXMY2($B$7:$B$26,C7:C26)/COUNT(C7:C26) J30
™
…^ 5 œ£ £ ƒ 5 ’£ ’‘ ’¤ c„ ŽŽ œ
’› ’£ ’‘ ’¤ ’¥ ’ ›
11.5 Weighted Moving Averages
•
Š
†
…^ 1Ž 5 Ž… 1 ’…2Ž 1 c1 …2 1Ž
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Weighted Moving Averages 573
˜ # # Ž S 5 Ž ‰
5Ž
ŽŽ ’ ŽŽ œ Ž 5 ’ 5 c5 5 Ž
ŽŽ œ ”
Œ ‡ Œ
’
™ ŽŽ › ƒ ŽŽ ›
„
FIGURE 11.4
Variable Cells
Constraint Cell
Objective Cell
Key Cell Formulas
Cell Formula Copied to
C5 5$F$3*B41$F$4*B3 C6:C26
F5 5SUM(F3:F4) --
F7 5SUMXMY2(B5:B26,C5:C26)/COUNT(C5:C26) --
™ œ › Ž ’ ™ £
œ ›
™£ ™‘ ™’‘†
™£† 5¨ ¨œª › 1 ¨ ¨›ª œ
ƒ™ ™‘ ™’‘ „
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574 Chapter 11 Time Series Forecasting
‰ Ž 5 ’ 5 ˜ £
ŽŽ ’
Œ ¤ †
¤† 5Œ¦ § …’ £† ’‘™£†™’‘ ©™•¦‰ ™£†™’‘
Š Œ ŽŽ £
œ › ‡ Œ ‰
‡ Œ «
ŽŽ ‘
FIGURE 11.5
Solver Settings:
Objective: F7 (Min)
Variable cells: F3:F4
Constraints:
F3:F4 ,5 1
F3:F4 .5 0
F5 5 1
Solver Options:
Standard GRG Nonlinear Engine
FIGURE 11.6
Key Cell Formulas
Cell Formula Copied to
C27 5F3* B26+F4* B25 --
C28 5C27 C29:C30
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Exponential Smoothing 575
‰ Ž 5 ˜ ’‚ ’ 5 ˜ ¤Ž
Œ ¤ ’˜ ‘ £œ
11.5.1 FORECASTING WITH THE WEIGHTED MOVING
AVERAGE MODEL
¦ š—
™ ƒ ’£„ †
…^ ’£ 5 Ž…’› 1 ’…’œ 5 ˜ ’‚ 3 œ‘ 1 ˜ ¤Ž 3 œ£ 5 œ£ ’‚
ƒ „
™ …^ 5 œ£ £ 5 ’£ ’‘ ’¤ c
ŽŽ ‘ ’› ’£ ’‘ ’¤ ’¥
’
11.6 Exponential Smoothing
†
…^ 1Ž 5 …^ 1 … 2 …^
ŽŽ › 1 Ž …^ 1Ž
…^ «
– … 2 …^
ŽŽ › ˜ Ž ˜ # # Ž
ŽŽ ›
†
…^ 1Ž 5 … 1 Ž 2 …2Ž 1 Ž 2 ’ …2’ 1 c1 Ž 2 …2 1 c
…^ 1Ž
… …2Ž
Ž 2
Ž
ŽŽ ¤ ƒ ŽŽ ¤
„
š— ˜ Ž ˜ ‚
Š Œ
™
ŽŽ ¥ ƒ ŽŽ ¥ „
ŽŽ ¥ œ
…^ Ž 5 …Ž ŽŽ ¥ ™œ
†
™œ† 5 œ
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576 Chapter 11 Time Series Forecasting
FIGURE 11.7 €
ŽŽ › 5 ’
™› ™£ ™’‘†
™›† 5™œ 1 ¨ ¨œª œ 2 ™œ
ƒ™ ™£ ™’‘ „
£ Œ †
£† 5Œ¦ § …’ ›† ’‘™›†™’‘ ©™•¦‰ ™›†™’‘
Š Œ ŽŽ ‚
‡ Œ ‡
Œ « ŽŽ Ž˜
‰ œ ˜ ’‘
11.6.1 FORECASTING WITH THE EXPONENTIAL
SMOOTHING MODEL
¦ š—
™ ƒ ’£„ †
…^ ’£ 5 …^ ’› 1 …’› 2 …^ ’› 5 œ£ ‚Ž 1 ˜ ’‘ª œ‘ 2 œ£ ‚Ž 5 œ£ ‚œ
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Exponential Smoothing 577
FIGURE 11.8 €
Objective Cell
Variable Cell
Key Cell Formulas
Cell Formula Copied to
C3 5B3 --
C4 5C31$F$3*(B32C3) C5:C26
F5 5SUMXMY2(B4:B26,C4:C26)/COUNT(C4:C26) --
FIGURE 11.9
Solver Settings:
Objective: F5 (Min)
Variable cells: F3 €
Constraints:
F3 ,5 1
F3 .5 0
Solver Options:
Standard GRG Nonlinear Engine
’› š—
’£ ’‘ ’‘ †
…^ ’‘ 5 …^ ’£ 1 …’£ 2 …^ ’£
…’£ ’› …^ ’£ …’£
” …^ ’‘ 5 …^ ’£
…^ ’£
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
578 Chapter 11 Time Series Forecasting
FIGURE 11.10 €
Key Cell Formulas
Cell Formula Copied to
C27 5C261$F$3*(B262C26) --
C28 5C27 C29:C30
™
…^ 5 œ£ ‚œ ƒ 5 ’£ ’‘ ’¤ c„
A Word of Caution about
Forecasting…
11.7 Seasonality
« Œ
†
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Stationary Data with Additive Seasonal Effects 579
ŽŽ ŽŽ ƒ ŽŽ ŽŽ „
FIGURE 11.11 FIGURE 11.11
€ €
Š
Œ ™ ™ ƒŒ™™„ Œ
Œ
Œ™™
™
ŽŽ Ž’ ƒ ŽŽ Ž’ „ ”
‡
11.8 Stationary Data with Additive
Seasonal Effects
ŽŽ Ž’
ƒ „
ƒ „
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580 Chapter 11 Time Series Forecasting
FIGURE 11.12
†
…^ 1 5 1 Œ12
5 … 2 Œ2 1 Ž 2 2Ž
Œ 5 … 2 1 Ž 2 Œ2
˜ # # Ž ˜ # # Ž
Œ
5 › 5 Ž’
ŽŽ £ 1
« Œ12
ŽŽ ‘
‡ … 2 Œ2 – 2Ž
ŽŽ ¤
… 2
Œ2
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Stationary Data with Additive Seasonal Effects 581
ŽŽ £ ŽŽ ¤ ‡
” †
a 5 Ž ’ c
…
5
5Ž
Œ 5 … 2 5 Ž ’ c
Š
ŽŽ Žœ ƒ
ŽŽ Žœ „
FIGURE 11.13
Variable Cells
Objective Cell
Key Cell Formulas
Cell Formula Copied to
E3 5AVERAGE($D$3:$D$6) E4:E6
E7 5$J$3*(D72F3)1(12$J$3)*E6 E8:E26
F3 5D32E3 F4:F6
F7 5$J$4*(D72E7)1(12$J$4)*F3 F8:F26
G7 5E61F3 G8:G26
J6 5SUMXMY2(G7:G26,D7:D26)/COUNT(G7:G26) --
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
582 Chapter 11 Time Series Forecasting
œ ‘ †
œ† 5 š — ¡ ¨¨œ†¨¨‘
ƒ™ › ‘ „
‰ œ
‘ †
œ† 5œ 2 œ
ƒ™ › ‘ „
™ œ ›
ŽŽ ‘ ŽŽ ¤
†
¤† 5¨¨œª ¤ 2 œ 1 Ž 2 ¨¨œ ª ‘
ƒ™ ¥ ’‘ „
¤† 5¨¨›ª ¤ 2 ¤ 1 Ž 2 ¨¨› ª œ
ƒ™ ¥ ’‘ „
‰ ŽŽ £
1 Ž †
…^ 1Ž 5 1 Œ1Ž2
› £
†
¡¤† 5 ‘ 1 œ
ƒ™ ¡¥ ¡’‘ „
¡¥ ¡’‘
Š Œ ŽŽ Ž›
‡ Œ ‘ †
‘† 5Œ¦ § …’ ¡¤†¡’‘¤†’‘ ©™•¦‰ ¡¤†¡’‘
ŽŽ Ž£
‰
FIGURE 11.14
Solver Settings:
Objective: J6 (Min)
Variable cells: J3:J4
Constraints:
J3:J4 ,5 1
J3:J4 .5 0
Solver Options:
Standard GRG Nonlinear Engine
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Stationary Data with Additive Seasonal Effects 583
FIGURE 11.15
Key Cell Formulas
Cell Formula Copied to
G27 5$E$261F23 G28:G30
11.8.1 FORECASTING WITH THE MODEL
Š ŽŽ Ž£
ŽŽ £ ’› ’› 1
†
…^ ’›1 5 ’› 1 Œ’›12›
• ’˜Ž¤ †
…^ ’£ 5 ’› 1 Œ’Ž 5 œ£› ££ 1 ¥ ›£ 5 œ‘œ ˜˜
…^ ’‘ 5 ’› 1 Œ’’ 5 œ£› ££ 2 Ž¤ ¥’ 5 œœ‘ ¤œ
…^ ’¤ 5 ’› 1 Œ’œ 5 œ£› ££ 1 ›‘ £¥ 5 ›˜Ž Žœ
…^ ’¥ 5 ’› 1 Œ’› 5 œ£› ££ 2 œŽ ¤œ 5 œ’’ ¥Ž
’› «
ŽŽ Ž£ †
¡’¤† 5¨ ¨’‘ 1 ’œ
ƒ™ ¡’¥ ¡œ˜„
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
584 Chapter 11 Time Series Forecasting
Initializing Forecasting Models
‡
Œ
Œ
ƒ Œ „
” Œ
€
Š
‡
11.9 Stationary Data with Multiplicative
Seasonal Effects
†
…^ 1 5 3 Œ12
5 … ©Œ2 1 Ž 2 2Ž
Œ 5 … © 1 Ž 2 Œ2
˜ # # Ž ˜ # # Ž
Œ
ŽŽ ¥ 1
Œ12 ŽŽ ‚
‡
ƒ … ©Œ2 „ – 2Ž ŽŽ Ž˜
… ©
Œ2
ŽŽ ¥ ŽŽ Ž˜ ‡
•
†
5 a 5 Ž ’ c
…
5Ž
Œ 5 … © 5 Ž ’ c
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Stationary Data with Multiplicative Seasonal Effects 585
Š
ŽŽ Ž‘ ƒ
ŽŽ Ž‘ „
œ ‘ †
œ† 5 š — ¡ ¨¨œ†¨¨‘
ƒ™ › ‘ „
‰ œ
‘ †
œ† 5œ© œ
ƒ™ › ‘ „
FIGURE 11.16
Variable Cells
Objective Cell
Key Cell Formulas
Cell Formula Copied to
E3 5AVERAGE($D$3:$D$6) E4:E6
E7 5$J$3*(D7/F3)1(12$J$3)*E6 E8:E26
F3 5D3/E3 F4:F6
F7 5$J$4*(D7/E7)1(12$J$4)*F3 F8:F26
G7 5E6*F3 G8:G26
J6 5SUMXMY2(G7:G26,D7:D26)/COUNT(G7:G26) --
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586 Chapter 11 Time Series Forecasting
™ œ ›
ŽŽ ‚ ŽŽ Ž˜
†
¤† 5¨¨œª ¤© œ 1 Ž 2 ¨¨œ ª ‘
ƒ™ ¥ ’‘ „
¤† 5¨¨›ª ¤© ¤ 1 Ž 2 ¨¨› ª œ
ƒ™ ¥ ’‘ „
‰ ŽŽ ¥
1 Ž †
…^ 1Ž 5 3 Œ1Ž2
› £
†
¡¤† 5 ‘ª œ
ƒ™ ¡¥ ¡’‘ „
¡¥ ¡’‘
Š Œ ŽŽ Ž¤
‡ Œ ‘ †
‘† 5Œ¦ § …’ ¡¤†¡’‘¤†’‘ ©™•¦‰ ¡¤†¡’‘
FIGURE 11.17
Solver Settings:
Objective: J6 (Min)
Variable cells: J3:J4
Constraints:
J3:J4 ,5 1
J3:J4 .5 0
Solver Options:
Standard GRG Nonlinear Engine
ŽŽ Ž¥
‰
11.9.1 FORECASTING WITH THE MODEL
Š ŽŽ Ž¥
ŽŽ ¥ ’› ’› 1
†
…^ ’›1 5 ’› 3 Œ’›12›
• ’˜Ž¤ †
…^ ’£ 5 ’› 3 Œ’Ž 5 œ£œ ‚£ 3 Ž ˜Ž£ 5 œ£‚ Žœ
…^ ’‘ 5 ’› 3 Œ’’ 5 œ£œ ‚£ 3 ˜ ‚›‘ 5 œœ› ‚›
…^ ’¤ 5 ’› 3 Œ’œ 5 œ£œ ‚£ 3 Ž Žœœ 5 ›˜˜ ‚‚
…^ ’¥ 5 ’› 3 Œ’› 5 œ£œ ‚£ 3 ˜ ‚Ž’ 5 œ’’ ‚£
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Trend Models 587
’›
ŽŽ Ž¥ †
¡’¤† 5¨ ¨’‘ª ’œ
ƒ™ ¡’¥ ¡œ˜„
FIGURE 11.18
Key Cell Formulas
Cell Formula Copied to
G27 5$E$26*F23 G28:G30
11.10 Trend Models
”
’ › ‘ ¥ Ž˜ Ž’ Ž› Ž‘ Ž¥
’˜ ”
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588 Chapter 11 Time Series Forecasting
Ž¥
Ž¥ Œ
11.10.1 AN EXAMPLE
Š™ ƒ « „
£ «
¬
£ ŽŽ Ž‚ ƒ
ŽŽ Ž‚ „
FIGURE 11.19 ‚
ŽŽ Ž‚
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Double Moving Average 589
11.11 Double Moving Average
ž ƒ „†
5 … 1 …2Ž 1 c1 …2 1Ž ©
ƒ „
†
5 1 2Ž 1 c1 2 1Ž ©
†
…^ 1 5 1
†
5’ 2
5 ’ 2 © 2 Ž
‡
‰
1 ŽŽ ŽŽ
ŽŽ ’˜ ƒ ŽŽ ’˜ „
5 ›
Š™
†
‘† 5 š — ¡ œ†‘
ƒ™ ¤ ’’ „
‚† 5 š — ¡ ‘† ‚
ƒ™ Ž˜ ’’ „
¡ ” †
¡‚† 5’ª ‚ 2 ‚
ƒ™ ¡Ž˜ ¡’’ „
”‚† 5’ª ‚ 2 ‚ © › 2 Ž
ƒ™ ”Ž˜ ”’’ „
¥ ’˜
†
Ž˜† 5¡‚ 1 ”‚
ƒ™ ŽŽ ’’ „
ŽŽ ’Ž
‰
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
590 Chapter 11 Time Series Forecasting
FIGURE 11.20
ƒ
Key Cell Formulas
Cell Formula Copied to
E6 5AVERAGE(D3:D6) E7:E22
F9 5AVERAGE(E6:E9) F10:F22
G9 52*E92F9 G10:G22
H9 52*(E92F9)/(421) H10:H22
I10 5G91H9 I11:I22
I23 5$G$221B23*$H$22 I24:I26
11.11.1 FORECASTING WITH THE MODEL
Š ŽŽ ’˜
ŽŽ ŽŽ ’˜
’˜ 1 †
…^ ’˜1 5 ’˜ 1 ’˜
’˜ ’˜ ŽŽ ’˜ ¡’’ ”’’
ƒ ’˜ 5 ’œ¥£ œœ ’˜ 5 Žœ‚ ‚„ Œ ’˜
’Ž ’’ ’œ ’› †
…^ ’Ž 5 ’˜ 1 Ž 3 ’˜ 5 ’œ¥£ œœ 1 Ž 3 Žœ‚ ‚ 5 ’£’£ ’œ
…^ ’’ 5 ’˜ 1 ’ 3 ’˜ 5 ’œ¥£ œœ 1 ’ 3 Žœ‚ ‚ 5 ’‘‘£ Žœ
…^ ’œ 5 ’˜ 1 œ 3 ’˜ 5 ’œ¥£ œœ 1 œ 3 Žœ‚ ‚ 5 ’¥˜£ ˜œ
…^ ’› 5 ’˜ 1 › 3 ’˜ 5 ’œ¥£ œœ 1 › 3 Žœ‚ ‚ 5 ’‚›› ‚›
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Double Exponential Smoothing (Holt’s Method) 591
FIGURE 11.21
„
‚
ŽŽ ’˜ †
’œ† 5¨¡¨’’ 1 ’œª¨”¨’’
ƒ™ ’› ’‘ „
11.12 Double Exponential Smoothing
(Holt’s Method)
ƒ ”– „
… ”–
ƒ„ ”–
†
…^ 1 5 1
5 … 1 Ž 2 2Ž 1 2Ž
5 2 2Ž 1 Ž 2 2Ž
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
592 Chapter 11 Time Series Forecasting
Š ŽŽ Ž’
5 Ž ’ œ 1
ƒ …^ 1„ ƒ „
ƒ „
ŽŽ Žœ ŽŽ Ž›
˜ Ž ˜ # # Ž ˜ # # Ž
2Ž 2 2Ž ŽŽ Ž›
«
2Ž
2 2Ž ŽŽ Ž›
«
”–
†
Ž ™ ŽŽ Žœ
’ ™ ŽŽ Ž›
œ ™ …^ 1 1 ŽŽ Ž’
”– Š™
ŽŽ ’’ ƒ ŽŽ ’’ „
™ œ › ™
Ž ƒ
„ ŽŽ ‘
2Ž Ž 5 …Ž
Ϡ
œ† 5œ
ŽŽ Žœ › ’’ †
›† 5¨¨œª› 1 Ž 2 ¨¨œ ª œ 1 œ
ƒ™ £ ’’ „
™
’ ƒ „ ŽŽ Ž›
2Ž
Œ 5 ˜ ƒ
„ œ†
œ† 5˜
ŽŽ Ž› › ’’ †
›† 5¨¨›ª › 2 œ 1 Ž 2 ¨¨› ª œ
ƒ™ £ ’’ „
ŽŽ Ž’ 1 Ž
†
…^ 1Ž 5 1 Ž 3
5 Ž ŽŽ ’’ 5 ’ ƒ
¡›„ œ œ Ž
Ž 5 ’ ¡› †
¡›† 5Œ¦ œ† œ
ƒ™ ¡£ ¡’’ „
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Double Exponential Smoothing (Holt’s Method) 593
FIGURE 11.22 …
Variable Cells
Objective Cell
Key Cell Formulas
Cell Formula Copied to
E3 5D3 --
E4 5$J$3*D41(12$J$3)*(E31F3) E5:E22
F3 50 --
F4 5$J$4*(E42E3)1(12$J$4)*F3 F5:F22
G4 5SUM(E3:F3) G5:G22
J6 5SUMXMY2(D4:D22,G4:G22)/COUNT(G4:G22) --
¡£ ¡’’
”–
Š Œ ‡ Œ
Œ ‘ †
‘† 5Œ¦ § …’ ›†’’¡›†¡’’ ©™•¦‰ ¡›†¡’’
Š Œ ŽŽ ’œ
‡ Œ « ŽŽ ’›
ŽŽ ’›
”–
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
594 Chapter 11 Time Series Forecasting
FIGURE 11.23
Solver Settings:
Objective: J6 (Min)
…
Variable cells: J3:J4
Constraints:
J3:J4 ,5 1
J3:J4 .5 0
Solver Options:
Standard GRG Nonlinear Engine
FIGURE 11.24 …
Key Cell Formulas
Cell Formula Copied to
G23 5$E$221B23*$F$22 G24:G26
11.12.1 FORECASTING WITH HOLT’S METHOD
Š ŽŽ ’›
ŽŽ Ž’ ’˜ ’˜ 1
†
…^ ’˜1 5 ’˜ 1 ’˜
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Holt-Winter’s Method for Additive Seasonal Effects 595
’˜ ’˜ ŽŽ ’› ’’ ’’
’˜ 5 ’œœ‘ ¥ ’˜ 5 Ž£’ Ž„ Œ ’˜ ’Ž ’’
’œ ’› †
…^ ’Ž 5 ’˜ 1 Ž 3 ’˜ 5 ’œœ‘ ¥ 1 Ž 3 Ž£’ Ž 5 ’›¥¥ ‚
…^ ’’ 5 ’˜ 1 ’ 3 ’˜ 5 ’œœ‘ ¥ 1 ’ 3 Ž£’ Ž 5 ’‘›Ž ˜
…^ ’œ 5 ’˜ 1 œ 3 ’˜ 5 ’œœ‘ ¥ 1 œ 3 Ž£’ Ž 5 ’¤‚œ Ž
…^ ’› 5 ’˜ 1 › 3 ’˜ 5 ’œœ‘ ¥ 1 › 3 Ž£’ Ž 5 ’‚›£ ’
ŽŽ ’› †
¡’œ† 5¨ ¨’’ 1 ’œª¨ ¨’’
ƒ™ ¡’› ¡’‘ „
11.13 Holt-Winter’s Method for Additive
Seasonal Effects
”
” Š –
Š ” Š –
” Š –
ƒ 5 ›Ÿ
5 Ž’„ †
…^ 1 5 1 1 Œ12
… 2 Œ2 1 Ž 2 2Ž 1 2Ž
5
5 2 2Ž 1 Ž 2 2Ž
Œ 5 … 2 1 Ž 2 Œ2
Š ŽŽ Ž£
5 Ž ’ c 1 …^ 1„
ŽŽ Ž£ «
1 ƒ 1 „
ƒ Œ12 „
ƒ „ ŽŽ Ž‘ ŽŽ Ž¤ ŽŽ Ž¥ ˜ Ž
˜ # # Ž ˜ # # Ž ˜ # # Ž
ŽŽ Ž‘ †
• 2Ž 1 2Ž
ƒ …„
• … 2 Œ2 ‡
…
ŽŽ Ž¤
ŽŽ Ž› ”–
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
596 Chapter 11 Time Series Forecasting
« ŽŽ Ž¥
†
• Œ2
• … 2
…
” Š – †
Ž ™ ŽŽ Ž‘
’ ™ ŽŽ Ž¤
œ ™ Œ ŽŽ Ž¥
› ™ …^ 1 1 ŽŽ Ž£
” Š – Š™
ŽŽ ’£ ƒ ŽŽ ’£ „ ™
®œ ®› ®£
ŽŽ Ž‘ ŽŽ Ž¥
2 Œ2
ŒŽ Œ’ c Œ ƒ ŒŽ
Œ’ Œœ Œ›„ • †
Œ 5 … 2 a 5 Ž’ c
…
5Ž
ŽŽ Ž‚ Œ
…
¡ ŽŽ ’£ ŽŽ Ž‚ †
¡œ† 5œ š — ¡ ¨¨œ†¨¨‘
ƒ™ ¡› ¡‘ „
ŽŽ Ž‘
1 Ž ƒ £„
Œ2 ” £ ŽŽ Ž‘
› ƒ ŽŽ Ž‘ Œ˜ „ ›
ƒ ŽŽ Ž¤ › œ „
› 5 …› 2 Œ› ƒ › 1 Œ› 5 …› „ › 5 ˜
‘ ‘†
‘† 5‘ 2 ¡‘
‘† 5˜
Š ŽŽ Ž‘
ŽŽ ’£ †
¤† 5¨®¨œª ¤ 2 ¡œ 1 Ž 2 ¨®¨œ ª ‘ 1 ‘
ƒ™ ¥ ’’ „
Š ŽŽ Ž¤
ŽŽ ’£ †
¤† 5¨®¨›ª ¤ 2 ‘ 1 Ž 2 ¨®¨› ª ‘
ƒ™ ¥ ’’ „
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Holt-Winter’s Method for Additive Seasonal Effects 597
FIGURE 11.25 ‚ …
Variable Cells
Objective Cell
Key Cell Formulas
Cell Formula Copied to
G3 5D32AVERAGE($D$3:$D$6) G4:G6
E6 5D62G6 --
E7 5$K$3*(D72G3)1(12$K$3)*(E61F6) E8:E22
F6 50 --
F7 5$K$4*(E72E6)1(12$K$4)*F6 F8:F22
G7 5$K$5*(D72E7)1(12$K$5)*G3 G8:G22
H7 5E61F61G3 H8:H22
N4 5SUMXMY2(H7:H22,D7:D22)/COUNT(H7:H22) --
Š ŽŽ Ž¥ Œ ŽŽ ’£ †
¡¤† 5¨®¨£ª ¤ 2 ¤ 1 Ž 2 ¨®¨£ ª¡œ
ƒ™ ¡¥ ¡’’ „
› ŽŽ Ž£
£ ŽŽ ’£ †
”¤† 5 ‘ 1 ‘ 1 ¡œ
ƒ™ ”¥ ”’’ „
g Š Œ ‡
Œ Œ ‰› †
‰›† 5Œ¦ § …’ ”¤†”’’ ¤†’’ ©™•¦‰ ”¤†”’’
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
598 Chapter 11 Time Series Forecasting
Š Œ ŽŽ ’‘
‡ Œ « ŽŽ ’¤
ŽŽ ’¤ ” Š –
”
—
FIGURE 11.26
Solver Settings:
Objective: N4 (Min)
‚ … Variable cells: K3:K5
Constraints:
K3:K5 ,51
K3:K5 .5 0
Solver Options:
Standard GRG Nonlinear Engine
FIGURE 11.27 ‚ …
Key Cell Formulas
Cell Formula Copied to
H23 5$E$221B23*$F$221G19 H24:H26
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Holt-Winter’s Method for Multiplicative Seasonal Effects 599
11.13.1 FORECASTING WITH HOLT-WINTER’S
ADDITIVE METHOD
Š ŽŽ ’¤
ŽŽ Ž£ ’˜ ’˜ 1
†
…^ ’˜1 5 ’˜ 1 ’˜ 1 Œ’˜1 2
ŽŽ ’¤ ’˜ ’˜ ’’ ’’
ƒ ’˜ 5 ’’£œ œ ’˜ 5 Ž£› œ„ ’˜ ’Ž ’’ ’œ
’› †
…^ ’Ž 5 ’˜ 1 Ž 3 ’˜ 1 ŒŽ¤ 5 ’’£œ œ 1 Ž 3 Ž£› œ 1 ’‘’ ‘‘’ 5 ’‘¤˜ œ
…^ ’’ 5 ’˜ 1 ’ 3 ’˜ 1 ŒŽ¥ 5 ’’£œ œ 1 ’ 3 Ž£› œ 2 œŽ’ £‚œ 5 ’’›‚ œ
…^ ’œ 5 ’˜ 1 œ 3 ’˜ 1 ŒŽ‚ 5 ’’£œ œ 1 œ 3 Ž£› œ 1 ’˜£ ›˜Ž 5 ’‚’Ž ‘
…^ ’› 5 ’˜ 1 › 3 ’˜ 1 Œ’˜ 5 ’’£œ œ 1 › 3 Ž£› œ 1 œ¥‘ ŽŽ‘ 5 œ’£‘ ‘
ŽŽ ’¤ †
”’œ† 5¨ ¨’’ 1 ’œª¨ ¨’’ 1 ¡Ž‚
ƒ™ ”’› ”’‘ „
11.14 Holt-Winter’s Method for
Multiplicative Seasonal Effects
ŽŽ ’¤
” Š –
” Š –
” Š –
ƒ 5 ›Ÿ
5 Ž’„ †
…^ 1 5 1 Œ12
…
5 1 Ž 2 2Ž 1 2Ž
Œ2
5 2 2Ž 1 Ž 2 2Ž
…
Œ 5 1 Ž 2 Œ2
” 1 …^ 1 ŽŽ ’˜
1 ƒ 1 „
ƒ Œ12„
ƒ „ ŽŽ ’Ž ŽŽ ’’ ŽŽ ’œ
˜ Ž ˜ # # Ž ˜ # # Ž ˜ # # Ž
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
600 Chapter 11 Time Series Forecasting
ŽŽ ’Ž †
• 2Ž 1 2Ž
ƒ …„
…
• Œ 2 ‡
…
«
ŽŽ ’œ †
• Œ2
…
•
…
Š – Š™
ŽŽ ’¥ ƒ ŽŽ ’¥ „ ™
®œ ®› ®£
ŽŽ ’Ž ŽŽ ’œ
2 Œ2
ŒŽ Œ’ c Œ †
…
Œ 5 5 Ž’ c
a
…
5Ž
ŽŽ ’› Œ
…
¡ ŽŽ ’¥ ŽŽ Ž‚ †
¡œ† 5œ© š — ¡ ¨¨œ†¨¨‘
ƒ™ ¡› ¡‘ „
ŽŽ ’Ž
1 Ž ƒ £„
Œ2 ” £ ŽŽ ’Ž
› ƒ ŽŽ Ž‘ Œ˜ „ ›
ƒ ŽŽ ’’ › œ „
› 5 …› ©Œ› ƒ › 3 Œ› 5 …›„ › 5 ˜
‘ ‘†
‘† 5‘©¡‘
‘† 5˜
Š ŽŽ ’Ž
ŽŽ ’¥ †
¤† 5¨®¨œª¤©¡œ 1 Ž 2 ¨®¨œ ª ‘ 1 ‘
ƒ™ ¥ ’’ „
Š ŽŽ ’’ †
¤† 5¨®¨›ª ¤ 2 ‘ 1 Ž 2 ¨®¨› ª ‘
ƒ™ ¥ ’’ „
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Holt-Winter’s Method for Multiplicative Seasonal Effects 601
FIGURE 11.28 ‚ …
Variable Cells
Objective Cell
Key Cell Formulas
Cell Formula Copied to
G3 5D3/AVERAGE($D$3:$D$6) G4:G6
E6 5D6/G6 --
E7 5$K$3*D7/G31(12$K$3)*(E61F6) E8:E22
F6 50 --
F7 5$K$4*(E72E6)1(12$K$4)*F6 F8:F22
G7 5$K$5*D7/E71(12$K$5)*G3 G8:G22
H7 5SUM(E6:F6)*G3 H8:H22
N4 5SUMXMY2(H7:H22,D7:D22)/COUNT(H7:H22) --
Š ŽŽ ’œ Œ †
¡¤† 5¨®¨£ª¤© ¤ 1 Ž 2 ¨®¨£ ª¡œ
ƒ™ ¡¥ ¡’’ „
› ŽŽ ’˜
£ †
”¤† 5Œ¦ ‘† ‘ ª¡œ
ƒ™ ”¥ ”’’ „
Š Œ ‡
Œ Œ ‰› †
‰›† 5Œ¦ § …’ ”¤†”’’ ¤†’’ ©™•¦‰ ”¤†”’’
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
602 Chapter 11 Time Series Forecasting
Š Œ ŽŽ ’‚
‡ Œ « ŽŽ œ˜
ŽŽ œ˜ ” Š –
™
ŽŽ ’¤
FIGURE 11.29
Solver Settings:
Objective: N4 (Min)
‚ … Variable cells: K3:K5
Constraints:
K3:K5 ,5 1
K3:K5 .5 0
Solver Options:
Standard GRG Nonlinear Engine
FIGURE 11.30 ‚ …
Key Cell Formulas
Cell Formula Copied to
H23 5($E$221B23*$F$22)*G19 H24:H26
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Linear Trend Model 603
11.14.1 FORECASTING WITH HOLT-WINTER’S
MULTIPLICATIVE METHOD
Š ŽŽ œ˜
ŽŽ Ž£ ’˜ ’˜ 1
†
…^ ’˜1 5 ’˜ 1 ’˜ Œ’˜12
ŽŽ œ˜ ’˜ ’˜ ’’ ’’
ƒ ’˜ 5 ’’Ž¤ ‘ ’˜ 5 Žœ¤ œ„ ’˜ ’Ž ’’ ’œ
’› †
…^ ’Ž 5 ’˜ 1 Ž 3 ’˜ ŒŽ¤ 5 ’’Ž¤ ‘ 1 Ž 3 Žœ¤ œ Ž Ž£’ 5 ’¤Žœ ¤
…^ ’’ 5 ’˜ 1 ’ 3 ’˜ ŒŽ¥ 5 ’’Ž¤ ‘ 1 ’ 3 Žœ¤ œ ˜ ¥›‚ 5 ’ŽŽ› ‚
…^ ’œ 5 ’˜ 1 œ 3 ’˜ ŒŽ‚ 5 ’’Ž¤ ‘ 1 œ 3 Žœ¤ œ Ž Ž˜œ 5 ’‚˜˜ £
…^ ’› 5 ’˜ 1 › 3 ’˜ Œ’˜ 5 ’’Ž¤ ‘ 1 › 3 Žœ¤ œ Ž Ž‚˜ 5 œ’‚œ ‚
ŽŽ œ˜ †
”’œ† 5 ¨ ¨’’ 1 ’œª¨ ¨’’ ª¡Ž‚
ƒ™ ”’› ”’‘ „
11.15 Modeling Time Series Trends
Using Regression
”
…
11.16 Linear Trend Model
†
… 5 ˜ 1 Ž†Ž 1
§Ž 5 §Ž
ƒ§ŽŽ 5 Ž §Ž’ 5 ’ §Žœ 5 œ „ ŽŽ ’£
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
604 Chapter 11 Time Series Forecasting
…
˜ 1 Ž†Ž ƒ „
ŽŽ ’£
…
ƒ „ ˜ 1 Ž†Ž ƒ „
˜
ŽŽ ’£ … †
…^ 5 ˜ 1 Ž†Ž
ŽŽ ’‘ …^
ŽŽ ’‘ ‡
…
…^ Š
ŽŽ œŽ ƒ ŽŽ œŽ
„ Š™ Š
ˆ ™œ ™’’
§Ž —
FIGURE 11.31
Key Cell Formulas
Cell Formula Copied to
E3 5TREND($D$3:$D$22,$C$3:$C$22,C3) E4:E26
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Linear Trend Model 605
FIGURE 11.32
FIGURE 11.33
ŽŽ œ’ ˜ Ž
ŽŽ œœ —
†
…^ 5 œ¤£ Ž¤ 1 ‚’ ‘’££†Ž
ŽŽ œŽ ƒ
ž €„ œ
› ’‘†
œ† 5— ‰ ¨¨œ†¨¨’’¨™¨œ†¨™¨’’™œ
ƒ™ › ’‘ „
11.16.1 FORECASTING WITH THE LINEAR TREND MODEL
Š ŽŽ ’¤
§Ž 5 ’Ž ’’ ’œ ’› †
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
606 Chapter 11 Time Series Forecasting
…^ ’Ž 5 œ¤£ Ž¤ 1 ‚’ ‘’££ 3 ’Ž 5 ’œ’˜ œ
…^ ’’ 5 œ¤£ Ž¤ 1 ‚’ ‘’££ 3 ’’ 5 ’›Ž’ ‚
…^ ’œ 5 œ¤£ Ž¤ 1 ‚’ ‘’££ 3 ’œ 5 ’£˜£ ‘
…^ ’› 5 œ¤£ Ž¤ 1 ‚’ ‘’££ 3 ’› 5 ’£‚¥ ’
‰ — ‰ƒ „ ’œ
’‘ ŽŽ œŽ
‡
A Note on the TREND( ) Function
— ‰ƒ „
— ‰ƒ „ †
— ‰ƒ… § § „
… …
§ §
ƒ „ § ƒ „
§ ƒ „ …
— ‰ƒ „
”
«
11.17 Quadratic Trend Model
ŽŽ œŽ
ŽŽ ’£
†
… 5 ˜ 1 Ž†Ž 1 ’†’ 1 e
§Ž 5 §’ 5 ’ †
…^ 5 ˜ 1 Ž†Ž 1 ’§’
§’ 5 ’
ŽŽ œ› ƒ ŽŽ œ› „
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Quadratic Trend Model 607
FIGURE 11.34 ƒ
Key Cell Formulas
Cell Formula Copied to
D3 C3^2 D4:D22
F3 5TREND($E$3:$E$22,$C$3:$D$22,C3:D3) F4:F26
’
œ › ’‘†
œ† 5™œ¯’
ƒ™ › ’‘ „
Š ˜ Ž ’
— ŽŽ œ£
ŽŽ œ‘ —
†
…^ 5 ‘£œ ‘¤ 1 Ž‘ ‘¤Ž †Ž 1 œ ‘Ž¤ †’
ŽŽ œ› ƒ
¬ €„ œ
› ’‘†
œ† 5— ‰ ¨ ¨œ†¨ ¨’’¨™¨œ†¨¨’’™œ†œ
ƒ™ › ’‘ „
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608 Chapter 11 Time Series Forecasting
FIGURE 11.35
ƒ
FIGURE 11.36
ƒ
ŽŽ œ›
‰
ŽŽ œŽ
11.17.1 FORECASTING WITH THE QUADRATIC
TREND MODEL
Š ŽŽ œ˜
§Ž 5 §’ 5 ’ ’Ž ’’ ’œ ’›
†
…^ ’Ž 5 ‘£œ ‘¤ 1 Ž‘ ‘¤Ž 3 ’Ž 1 œ ‘Ž¤ 3 ’Ž ’ 5 ’£‚¥ ¥
…^ ’’ 5 ‘£œ ‘¤ 1 Ž‘ ‘¤Ž 3 ’’ 1 œ ‘Ž¤ 3 ’’ ’ 5 ’¤¤Ž ˜
…^ ’œ 5 ‘£œ ‘¤ 1 Ž‘ ‘¤Ž 3 ’œ 1 œ ‘Ž¤ 3 ’œ ’ 5 ’‚£˜ ›
…^ ’› 5 ‘£œ ‘¤ 1 Ž‘ ‘¤Ž 3 ’› 1 œ ‘Ž¤ 3 ’› ’ 5 œŽœ¤ Ž
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Adjusting Trend Predictions with Seasonal Indices 609
‰ — ‰ƒ „ ’œ
’‘ ŽŽ œ›
‡
11.18 Modeling Seasonality with
Regression Models
ŽŽ œŽ
ŽŽ œ› °
‰
ƒ „
ŽŽ œŽ ŽŽ œ›
11.19 Adjusting Trend Predictions
with Seasonal Indices
« Š™
Œ
«
Š
”
ŽŽ œ¤ ƒ
ŽŽ œ¤ „
11.19.1 COMPUTING SEASONAL INDICES
«
¡ ŽŽ œ¤
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610 Chapter 11 Time Series Forecasting
FIGURE 11.37
ƒ
Key Cell Formulas
Cell Formula Copied to
D3 5C3^2 D4:D26
F3 5TREND($E$3:$E$22,$C$3:$D$22,C3:D3) F4:F26
G3 5E3/F3 G4:G22
K3 5AVERAGEIF($B$3:$B$22,J3,$G$3:$G$22) K4:K6
H3 5F3*VLOOKUP(B3,$J$3:$K$6,2) H4:H26
«
†
¡œ† 5 œ© œ
ƒ™ ¡› ¡’’ „
¡œ Ž Ž˜’± ƒ
’± „ ¡›
’ ¥œ± ƒ Ž¤±
„ ¡
Š
¡
¢Ž ¡œ ¡¤ ¡ŽŽ ¡Ž£ ¡Ž‚
’ ¡› ¡¥ ¡Ž’ ¡Ž‘
¡’˜ Œ
œ › Š š — ¡ ƒ „
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Adjusting Trend Predictions with Seasonal Indices 611
”
®œ ®‘ †
®œ† 5 š — ¡ ¨ ¨œ†¨ ¨’’œ¨¡¨œ†¨¡¨’’
ƒ™ ®› ®‘ „
š — ¡ ƒ „ ®œ œ
’’ œ
¡œ ¡’’ ®œ
Ž
®› ®£ ®‘
’ œ ›
Ž ®œ
Ž˜£ ¤± ƒ £ ¤±
„ Œ
’ ®›
¥˜ Ž± ƒ ’˜± „
Š «
” ŽŽ œ¤ †
”œ† 5 œªšž••®¦ˆ œ¨¨œ†¨®¨‘’
ƒ™ ”› ”’‘ „
Ž Ž˜£ ¤±
’ ¥˜ Ž± œ ›
ŽŽ œ¥
” ŽŽ œ¤
11.19.2 FORECASTING WITH SEASONAL INDICES
Š « «
’Ž ’’ ’œ ’›†
…^ ’Ž 5 ‘£œ ‘¤ 1 Ž‘ ‘¤Ž 3 ’Ž 1 œ ‘Ž¤ 3 ’Ž ’ 5 ’£‚¥ ¥
…^ ’’ 5 ‘£œ ‘¤ 1 Ž‘ ‘¤Ž 3 ’’ 1 œ ‘Ž¤ 3 ’’ ’ 5 ’¤¤Ž ˜
…^ ’œ 5 ‘£œ ‘¤ 1 Ž‘ ‘¤Ž 3 ’œ 1 œ ‘Ž¤ 3 ’œ ’ 5 ’‚£˜ ›
…^ ’› 5 ‘£œ ‘¤ 1 Ž‘ ‘¤Ž 3 ’› 1 œ ‘Ž¤ 3 ’› ’ 5 œŽœ¤ Ž
«
’Ž ’’ ’œ
’› Ž ’ œ › †
Œ ’Ž 5 ’£‚¥ ‚ 3 Ž˜£ ¤± 5 ’¤›¤ ¥
Œ ’’ 5 ’¤¤Ž Ž 3 ¥˜ Ž± 5 ’’Ž‚ ‘
Œ ’œ 5 ’‚£˜ £ 3 Ž˜œ Ž± 5 œ˜›Ž ›
Œ ’› 5 œŽœ¤ ’ 3 ŽŽŽ Ž± 5 œ›¥‘ Ž
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612 Chapter 11 Time Series Forecasting
FIGURE 11.38
„
‚
ŽŽ œ¤ ‰
Summary of the Calculation and
Use of Seasonal Indices
™ …^
† … ©…^ ƒ †
… 2 …^ „
’
œ ƒ
– „
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Adjusting Trend Predictions with Seasonal Indices 613
11.19.3 REFINING THE SEASONAL INDICES
ŽŽ œ¤
«
ŽŽ œ‚ ƒ ŽŽ œ‚
„
Œ
ŽŽ œ‚ ‚ Ž˜ ŽŽ
˜ Ž ’ ƒ §Ž 5
§’ 5 ’ †
…^ 5 ˜ 1 Ž§Ž 1 ’§’
‰ ‚ Ž˜ ŽŽ
ŽŽ œ‘
†
œ† 5¨¨‚ 1 ¨¨Ž˜ª™œ 1 ¨¨ŽŽªœ
ƒ™ › ’’ „
FIGURE 11.39 ƒ
Variable Cells
Objective Cell
Constraint Cell
Key Cell Formulas
Cell Formula Copied to
D3 5C3^2 D4:D26
F3 5$J$91$J$10*C31$J$11*D3 F4:F26
G3 5F3*VLOOKUP(B3,$I$3:$J$6,2) G4:G26
J13 5SUMXMY2(G3:G22,E3:E22)/COUNT(G3:G22) --
J7 5AVERAGE(J3:J6) --
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614 Chapter 11 Time Series Forecasting
™ œ ‘ « ‰
«
ŽŽ œ¤ ¡
ŽŽ œ‚ †
¡œ† 5 œªšž••®¦ˆ œ¨¨œ†¨¨‘’
ƒ™ ¡› ¡’’ „
ŽŽ œ‚ ŽŽ œ¤
Œ ‚’’ ›‘ Žœ ” Œ
ŽŽ ›˜
‡ Œ
ŽŽ ›Ž Œ
² – Œ
›˜˜
FIGURE 11.40
Solver Settings:
Objective: J13 (Min)
Variable cells: J3:J6, J9:J11
Constraints:
ƒ J7 5 1
Solver Options:
Standard GRG Nonlinear Engine
FIGURE 11.41 ƒ
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Seasonal Regression Models 615
‰ Œ
¤ ƒ Ž˜˜±„
Ž˜£±
£± Ž˜˜±
ƒŒ
‡ „
11.20 Seasonal Regression Models
‚
˜ Ž
2 Ž Š™
5 ›
†
Ž … Ž
§œ 5
˜
Ž … ’
§› 5
˜
Ž … œ
§£ 5
˜
‰ §œ §› §£
‡ †
Value of
Quarter X3 t X 4t X 5t
Ž Ž ˜ ˜
’ ˜ Ž ˜
œ ˜ ˜ Ž
› ˜ ˜ ˜
§œ §› §£ …
11.20.1 THE SEASONAL MODEL
Š
†
… 5 ˜ 1 Ž†Ž 1 ’†’ 1 œ†œ 1 ›†› 1 £†£ 1
’
†Ž 5 †’ 5
ŽŽ œŽ †
… 5 ˜ 1 Ž†Ž 1 ’§’ 1
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616 Chapter 11 Time Series Forecasting
§œ 5 §› 5 §£ 5 ˜
ŽŽ œŽ †
… 5 ˜ 1 œ 1 Ž†Ž 1 ’§’ 1
§œ 5 Ž §› 5 §£ 5 ˜ Œ
ŽŽ œŽ †
† … 5 ˜ 1 › 1 Ž§Ž 1 ’§’ 1
† … 5 ˜ 1 £ 1 Ž†Ž 1 ’†’ 1
ŽŽ œ’ ŽŽ œ£ œ › £ ŽŽ œŽ
œ › £
ŽŽ œŽ
ŽŽ ›’ ƒ ŽŽ ›’ „
« ŽŽ œ¤ ŽŽ ›’
¡ ŽŽ ›’
FIGURE 11.42
Key Cell Formulas
Cell Formula Copied to
D3 5C3^2 D4:D26
E3 5IF($B35E$2,1,0) E4:G26
I3 5TREND($H$3:$H$22,$C$3:$G$22,C3:G3) I4:I26
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Seasonal Regression Models 617
§œ §› §£ Š
œ › ¡’‘†
œ† 5 ¨ œ 5 ¨’Ž˜
ƒ™ › ¡’‘ „
ŽŽ ›’ ƒ Œ €„
œ
› ’‘†
œ† 5— ‰ ¨”¨œ†¨”¨’’¨™¨œ†¨¡¨’’™œ†¡œ
ƒ™ › ’‘ „
Š ˜ Ž ’ œ › £
— ŽŽ ›œ
ŽŽ ››
†
…^ 5 ¥’› ›¤’ 1 Ž¤ œŽ‚§Ž 1 œ ›¥£§’ 2 ¥‘ ¥˜£§œ 2 ›’› ¤œ‘§› 2 Ž’œ ›£œ§£
FIGURE 11.43
FIGURE 11.44
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618 Chapter 11 Time Series Forecasting
FIGURE 11.45
„
‚
œ 5 2¥‘ ¥˜£ › 5 2›’› ¤œ‘
£ 5 2Ž’œ ›£œ §œ Ž
œ Ž
¨¥‘¥˜£ ›
› ’
¨›’›¤œ‘ ›
£ œ
¨Ž’œ›£œ ›
ŽŽ ›› —’ 5 ˜ ‚¥‘
ŽŽ ›£
11.20.2 FORECASTING WITH THE SEASONAL
REGRESSION MODEL
Š ŽŽ œ‘
Š™–
†
…^ ’Ž 5 ¥’› ›¤’ 1 Ž¤ œŽ‚ ’Ž 1 œ ›¥£ ’Ž’ 2 ¥‘ ¥˜£ Ž 2 ›’› ¤œ‘ ˜ 2 Ž’œ ›£œ ˜ 5 ’‘œ¥ £
…^ ’’ 5 ¥’› ›¤’ 1 Ž¤ œŽ‚ ’’ 1 œ ›¥£ ’’’ 2 ¥‘ ¥˜£ ˜ 2 ›’› ¤œ‘ Ž 2 Ž’œ ›£œ ˜ 5 ’›‘¤ ¤
…^ ’œ 5 ¥’› ›¤’ 1 Ž¤ œŽ‚ ’œ 1 œ ›¥£ ’œ’ 2 ¥‘ ¥˜£ ˜ 2 ›’› ¤œ‘ ˜ 2 Ž’œ ›£œ Ž 5 ’‚›œ ’
…^ ’› 5 ¥’› ›¤’ 1 Ž¤ œŽ‚ ’› 1 œ ›¥£ ’›’ 2 ¥‘ ¥˜£ ˜ 2 ›’› ¤œ‘ ˜ 2 Ž’œ ›£œ ˜ 5 œ’›¤ ¥
‰ — ‰ƒ „ ŽŽ ›’
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Summary 619
11.21 Combining Forecasts
¡
—
Š
Ž ’ œ •
…^
†
…^ 5 ˜ 1 Ž Ž 1 ’ ’ 1 œ œ
Š Œ
‡ Œ …^
…^ ŽŽ œ¤
Ž
Ž 5 Ž ˜ 5 ’ 5 œ 5 ˜
…^ 5 Ž ˜ ’ œ
‡ Œ
‚
—’
—’
Œ Œ
«
—’ ƒ ‚„
11.22 Summary
ƒ
„ ƒ
„
«
ƒ
„
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620 Chapter 11 Time Series Forecasting
11.23 References
™ — ™ † — € ‡ ˆ
£ Ž‚¥‚
™ — — Œ©•— ˆ ™ € ‡ ’› ’ Ž‚‚›
ˆ ” € ‰ Š„ ‡ ™
¦ ˆ ’˜Ž›
¡ Œ † Œ € ˆ › Ž Ž‚¥£
¡ — ¡ € ‹ ‘› Ž Ž‚¥‘
Œ Œ Š Š ‰ … † Š
’˜˜¥
• ® — „ ‹ •”† Œ Š ’˜Ž’
ˆ — — Š ‰ … † ¡
” Ž‚‚¤
THE WORLD OF BUSINESS ANALYTICS
™ ‰ … £˜˜
¨’ Œ
• ‰ ƒ ˆ
™ ™ Œ • ‰ € ‚„ ™
• £› ’‚
—’ ˜ ¥œ
Ž›’ ‘
˜ ˜£
˜ £˜ ˜ ’
Ž›’ ‘ ŽœŽ ¥
‰
Œ† ® š Œ ™
‰ … ™ ˆ € ˆ ‹ ¥ ’ Œ Ž‚¤¤ Ž˜Ž“Ž˜¤
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Questions and Problems 621
Questions and Problems
Ž Š
°
’
˜ œ£œ ˜ œ£¤
˜ œ££ ˆ
˜ œ£œ ˜ œ£¤
ŽŽ ›‘
FIGURE 11.46
¦
•
°
œ – ˆ ƒ 5 ˜ ’£„
œ¤ ›œ
Š – Œ °
Œ œ’ Š
Œ °
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622 Chapter 11 Time Series Forecasting
¬ › Ž˜
ƒ ¨Ž˜˜˜ „
› ˆ
°
£ ™
ˆ
°
Š°
™ ’
‘ ¦ Œ
‡ Œ
Š °
ˆ
Š ’ °
¤ ™ ƒ 5 ›„
ˆ
Š ’ °
¥ ™ ‡ Œ
¦ Œ
Š °
ˆ
Š ’ °
‚ ¦ ”– ‡ Œ ¦
Œ
Š °
ˆ ”–
Š ’ °
Ž˜ ¦
Š °
—’
ˆ
Š ’ °
Š
°
™ « —’
Š °
ˆ
Š ’ °
° Š°
¬ ŽŽ Ž›
€ ‚ ƒ
¦ Œ
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Questions and Problems 623
ŽŽ ˆ
°
Ž’ ™ ƒ 5 ’„
ˆ
Š ’ °
Žœ ¦ ”– ‡ Œ ¦
Œ
Š °
ˆ ”–
Š ’ °
Ž› ¦
Š °
—’
ˆ
Š ’ °
Š
°
™ « —’
Š °
ˆ
Š ’ °
° Š°
¬ Ž£ ’Ž
„…†
Ž£ ¦
Š °
—’
ˆ
Š ‘ °
™
¦
‘¢
Ž‘ ¦
Š °
™ « —’
Š °
ˆ
Š ‘ °
™
¦
‘¢
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624 Chapter 11 Time Series Forecasting
Ž¤ ¦ ¦
Œ
Š °
ˆ
Š ‘ °
Ž¥ ¦ ¦
Œ
Š °
ˆ
Š ‘ °
Ž‚ ¦ ” Š – ‡
Œ ¦ Œ
Š °
ˆ
Š ‘ °
’˜ ¦ ” Š – ‡
Œ ¦ Œ
Š °
ˆ
Š ‘ °
’Ž ¦
Š °
—’
ˆ
Š ‘ °
¬ ’’ ’‚
‡ˆ
œ
’’ ¦
Š °
—’
ˆ
Š ’˜Ž¤ °
™
¦ ’˜Ž¤
’œ ¦
Š °
™ « —’
Š °
ˆ
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Questions and Problems 625
Š ’˜Ž¤ °
™
¦ ’˜Ž¤
’› ¦ ¦
Œ
Š °
ˆ
Š ’˜Ž¤ °
’£ ¦ ¦
Œ
Š °
ˆ
Š ’˜Ž¤ °
’‘ ¦ ”– ‡ Œ ¦
Œ
Š °
ˆ ”–
Š ’˜Ž¤ °
™
”–
¦ ’˜Ž¤
’¤ ¦ ” Š – ‡
Œ ¦ Œ
Š °
ˆ
Š ’˜Ž¤ °
’¥ ¦ ” Š – ‡
Œ ¦ Œ
Š °
ˆ
Š ’˜Ž¤ °
’‚ ¦
Š °
—’
ˆ
Š ’˜Ž¤ °
¬ œ˜ œ›
„‰ƒ œ
’’
œ˜ ˆ
°
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626 Chapter 11 Time Series Forecasting
œŽ ™
ˆ
™ Œ Š
°
™ ’
œ’ ¦ Œ
‡ Œ
Š °
ˆ
Š ’œ ’› °
œœ ™ ‡ Œ
¦ Œ
Š °
ˆ
Š ’œ ’› °
œ› ¦ ”– ‡ Œ ¦
Œ
Š °
° Š °
¬ œ£ œ‚
‚ „ ’
œ£ ¦
Š °
—’
ˆ
Š ‘ ’˜Ž¤ °
™
¦ ‘
’˜Ž¤
™
¦ ‘
’˜Ž¤
œ‘ ¦
Š °
™ « —’
Š °
ˆ
Š ‘ ’˜Ž¤ °
™
¦
‘¢ ’˜Ž¤
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Questions and Problems 627
™
¦
‘¢ ’˜Ž¤
œ¤ ¦ ”– ‡ Œ ¦
Œ
Š °
ˆ ”–
Š ‘ ’˜Ž¤ °
™
”–
¦
‘¢ ’˜Ž¤
™ ”–
¦
‘¢ ’˜Ž¤
œ¥ ¦ ” Š – ‡
Œ ¦ Œ
Š °
ˆ
Š ‘ ’˜Ž¤ °
œ‚ ¦ ” Š – ‡
Œ ¦ Œ
Š °
ˆ
Š ‘ ’˜Ž¤ °
¬ ›˜ ›œ
Š€ ¦ Œ
ƒ Ž˜˜˜ „ ‚›
›˜ ˆ
°
›Ž ™ ƒ 5 ›„
ˆ
Š › °
›’ ¦ ”– ‡ Œ ¦
Œ
Š °
ˆ ”–
Š › °
›œ ¦
Š °
—’
ˆ
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
628 Chapter 11 Time Series Forecasting
Š ’ °
Š
°
™ « —’
Š °
ˆ
Š ’ °
° Š°
¬ ›› £˜
‹ Œ œ˜ ¥’
›› ˆ
°
›£ ™
ˆ
™ Œ Š
°
™ ’
›‘ ¦ Œ
‡ Œ
Š °
ˆ
Š ’ °
›¤ ™ ‡ Œ
¦ Œ
Š °
ˆ
Š ’ °
›¥ ™ ƒ 5 ›„
ˆ
Š ’ °
›‚ ¦ ”– ‡ Œ ¦
Œ
Š °
ˆ ”–
Š ’ °
£˜ ¦ ‘
†
…^ 5 ˜ 1 Ž 1 ’
’
1 œ
œ
1 ›
›
1 £
£
1 ‘
‘
Š ˜ Ž c ‘°
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Questions and Problems 629
Š ’ °
™
¬ £Ž ££
„
’
£Ž ˆ
°
£’ ¦ ¦
Œ
Š °
ˆ
Š › °
£œ ¦ ¦
Œ
Š °
ˆ
Š › °
£› ¦ ” Š – ‡
Œ ¦ Œ
Š °
ˆ
Š › °
££ ¦ ” Š –
‡ Œ ¦ Œ
Š °
ˆ
Š › °
¬ £‘ ‘˜
ƒ ‚
¦ Œ ‚›
£‘ ˆ
°
£¤ ¦ ¦
Œ
Š °
ˆ
Š › °
£¥ ¦ ¦
Œ
Š °
ˆ
Š › °
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630 Chapter 11 Time Series Forecasting
£‚ ¦ ” Š – ‡
Œ ¦ Œ
Š °
ˆ
Š › °
‘˜ ¦ ” Š – ‡
Œ ¦ Œ
Š °
ˆ
Š °
¬ ‘Ž ‘£
Ž ‰
Žœ
‘Ž ˆ
°
‘’ ¦ ¦
Œ
Š °
ˆ
Š °
‘œ ¦ ¦
Œ
Š °
ˆ
Š °
‘› ¦ ” Š – ‡
Œ ¦ Œ
Š °
ˆ
Š °
‘£ ¦ ” Š – ‡
Œ ¦ Œ
Š °
ˆ
Š °
CASE 11.1 PB Chemical Company
š ˆ Œ ‹
ˆ ™ ™
¦ ˆ –
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Case 11.2 631
•
ˆ
ˆ –
ˆ
” ˆ –
ˆ ˆ –
ˆ –
ˆ
ˆ – ƒ ¥£± ˆ – „
‰
ˆ –
Œ – ”
Œ
ˆ –
Ž Š ˆ –
° ” °
’ Œ
° Š
° Š ƒ
„°
œ ¡ «
°
› Œ –
ˆ – ” ˆ
°
£ Š ˆ – °
Forecasting COLAs CASE 11.2
ˆ ³ ƒˆ ‹³„
¦ Œ
ˆ ‹³
†
¦ ‰
–
–
ƒ „
‰ ‰
–
ƒ – £ „
ˆ ‹³
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632 Chapter 11 Time Series Forecasting
Œ ˆ ‹³–
« ƒ™•ž „ ” –
™•ž
ƒ™ˆ„
™ˆ ƒ
™ˆ Ž‚‚Ž ’˜Ž‘ „ƒ‘
„
ˆ ‹³
™ˆ Ž ˆ
ˆ ‹³–
™ˆ
‰
ˆ ‹³ ™ˆ
Ž ˆ ™ˆ
°
’ ”– Œ ƒ „
ƒ„ ‡ Œ ™ˆ
Š Œ ° Š ™ˆ
’˜Ž‘ ’˜Ž¤ °
œ ™ˆ Š Œ
° Š ™ˆ ’˜Ž‘ ’˜Ž¤
°
› ™ ™ˆ
”– Š
™ˆ °
°
£
’˜˜‚ Š Œ ”– °
Š Œ ° Š ™ˆ
’˜Ž‘ ’˜Ž¤ °
‘ ¡ Š ™ˆ
°
°
¤ Œ
”–
†
™ ˆ 5 3 ” 1 Ž 2 3 —
” ”– —
˜ Ž ¦ Œ ‡ Œ
™ˆ Š
Œ ° Š ™ˆ
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Case 11.3 633
Strategic Planning at Fysco Foods CASE 11.3
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634 Chapter 11 Time Series Forecasting
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Chapter 12
Introduction to Simulation
Using Analytic Solver Platform
12.0 Introduction
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636 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
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Methods of Risk Analysis 637
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Worst case Best case Worst case Best case
Worst case Best case Worst case Best case
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638 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
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A Corporate Health Insurance Example 639
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640 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
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Spreadsheet Simulation Using Analytic Solver Platform 641
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642 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
12.5.1 STARTING ANALYTIC SOLVER PLATFORM
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Random Number Generators 643
FIGURE 12.3
Distribution RNG Description
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644 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
FIGURE 12.4
FIGURE 12.5
12.6.1 DISCRETE VS. CONTINUOUS RANDOM VARIABLES
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Preparing the Model for Simulation 645
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646 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
FIGURE 12.6
Key Cell Formulas
Cell Formula Copied to
B11 5D5*PsiUniform(12F5,11H5) --
B12 5B11*PsiUniform(12$F$5,11$H$5) B13:B22
C11 5$D$7*B11 C12:C22
D11 5PsiNormal($D$6*(11$F$6)^A11,$H$6) D12:D22
E11 5D11*B11 E12:E22
G11 5E112C11 G12:G22
G23 5SUM(G11:G22) --
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Preparing the Model for Simulation 647
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648 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
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Running the Simulation 649
12.8 Running the Simulation
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650 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Running the Simulation 651
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652 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
12.8.4 RUNNING THE SIMULATION
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Data Analysis 653
FIGURE 12.11 …
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654 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
FIGURE 12.12 Ġ
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Data Analysis 655
FIGURE 12.13 †
12.9.4 OBTAINING OTHER CUMULATIVE PROBABILITIES
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656 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
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The Uncertainty of Sampling 657
12.10 The Uncertainty of Sampling
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658 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
FIGURE 12.16
Key Cell Formulas
Cell Formula Copied to
B4 5PsiMean(‘Health Claims Model’!G23) --
B5 5PsiStdDev(‘Health Claims Model’!G23) --
B9 5B42NORMSINV(12B7/2)*B5/SQRT(B6) --
B10 5B41NORMSINV(12B7/2)*B5/SQRT(B6) --
B13 5B122NORMSINV(12B7/2)*SQRT(B12*(12B12)/B6) --
B14 5B121NORMSINV(12B7/2)*SQRT(B12*(12B12)/B6) --
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The Uncertainty of Sampling 659
12.10.2 CONSTRUCTING A CONFIDENCE INTERVAL
FOR A POPULATION PROPORTION
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INTERVAL WIDTHS
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660 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
12.11 Interactive Simulation
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The Benefits of Simulation 661
FIGURE 12.17 €
Key Cell Formulas
Cell Formula Copied to
G27 512PsiTarget(G23,G25) --
12.12 The Benefits of Simulation
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662 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
Applying Simulation in Personal
Financial Planning
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A Reservation Management Example 663
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664 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
FIGURE 12.18
Key Cell Formulas
Cell Formula Copied to
C8 5PsiSimParam({19,20,21,22,23,24,25}) --
C10 5PsiDiscrete(E5:E16, F5:F16) --
C11 5MIN(C10,C8) --
C12 5PsiBinomial(C11,1–C6) --
C14 5C11*C5 --
C15 5MAX(C122C4,0)*C7 --
C16 5C142C151PsiOutput( ) --
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12.14.2 DETAILS FOR MULTIPLE SIMULATIONS
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A Reservation Management Example 665
FIGURE 12.19
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666 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
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12.14.4 DATA ANALYSIS
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An Inventory Control Example 667
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668 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
FIGURE 12.22
Key Cell Formulas
Cell Formula Copied to
D4 5PsiMin(Model!$C$16,B4) D5:D10
E4 5PsiPercentile(Model!$C$16,0.2,B4) E5:E10
F4 5PsiMean(Model!$C$16,B4) F5:F10
G4 5PsiPercentile(Model!$C$16,0.8,B4) G5:G10
H4 5PsiMax(Model!$C$16,B4) H5:H10
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An Inventory Control Example 669
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670 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
FIGURE 12.23
12.15.2 IMPLEMENTING THE MODEL
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An Inventory Control Example 671
FIGURE 12.24
Key Cell Formulas
Cell Formula Copied to
B6 550 --
B7 5F6 B8:B35
C7 5COUNTIF($J$6:J6,A7)*$M$6 C8:C35
D6 5PsiDiscrete(Data!$F$7:$F$17,Data!$G$7:$G$17) D7:D35
E6 5MIN(D6,B61C6) E7:E35
F6 5B61C62E6 F7:F35
G6 5F6 --
G7 5G62E71IF(H651,$M$6,0) G8:G35
H6 5IF(G6,$M$5,1,0) H7:H35
I6 5IF(H650,0,PsiDiscrete(Data!$C$7:$C$9,Data!$D$7:$D$9)) I7:I35
J6 5IF(I650,0,A6111I6) J7:J35
M9 5SUM(E6:E35)/SUM(D6:D35) 1 PsiOutput( ) --
M10 5AVERAGE(B6:B35) 1 PsiOutput( ) --
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672 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
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An Inventory Control Example 673
12.15.3 REPLICATING THE MODEL
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674 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
12.15.4 OPTIMIZING THE MODEL
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
An Inventory Control Example 675
FIGURE 12.27
Key Cell Formulas
Cell Formula Copied to
M13 5PsiMean(M9) M14
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676 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
An Inventory Control Example 677
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678 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
FIGURE 12.30 Š „ Œ
FIGURE 12.31 Š
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An Inventory Control Example 679
FIGURE 12.32 Š
FIGURE 12.33 Š
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680 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
FIGURE 12.34
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An Inventory Control Example 681
FIGURE 12.35
FIGURE 12.36
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
682 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
… –¤ š —“
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Creating Trend Charts
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
An Inventory Control Example 683
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Change Constraint
Settings
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684 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
12.16 A Project Selection Example
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A Project Selection Example 685
FIGURE 12.39
‹
Key Cell Formulas
Cell Formula Copied to
D14 5SUMPRODUCT(D6:D13,C6:C13) --
D16 5D152D14 --
F6 5IF(C651,PsiBinomial(1,E6),0) F7:F13
J6 5IF(F651,PsiTriangular(G6,H6,I6),0) J7:J13
K6 5J62C6*D6 K7:K13
K14 5SUM(K6:K13)1PsiOutput( ) --
K16 5PsiMean(K14) --
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
686 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
FIGURE 12.40
Solver Settings:
Objective: K16 (Max)
‹ Variable cells: C6:C13
Constraints:
D16 .5 0
C6:C16 5 binary
Solver Options:
Standard Evolutionary Engine
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12.16.2 SOLVING AND ANALYZING THE PROBLEM
WITH ANALYTIC SOLVER PLATFORM
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
A Project Selection Example 687
FIGURE 12.41 Œ
Key Cell Formulas
Cell Formula Copied to
K18 5PsiMin(K14) --
K19 5PsiMax(K14) --
K20 5PsiRange(K14) --
K22 5PsiTarget(K14,0) --
K23 5PsiTarget(K14,1000) --
’—–
12.16.3 CONSIDERING ANOTHER SOLUTION
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688 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
FIGURE 12.42 Œ ’“
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A Portfolio Optimization Example 689
12.17 A Portfolio Optimization Example
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Gas Coal Oil Nuclear Wind
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690 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
Correlations Between Returns by Fuel Type
Gas Coal Oil Nuclear Wind
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
A Portfolio Optimization Example 691
FIGURE 12.43 Œ
Key Cell Formulas
Cell Formula Copied to
D10 5SUM(D5:D9) --
E5 5C5*D5 E6:E9
F5 5PsiNormal(G5,H5,PsiCorrMatrix($C$14:$G$18,A5)) F6:F9
F10 5SUMPRODUCT(F5:F9,E5:E9)/SUM(E5:E9)1PsiOutput() --
F21 5PsiMean(F10) --
F22 5PsiStdDev(F10)
F23 5PsiOptParam(0.02,0.12) --
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692 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
Correlation
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ANALYTIC SOLVER PLATFORM
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A Portfolio Optimization Example 693
FIGURE 12.44 Œ
Number of
optimizations
to run
FIGURE 12.45
Solver Settings:
Objective: F21 (Max)
Variable cells: D5:D9 Š
Constraints:
D5:D9 .5 0
D5:D9 ,51000
D10 5 1000
F22 ,5 F23
Solver Options:
Evolutionary Engine
Optimizations to Run 5 6
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694 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
FIGURE 12.46 Š
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References 695
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696 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
THE WORLD OF BUSINESS ANALYTICS
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Questions and Problems 697
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698 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
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Questions and Problems 699
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700 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
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Questions and Problems 701
May June July August September October
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702 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
¥ Ž‹ €
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Growth Rates
Department 2017 Revenues Minimum Maximum
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Questions and Problems 703
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704 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Questions and Problems 705
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
706 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Questions and Problems 707
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708 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
‘ ŸŒ‹
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Questions and Problems 709
5
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710 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Case 12.1 711
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712 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Case 12.3 713
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714 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
Ž
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Case 12.3 715
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716 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
Ž “š “
‡ ‹Œ €
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into the Model
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into the Model
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Case 12.4 717
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The Foxridge Investment Group CASE 12.4
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718 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Case 12.4 719
FIGURE 12.49
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720 Chapter 12 Introduction to Simulation Using Analytic Solver Platform
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Chapter 13
Queuing Theory
13.0 Introduction
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13.1 The Purpose of Queuing Models
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721
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722 Chapter 13 Queuing Theory
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FIGURE 13.1
$
Total cost
Cost of providing service
Cost of customer dissatisfaction
Service
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Characteristics of Queuing Systems 723
FIGURE 13.2
Customer … Customer
Arrives Leaves
Waiting Line Server
Customer
Leaves
Server 1
Customer … Customer
Arrives Leaves
Waiting Line Server 2
Customer
Leaves
Server 3
… Customer
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Customer … Customer
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… Customer
Leaves
Waiting Line Server 3
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13.3 Characteristics of Queuing Systems
„ ˜ Š
‹ † “
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
724 Chapter 13 Queuing Theory
13.3.1 ARRIVAL RATE
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l 5 Ÿ
Key Cell Formulas
Cell Formula Copied to
B5 5($B$2^A5*EXP(2$B$2))/FACT(A5) B6:B21
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Characteristics of Queuing Systems 725
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726 Chapter 13 Queuing Theory
‹
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FIGURE 13.4
5
Key Cell Formulas
Cell Formula Copied to
D5 5EXP(2$C$2*A5)2EXP(2$C$2*C5) D6:D23
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Queuing Models 727
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728 Chapter 13 Queuing Theory
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The M/M/s Model 729
13.6 The M/M/s Model
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„ £ £
‹ † ¡
FIGURE 13.6
— 5 £
™ˆ 5 a
£ £
2† 2†
1
5ˆ › › 2
ˆ £ 1†
§ 5
2 † › 2 £ “
§ 5 § 1
5 §£
†
5 1
†
™ 5 ™
› 2 ˆ
£
™ˆ #
›
™ 5
£
™ˆ .
› 2
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
730 Chapter 13 Queuing Theory
13.6.1 AN EXAMPLE
„ £ £
„ Œ ƒ
ƒ ™
„
Š
„ Œ ¤ „
¤
Ÿ Š
“
13.6.2 THE CURRENT SITUATION
Œ Œ •
£ £†
Š ‹ † Œ •
FIGURE 13.7
ƒ ‚“‚‚¢
„
‹
„ ‹†“ ˆ †¢ Œ •
„ ‹†ˆ ˆ Ÿ †
“† ¢“ „ ‹††
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
The M/M/s Model 731
ˆ Ÿ ˆ
Œ • „
Œ • Ž
13.6.3 ADDING A SERVER
„ Œ
„ Š
£ £“Š ‹ œ† ž
FIGURE 13.8
„ ‹†“
ˆ †¢ ˆ †žžˆ
‹†ˆ
ˆ ˆ“ˆ‡ † “Ÿ „
“
Ž ¤
‹ £ £† ‹ †
ˆ Ÿ Š ˆ Ÿ † „
ˆ Ÿ 2 ˆ Ÿ † 5 ˆ †¢“‡ ‹ £ £“
‹ † ž
ˆ †¡ Š ˆ ˆ“ˆ‡ „
ˆ †¡ 2 ˆ ˆ“ˆ‡ 5 ˆ †¢“‡
„ £ £“ ¨
„
†£ 5 ˆ †¢“‡
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
732 Chapter 13 Queuing Theory
13.6.4 ECONOMIC ANALYSIS
Œ
„
‘
¤ Š
¤
13.7 The M/M/s Model with Finite
Queue Length
„ £ £ ‹ † † ž ˜
Ž Š
˜
¨ Š „
£ £Š Š
€ ˜ ‹ † ‡
FIGURE 13.9
— 5 § 2 § £
™ˆ 5 † 1 a a
£ £ €
2 2†
1
5† › › 51†
€ £
™ 5 ™ˆ 5 † “
›
£
™ 5 ™ˆ 5 1 † 1 “ € 1
›2
™ 5 ˆ . € 1
™ˆ £
§ 5 † 2 €2 2 € 2 €2 † 2 5 £
› † 2 “
§ 5 a ™ 1 § 1 † 2 a ™
2† 2†
5ˆ 5ˆ
‚
5
† 2 ™€
‚
5
† 2 ™€
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
The M/M/s Model with Finite Queue Length 733
„ Š Œ •
Š
’
‘
„¤
13.7.1 THE CURRENT SITUATION
Œ Œ •
£ £†Š Š Ÿ ‹ † †ˆ
Œ •
FIGURE 13.10
ƒ ‚“‚‚¢
ƒ ‚Ÿ Š
„ ‹† ˆ ˆ¢†‡ Œ •
Ž Š Š „
‹†ˆ ˆ ““Ÿ‡
† ŸŸ „ ‹††
ˆ ¡ž ““ †“
Œ •
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
734 Chapter 13 Queuing Theory
13.7.2 ADDING A SERVER
„ Œ
£ £“Š Š ‹ † ††
FIGURE 13.11
„ ‹†
ˆ ˆˆˆ ‹†ˆ
ˆ ˆ“ˆ¢
† ““ „
“ Ž
¤
‘ ¤
13.8 The M/M/s Model with Finite
Population
„ Š Š
—
Š
Š
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
The M/M/s Model with Finite Population 735
Š „ £ £
˜ Š š
• „
• „ ƒ
• „ ™
• ‚
• ‹ ‹’Š
¦
„
£ £Š ˜ ƒ ˜
‹ † †“
FIGURE 13.12
™ˆ 5 a 1 a
2†
ƒ› ƒ
ƒ› 2†
2
5ˆ ƒ 2 ›› 5 ƒ 2 ››
ƒ›
™ 5 ™ˆ ˆ##
ƒ 2 ››
„ƒ
ƒ›
™ 5 2 ™ˆ , #ƒ
ƒ 2 ››
™ 5 ˆ . ƒ
§ 5 a 2 ™
ƒ
5
§ 5 a ™ 1 § 1 † 2 a ™
2† 2†
5ˆ 5ˆ
§
5
ƒ 2 §
§
5
ƒ 2 §
13.8.1 AN EXAMPLE
’ £ £
„ ƒ †ˆ
™ ˆ ˆ†
„ ©†ˆˆ
„
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
736 Chapter 13 Queuing Theory
ž „ †£ž
˜
Š
©“ˆ
13.8.2 THE CURRENT SITUATION
„ †ˆ Ž
„ £ £
˜ „
• ˜ ‹ † †
FIGURE 13.13
…
Key Cell Formulas
Cell Formula Copied to
J8 5I8*E4 --
J9 5F9*I9 --
J10 5SUM(J8:J9) --
Œ ˆ ˆ†
„ ‚“
ˆ ˆ† „
†£ž 5 ˆ †“Ÿ
‚ „ ‚¢ Œ
†ˆ ‚Ÿ ˜ †ˆ „
‘“ Œ †ˆ
ˆ ˆ†
†ˆ 3 ˆ ˆ† 5 ˆ † ‘“
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
The M/M/s Model with Finite Population 737
„ ‹¡ ‹†“
‹††
† ‡ž ’ ‹†ˆ
†ˆ ƒ ‹‡
† Ÿ“¢
‘ ª
Š „
©“ˆ ‹‡ † Ÿ“¢
Œ ©†ˆˆ
ª‡ ©†Ÿ“ ¢¢
„
©† “ ¢¢
Software Note
„ …
‹ † † „ š
† ƒ ¤
“ ƒ —
13.8.3 ADDING SERVERS
‹ † †¢
FIGURE 13.14
…
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
738 Chapter 13 Queuing Theory
ƒ ‹†ˆ
ˆ ž“ ¢‡ †ˆ
‹‡
ˆ ž† „
©¢ˆ
© † “ †Ÿ“ ¢¢2ž† †“ 5 † “ „
©Ÿ† “ ª†ˆ ©†“† †“
‹ † †Ÿ
¦ ©“ˆ
‹ † †¢
©¡ ¡
©†“† †“ ©†¢ ¡ „
FIGURE 13.15
†
…
13.9 The M/G/1 Model
‹ † ¢
‘
‹ Š
„ Š †ˆ Š
ˆ¢Ÿ ¡ˆ „ £¥£†
Š ˜ Š
„
£¥£†Š ˜ ‹ † †¡
„ £¥£†Š Š
Š
™ s
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
The M/G/1 Model 739
FIGURE 13.16
™ˆ 5 † 2 £
“s“ 1 £ “
§ 5
“ † 2 £
‡
§ 5 § 1 £
5 §£
5 1 †£
™ 5 £
„ ‹ † †¡ Š
„
£¥£†Š
« §
†ˆ ¡ „ « §
©†Ÿ ƒ « § ™
Ÿ
« § ’ Œ
†Ÿ ˆ “Ÿ
“ ˆ ˆ ’
©Ÿˆˆˆ „ •
ƒ ’ •
’ ˜
13.9.1 THE CURRENT SITUATION
’ • £¥£†Š „
‹ † †
FIGURE 13.17
‡
ˆ
‚
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
740 Chapter 13 Queuing Theory
ƒ ‚ Ÿ „
‚¢
‚Ÿ
ƒ ‹†† †“
ƒ ‹†¢ † †¢ ¡ž
13.9.2 ADDING THE AUTOMATED DISPENSING DEVICE
’
†“ ˆ “ˆ ‹ † †ž
Ÿ
FIGURE 13.18
‡
ˆ ‚
„ ‹†¢
† †¢ ˆ ¢‡ž
“¡ ƒ ‹†† Š
ˆ ž‡ „
„ Š « § Š
Š
„’ Ž
Š
†“ ‹ † † ¥ Š
š
† ƒ
“ ƒ ¥
‹ ¥ ‹ † †‡
¢ ƒ ’‰
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
The M/G/1 Model 741
FIGURE 13.19
‡ ‰Š
†
„ ¥ ‹ † “ˆ ‘
¢
Š †“ „
« § Ÿ ¢ †
FIGURE 13.20
‡
ˆ ‚
Key Cell Formulas
Cell Formula Copied to
I8 5E323.5 --
I9 5I8*15 --
I10 5I9*10 --
I11 5I10*6 --
I13 55000 --
I15 5I13/I11 --
ƒ ‹ † “ˆ ˜
Œ
ˆ ž † © ž ¡
¡ ž
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
742 Chapter 13 Queuing Theory
13.10 The M/D/1 Model
„ £¥£†
‘ Š
‹ Š
„
Š ¨ †ˆ
„ ££†
„ ££† £¥£†
ˆ s 5 ˆ s 5 ˆ
Š
13.11 Simulating Queues and
the Steady-State Assumption
…
Š
Š ‘ Š
˜ Š
Š Š
˜ Š •Ž Š
Š Š
„
Š Š
„ Š
Š
‹
‹ † “† ‹ †“†
£ £† Š
‹ † “†
„ ‹ † “†
Š Ÿˆˆ „ ˜
Š ¦
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
References 743
FIGURE 13.21
‡
13.12 Summary
Š „
Š
¦
Š „
Š ˜ Š
‹
Š
Š
˜
13.13 References
¥ ¤ … „ ™ ‡
†‡ ‡
¥ ƒ ‘ ¦ – š †‡žŸ
‘¤ ‰ ‚ ƒ¦ªš™ ‘†‡‡†
‰ ™ … ¤ … ƒ š™ ª Œ •¬„
€ … „ • ‡†‡ ‡
§ … ƒ š„ § ‹ Œ ‰ Ÿ
†‡¡‡
…™ „ ¤ §§Œ “††‡‡†
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
744 Chapter 13 Queuing Theory
THE WORLD OF BUSINESS ANALYTICS
®‰ § Ž ¤
‚ ‹ £†Ÿ£†‡‡† ††ˆ Œ†¢
¨ ¨
Ž †Ÿ
•
• ˜
„ ¨ Š ¨
†‡ˆˆ
¤
„
„ ¦
¤ §
„
Œ Œ § •
”
ˆˆ
„ ‰ „
š
• ƒ ”
’
Ÿ † ¢ “
• •
• „
• ƒ
§ • ¦
„ •
§
Ž‘ ’
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Questions and Problems 745
• ƒ „
„
Ž
•
„
§ • †‡ž¢
‘Œ
¦ ¯ Š °
¥
¢ˆ
ˆ
§ “ˆ š
§ •
™
§
‘
Š
§
Ž
”
Questions and Problems
† ƒ Š ‹ † “ ‹
Š
“ ’ Š ‹ † “
±‚
„
±¥
¢
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
746 Chapter 13 Queuing Theory
Ÿ „ • †ˆ
™ „
Ÿ
±
’ ±
’
±
¡ „ƒ Œ ’‹
™
ˆ
‘ ±
‘ †ˆ ±
— Š † † ˆ†“
†ˆ – ™’ ’¦
‚
†ˆ
±
¤ Š ¡
¢ˆ
±
— Š † “ •
† € ‚²™’¦ „
‚
ƒ • š “Ÿ
¢
ž ¤ Š ¡ Š š
±
±
’ ±
’ ±
’ Š ±
Š
“ ± “ š–
Š
‡ ƒ¤— Œ
‡
•
†ž
™
•
±
¢ •
±
Ÿ •
±
•
±
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Questions and Problems 747
†ˆ ’‹ ‘
™
„
‘
Ÿ
‘ ‹
• Ž ±
†† ˜ ‹ ’
• ƒ
‹
„
¢ ‚
©“† ˜ •
„
“
† „ ©Ÿ
˜ Ž ±‚
‹ ˜ Š
˜ ±
†“ „ ƒ
¡‡
“
™ „
•
†
±
±
Š ±
‘
±
† ƒ ‹ „ Š
™ ‚
ˆ
±
±
±
Š ±
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
748 Chapter 13 Queuing Theory
†¢ „ ¤ ƒ — ¤ƒ—
††šˆˆ
“šˆˆ ¤ƒ—
„ ¤ƒ—
™
¡ˆ ‚
“¢
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’
±
Š ±
±
†Ÿ „ „ ƒ ©¢Ÿ
ž
±
’
±
’ ±
©‡
’
ž
±
©¢Ÿ ±
†¡ „ ’ Œ ’ ‹ „
˜
„ „
“¡ Ž “ Ž
††£“
‚
Š Ž
„ ˜
Š Ÿˆ
™ „
Š
’ ±
—
Š ±
—
±
‘ ˜
Š ±
† —
„ †Ÿ
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Questions and Problems 749
†ˆ Š †Ÿ
†ˆ Ž
¤ Š ™
¡ˆ „
†Ÿ ¨
’ Š ±
’ Š ±
Ž ±
‘
†³ Ž ±
†ž ¤ Š
žˆˆ
¡ˆ ™
„ ¤ Ÿ
†ˆ ¤
Ÿ
±
±
’ ¤ ±
‘ Š ¤
Ÿ³ ±
†‡ ¤ ¤
ƒ
¢ ž
†¢ ™
„
Š
’
±
’ ±
±
•˜ ±
¤ ¤ †ˆ³
‘
±
“ˆ ¤ Š ¤ ¤ •
©ŸŸ ©†“
±
±
±
‘ ˜
±
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
750 Chapter 13 Queuing Theory
“† ™ƒ Š ¦
ƒ „ ™ƒ ™
¢ Ÿ Ÿ „
™ƒ „ Š
™ƒ †
ˆ Ÿ
Ÿ ±
Ÿ
±
’ ™ƒ ±
’ ™ƒ
±
¦ ©¢ˆ
™ƒ ‘
™ƒ ±
““ ž† €
„ „ € ™
’‹
¢Ÿ ™
„ Š •
Ÿ „
±
ž† ±
’ ±
“ „ ‘ Œ Š “ Ÿ
ƒ
“ˆ
’ ±
’ ±
‘ Œ
† ‘
Š ±
“¢ Š
„
Š
“ˆ „ Š
™
Š „
±
±
’
±
Š
±
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Case 13.1 751
“Ÿ ƒ ™ƒ †ˆ
’ •
ž £ž 5 ˆ Ÿ
„
„ ¢
±
’ ±
’ ±
±
„ ˜ ©Ÿ ¢ˆ „
©Ÿˆ
˜ ±
“¡ Š ™
5 Ÿ
5 ¡
ƒ £ £
5 †
ƒ £¥£†
¦ †£
†£
ƒ £ £† £¥£† „
‚
“ ƒ †Ÿˆ žˆˆ §•Œ
„ “ˆ
©†ˆ ¡
“ˆ
„ ©“Ÿ
’ ±
±
¢ˆ ±
±
May the (Police) Force Be with You CASE 13.1
ƒ ¤
• ƒ ¦
€
• „ •
• ƒ
•
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
752 Chapter 13 Queuing Theory
„ ¦ †‡ Ÿ ƒ
¢ ’
•
‡†† —
•
ƒ
ƒ ’
ࠠ
Ÿˆˆ
Š
„ ‹ † ¡
£ £Š ¦ •
—
Ž Œƒ
Š Š
Š
‡†† ±
™
±
±
— £ £Š ‡††
±
ƒ
±
‘ ¦
±
CASE 13.2 Call Center Staffing at Vacations Inc.
€ € ¦ ’
€
Š Š €
„ ˜
€ •
€ •
” “
€ • ˜
Ž “ ¢ˆ³
•
„ †ˆ³
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Case 13.3 753
‚ €
©“Ÿˆ ‚ © ˆˆˆ €
©“Ÿˆ •
€ • †ˆ †ˆ
Ÿˆ ™
¢
„ € †ˆ
•
’ ±
€ • ±
€ ©†“ ‘
˜ ±
Bullseye Department Store CASE 13.3
Œ
— „ Ÿˆ ‹ ¥
ƒ „ •
¥
ª ‹§ ¥
„ ™
‚
ˆ
Š
Œ
Œ
’
„
†ž ©†
Š „
Š ©¡
Š “
‹ ˜ ©¡
©†
Œ ©¡ˆ
Œ
±
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Chapter 14
Decision Analysis
14.0 Introduction
€
‚
ƒ „
„
ƒ
…
„
‚
14.1 Good Decisions vs. Good Outcomes
754
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
An Example 755
† „ ‡ ˆ
‰
…
‚
14.2 Characteristics of Decision Problems
Š
‹
Œ
‰
Ž
‘
…
‚
14.3 An Example
… ’ “
† ”€
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
756 Chapter 14 Decision Analysis
…
Ž
Ž
•
– –
‚
FIGURE 14.1
14.4 The Payoff Matrix
‚
‚
14.4.1 DECISION ALTERNATIVES
Š
—
”
–
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
The Payoff Matrix 757
14.4.2 STATES OF NATURE
˜ Ž
Š
—
–—
‰
FIGURE 14.2
14.4.3 THE PAYOFF VALUES
™ –—
Ž
š” š”
– Š
‡
š”€€€€€€
Š
•
2š›€€€€€€
š”€€€€€€
•™ –— Ž
š›
šœ š—
•œ –—
Ž
š œ –—
Ž š—
š– š›
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
758 Chapter 14 Decision Analysis
ž Œ
Ÿ –— š™
Š
‡
š”€€€€€€
Š
‡
1š –€€€€€€
Š
•
2š›€€€€€€
Š
•
2š—€€€€€€
š ™€€€€€€
•Ÿ š
Ž
› •›
š€
14.5 Decision Rules
‹
š”
¡
Ž
š
¡
‹
…
14.6 Nonprobabilistic Methods
Š
ƒ
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Nonprobabilistic Methods 759
14.6.1 THE MAXIMAX DECISION RULE
–— Ž
¢ £
–”
FIGURE 14.3
Key Cell Formulas
Cell Formula Copied to
D5 5MAX(B5:C5) D6:D8
Ž
‚
š” ‘
š—
Š
State of Nature
Decision 1 2 MAX
”€ 2€€€€ ”€ d
—¤ —¤ —¤
…
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
760 Chapter 14 Decision Analysis
14.6.2 THE MAXIMIN DECISION RULE
¢ £
––
FIGURE 14.4
Key Cell Formulas
Cell Formula Copied to
D5 5MIN(B5:C5) D6:D8
¢ £ • †
––
† š€
Ž
Š
State of Nature
Decision 1 2 MIN
€€€ —› —›
—¤ —¤ —¤ d
…
14.6.3 THE MINIMAX REGRET DECISION RULE
Ž
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Nonprobabilistic Methods 761
…
„
š—” Ž
š
š—
š—”
‚
–™
FIGURE 14.5
Key Cell Formulas
Cell Formula Copied to
B5 5MAX(Payoffs!B$5:B$8)2Payoffs!B5 B5:C8
D5 5MAX(B5:C5) D6:D8
Š
™Š 5Ž¥ ‡ ¦š™Šš› 2 ‡ ¦™
• ™ •›
‰
‚
Ž
™
€ …
š— ” 2 2› 5 —
• † –™ ‚
–™
š—
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
762 Chapter 14 Decision Analysis
Š
State of Nature
Decision 1 2
¤ —
– œ
Š
State of Nature
Decision 1 2 MAX
€ – – d
™ € ™
‹
Š
State of Nature
Decision 1 2
¤ —
– œ
• ” ¤
‹
•
Š
State of Nature
Decision 1 2 MAX
€ Ÿ Ÿ
™ ” ™ d
• œ € œ
¡
Œ
14.7 Probabilistic Methods
‡
… Ž
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Probabilistic Methods 763
…
Œ
…
14.7.1 EXPECTED MONETARY VALUE
‰Ž§ ‰Ž§
Š
‰Ž§ 5 a
5
5
–œ ‰Ž§
Ž –€¨
œ€¨
€ •€
ˆ ‰Ž§
† Š
†™Š 5¡ˆŽ‡˜ †ˆ• ™Š•™šš€Šš•š€
• †œ †›
FIGURE 14.6
Key Cell Formulas
Cell Formula Copied to
D5 5SUMPRODUCT(B5:C5,$B$10:$C$10) D6:D8
C10 512B10 --
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
764 Chapter 14 Decision Analysis
‰Ž§
‰Ž§
ž Œ ‰Ž§ –œ
‰Ž§ š”–
ƒ „ Ž
š
š› ¡
š”–
… Ž
š œ€¨ š› –€¨
š”–
‰Ž§
¡ ‰Ž§
¢
£ …
Š
State of Nature
Decision 1 2 EMV
™€€€ 2™€€€ ™€€€ d
™€€€ –€€€ –™€€
‡ €™ €™
š™€€€
Œ š–™€€
„
š™€€€ š™€€€
š™€€€ š–€€€
© ‰Ž§ ž
14.7.2 EXPECTED REGRET
ƒ
‰ ž
–Ÿ
–Ÿ ‰Ž§
–Ÿ ‰ ž
‰Ž§
–œ ‰ ž ‰Ž§ ‰Ž§
‰ ž
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Probabilistic Methods 765
FIGURE 14.7
Key Cell Formulas
Cell Formula Copied to
B5 5MAX(Payoffs!B$5:B$8)2Payoffs!B5 B5:C8
D5 5SUMPRODUCT(B5:C5,$B$10:$C$10) D6:D8
C10 512B10 --
EMV and EOL
‰Ž§ ‰ ž
14.7.3 SENSITIVITY ANALYSIS
ƒ
‰Ž§
–œ œ€¨
…
™™¨„ ™€¨„ –™¨„ ƒ
„
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–›
– —– €
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‰Ž§
Š
¡ ” ‰—–
— • † ƒ †
” ¡ • • € –›
– • ª
‰ – —– €
‰Ž§
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
766 Chapter 14 Decision Analysis
FIGURE 14.8
Key Cell Formulas
Cell Formula Copied to
D5 5SUMPRODUCT(B5:C5,$B$10:$C$10) D6:D8
C10 512B10 --
A15 5A141.1 A16:A24
B13 5D5 --
C13 5D6 --
D13 5D7 --
E13 5D8 --
‹ •€
€
–¤
–¤
€– ‰Ž§
…
‰Ž§
–¤
€–
€œ ‰Ž§
š– š—œ ƒ
‰Ž§
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
The Expected Value of Perfect Information 767
FIGURE 14.9
14.8 The Expected Value
of Perfect Information
‰Ž§ …
¡
€€¨
–€¨
š” ¡ œ€¨
š
Š
‰ 5 €–€ 3 š” 1 €œ€ 3 š
5 š›
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
768 Chapter 14 Decision Analysis
¡ Ž
„ –œ
‰Ž§ š”–
‰Ž§ š›– š› 2 š”– 5 š›–
š›–
‰§‡
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‰ ‰
5 2 ‰Ž§
–€ ‚ ‰§‡ • †œ
–€ ‰Ž§ š”–
‰Ž§
— •— Š
—Š «Ž¥ ™Š›
• •—
†— Š
†—Š 5¡ˆŽ‡˜ †ˆ• —Š•—€Š•€
†– Š
†–Š 5†— 2 Ž¥ †™Š†›
FIGURE 14.10
Key Cell Formulas
Cell Formula Copied to
B12 5MAX(B5:B8) C12
D5 5SUMPRODUCT(B5:C5,$B$10:$C$10) D6:D8 & D12
D14 5D122MAX(D5:D8) --
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Decision Trees 769
‹ š›– ‰§‡ †– ‰ ž
–Ÿ ‰ ž
‰§‡
Key Point
‰§‡
‰ ž
14.9 Decision Trees
‚
– Ž
FIGURE 14.11
Land purchase decision Airport location Payoff
A 13
31
Buy A
1
218
B 212
6
A 28
4
Buy B
2
212
B 11
23
A 5
35
Buy A&B
3
230
B 21
29
A 0
0
Buy nothing
4
0
B 0
0
–
– Ž
¬› ¢ £
š›
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
770 Chapter 14 Decision Analysis
–
— ” –
®
”
š”
‰ –
–—
š”
2› 1 ” 5 ” ©
14.9.1 ROLLING BACK A DECISION TREE
…
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‰Ž§
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‰Ž§ –—
‰Ž§ –—
€– €œ
€– š” €œ
š— ‰Ž§ Š
‰Ž§ 5 €– 3 ” 1 €œ 3 2— 5 2—€
–—
‚ Š
‰Ž§ — 5 €– 3 2› 1 €œ 3 5 ”–
‰Ž§ ” 5 €– 3 ™ 1 €œ 3 2 5 –
‰Ž§ – 5 €– 3 € 1 €œ 3 € 5 €€
‰Ž§
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Creating Decision Trees with Analytic Solver Platform 771
FIGURE 14.12
Land purchase decision Airport location Payoff
0.4
A 13
31
Buy A
1
218 EMV 5 22 0.6
B 212
6
0.4
A 28
4
Buy B
2
212 EMV 5 3.4 0.6
B 11
23
2
0.4
A 5
EMV 5 3.4 35
Buy A&B
3
230 EMV 5 1.4 0.6
B 21
29
0.4
A 0
0
Buy nothing
4
0 EMV 5 0 0.6
B 0
0
‰Ž§ 2— ”– – €
‰Ž§ ‰Ž§ ”–
‰Ž§
—
¢ £
–—
–—
–— …
– –— Ž
€
–”
€
14.10 Creating Decision Trees
with Analytic Solver Platform
¡ ‡ ‚
‰ ƒ
–” ‰
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
772 Chapter 14 Decision Analysis
FIGURE 14.13
Land purchase decision Airport location Payoff
0.4
A 13
31
Buy A
1
218 EMV 5 22 0.6
B 212
6
0.4
A 28
4
Buy B
2
212 EMV 5 3.4 0.6
B 11
23
2
0.4
A 5
EMV 5 3.4 35
Buy A&B
3
230 EMV 5 1.4 0.6
B 21
29
Buy nothing
0
0
Š
¡
— • ¡ ‡
” • † ‹ ‹
¡ ‡ †
–– †
† ¡
–– ¢‹ ‹ £
–” ƒ ª †
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–™
† ¡
14.10.1 ADDING EVENT NODES
‰ –”
–™ Š
¡ ”
— • † ‹ • ‹
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Creating Decision Trees with Analytic Solver Platform 773
FIGURE 14.14
FIGURE 14.15
† …
–œ ‰
–—Ÿ
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
774 Chapter 14 Decision Analysis
FIGURE 14.16
FIGURE 14.17
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Creating Decision Trees with Analytic Solver Platform 775
¯ …
©
‰
¡ ‡
†
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— • † ‹ • ‹
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–› ƒ
–¤
14.10.2 DETERMINING THE PAYOFFS AND EMVs
‹ †
ª”
FIGURE 14.18
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
776 Chapter 14 Decision Analysis
FIGURE 14.19
–¤ «¡ˆŽ …–†œ
†
‰Ž§
—€ –¤
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¤ ‰Ž§
14.10.3 OTHER FEATURES
†
Ž
† ‰Ž§
‰Ž§ …
‚ –¤ †
Ž ¡
¢† ‹ ‰§®•‰£
‚ ‚
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Multistage Decision Problems 777
† ‚
…
• ‰
†
14.11 Multistage Decision Problems
…
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‚
¡ … ¡…
š›™€€€
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Technology Equipment Cost
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š–€€€
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Possible R&D Costs
Best Case Worst Case
Cost Prob. Cost Prob.
Ž š”€€€€ €– šœ€€€€ €œ
• š–€€€€ €› šŸ€€€€ €—
š–€€€€ €¤ š›€€€€ €
¡ ‚
¡…
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
778 Chapter 14 Decision Analysis
14.11.1 A MULTISTAGE DECISION TREE
¡
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FIGURE 14.20
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š”™€€€
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Multistage Decision Problems 779
š”—€€€
–—€
˜¯†
¡
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14.11.2 DEVELOPING A RISK PROFILE
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–—
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FIGURE 14.21
–—
š€ €™€
š™€€€ €€™
€™ 3 € 5 €€™ ˜¯†
š–€€€
€–™ €™ 3 €¤ 5 €–™ ˜¯†
š”œ€€€
‰Ž§
–—
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
780 Chapter 14 Decision Analysis
˜¯†
‰Ž§
14.12 Sensitivity Analysis
¡
¡
™€¬™€
„ ƒ ”€¨ —€¨ €¨
„ ¡ „
ˆ
–—— –——
‚
FIGURE 14.22 € ‚
Key Cell Formulas
Cell Formula Copied to
H31 512H13 --
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Sensitivity Analysis 781
‰Ž§
…”
…”
Š
…”Š 5 2 …”
Ž ‚ …” ¡ ‡ Œ “˜“
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14.12.1 TORNADO CHARTS
‚
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–—”
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¡ ”—
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…œ
š›™€€€ ‰Ž§ 2€¨ 1€¨
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
782 Chapter 14 Decision Analysis
FIGURE 14.23
• …”
‡—¤ ˜¯†
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¢ £
š›™€€€
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–—– –—–
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‡¡ ‡
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Sensitivity Analysis 783
FIGURE 14.24 ‚
Key Cell Formulas
Cell Formula Copied to
P4 5PsiSenParam(–60000*1.2, –60000*0.8, –60000) --
P9 5PsiSenParam(–30000*1.2, –30000*0.8, –30000) --
P14 5PsiSenParam(–70000*1.2, –70000*0.8, –70000) --
P19 5PsiSenParam(–40000*1.2, –40000*0.8, –40000) --
P24 5PsiSenParam(–80000*1.2, –80000*0.8, –80000) --
P29 5PsiSenParam(–40000*1.2, –40000*0.8, –40000) --
Software Note
Š ¡
‡¡
‡ ¢• ¨ • £
–—– ¬
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6۬
6—€¨
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
784 Chapter 14 Decision Analysis
14.12.2 STRATEGY TABLES
‚
–—€
…
˜¯† ¡
€€ €
˜¯† €€ €™ –—™ –—™
‚
–—™ ƒ— ƒ——
ˆ † ‰
…”
…”
…”Š 5 2 …”
FIGURE 14.25 „
Key Cell Formulas
Cell Formula Copied to
H31 512H13 --
P26 512P21 --
W11 5IF(B3151,CHOOSE(J15,"Microwave","Cellular","Infrared"),"Don't") --
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Sensitivity Analysis 785
• ¥ • ˜¯†
ˆ † ‰
‡—
‡—œ
‡—œŠ 5 2 ‡—
ƒ
ƒŠ 5 ”5•… ¡‰
’™¢Ž £¢• £¢ £ ¢†Œ£
”‘ ‰Ž§
”
¢Ž £ ¢• £ ¢ £
’™
¢†Œ£
† –—œ
FIGURE 14.26
–—œ ‚
€€
‹ ©Ÿ
–—€
…
˜¯†
˜¯†
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
786 Chapter 14 Decision Analysis
14.12.3 STRATEGY CHARTS
¡
˜¯†
¡
€€ €
˜¯† €€ €™
¡ ‡ ‡— …” –—Ÿ
FIGURE 14.27 „
Key Cell Formulas
Cell Formula Copied to
H13 5PsiSenParam(0,1) --
H31 512H13 --
P21 5PsiSenParam(0,0.5) --
P26 512P21 --
W2 5IF(B3152,0,J15) --
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Sensitivity Analysis 787
–—Ÿ
‡—Š 5‡¡ ‡ €€™
…”Š 5‡¡ ‡ €
ƒ
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ƒ—Š 5 ”5—€’™
‹ ƒ— €
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– • ª
¡ ‡ ”† –—›
‡— …” ‹
–—œ
FIGURE 14.27 „
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
788 Chapter 14 Decision Analysis
14.13 Using Sample Information
in Decision Making
Ž
Ž
• Ž •Ž ‚
‚ Š
š—™
š™ •Ž Ÿ€¨
”€¨
‚
‚
Demand
Factory Size High Low
ž šŸ™ š¤™
¡ š—™ š€™
–—¤ –—¤
‰Ž§ š—œ
FIGURE 14.29 ‚
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Using Sample Information in Decision Making 789
‹ ‚ •Ž
–”€
–”€
FIGURE 14.30
‚
–”€
ƒ •Ž
€œŸ €””
14.13.1 CONDITIONAL PROBABILITIES
…
‰ •Ž €Ÿ€
Š
‡ 5 €Ÿ
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
790 Chapter 14 Decision Analysis
‡ 5 ¥ ¢ ¥£
€¤€
Š
‡ 5 €¤€
‡ 5 ¥ ¢ ¥£
Š
‡ 5 2 ‡
5 2 €¤€ 5 €€
–”€
€”€Š
‡ 5 €”€
ƒ
Š
‡ 5 2 ‡
5 2 €” 5 €Ÿ€
–”€ ž
14.13.2 THE EXPECTED VALUE OF SAMPLE INFORMATION
–”€ •Ž ‘
š—œ›—
¡ •Ž
„
‰§¡ Š
‰ ‰
„ 5 2
‰§¡
–”€
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Computing Conditional Probabilities 791
š—œ›—
–—¤
š—œ ¡ ‰§¡ Š
‰§¡ 5 š—œ›— 2 š—œ 5 š€›—
•Ž š›—€€€€
14.14 Computing Conditional Probabilities
•Ž …
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ž 5
5
ˆ 5
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‡ d 5 ¥ ¢ ¥£ ¡
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‡ d ž 5 €€œŸ
‡ ˆ d … 5 €€
‡ ˆ d ž 5 €—””
œ •œ
Š
‡ … 5 €Ÿ€
‡ ž 5 €”€
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
792 Chapter 14 Decision Analysis
FIGURE 14.31
†– †™
‘ Š
‡ 5 €œœŸ
‡ ˆ 5 €”””
ƒ
Š
‡ d
‡ 5
‡
ƒ
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‡ … d €œ€
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5 5 €¤€
‡ €œœŸ
‡ ž d €€œŸ
‡ ž 5
5 5 €€
‡ €œœŸ
‡ … d ˆ €€
‡ … ˆ 5
5 5 €”€
‡ ˆ €”””
‡ ž d ˆ €—””
‡ ž ˆ 5
5 5 €Ÿ€
‡ ˆ €”””
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Computing Conditional Probabilities 793
ƒ
–”
Š
—Š 5–®š†–
• — •”
–”€
Š
‡ … d €œ€
‡ … 5 5 5 €›™Ÿ
‡ … €Ÿ€
‡ … d ˆ €€
‡ ˆ … 5 5 5 €–”
‡ … €Ÿ€
‡ ž d €€œŸ
‡ ž 5 5 5 €——”
‡ ž €”€
‡ ž d ˆ €—””
‡ ˆ ž 5 5 5 €ŸŸŸ
‡ ž €”€
–”
Š
¤Š 5–®šœ
• —€ •—€
14.14.1 BAYES’s THEOREM
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‡ 5
‡ ‡ 1 ‡ ‡
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–”
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‡ … ‡ …
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‡ … ‡ … 1 ‡ ž ‡ ž
˜…¡
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‡ … ‡ …
€›™Ÿ €Ÿ€
‡ … 5
5 5 €¤€
‡ … ‡ … 1 ‡ ž ‡ ž
€›™Ÿ €Ÿ€ 1 €——” €”€
‡ … — –”
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
794 Chapter 14 Decision Analysis
14.15 Utility Theory
‰Ž§
‰Ž§
Š
State of Nature
Company 1 2 EMV
™€€€€ 2”€€€€ œ€€€€ d
Ÿ€€€€ –€€€€ ™™€€€
‡ €™ €™
™€¨
š™€€€€ ™€¨ š”€€€€
™€¨ šŸ€€€€
™€¨ š–€€€€
‰Ž§
‰Ž§ …
‰Ž§
š”€€€€
ƒ
š–€€€€ Œ ‰Ž§
Œ
…
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Œ
14.15.1 UTILITY FUNCTIONS
ˆ
€ €
†
¢ £ ‰Ž§
… ¢ £
¢ £
–”—
–”—
¢ £
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Utility Theory 795
FIGURE 14.32
Utility Risk averse
1.00
Risk neutral
0.75
Risk seeking
0.50
0.25
0.00
Payoff
¢ £
¢ £
‰Ž§
–”—
14.15.2 CONSTRUCTING UTILITY FUNCTIONS
Œ
„ €
€
€
ƒ ˆ š
Š
ˆ 2”€€€€ 5 €
ˆ ™€€€€ 5
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
796 Chapter 14 Decision Analysis
‹ šŸ€€€€
Š
˜ šŸ€€€€
˜ š™€€€€
š”€€€€ 2
5 €
šŸ€€€€ š”€€€€ 5
—
š™€€€€ šŸ€€€€ ¡ €
±
, ± . ±
— ±
Œ
š”€€€€
— 5 €› ± 5 €› šŸ€€€€
Š
ˆ Ÿ€€€€ 5 ˆ ™€€€€ ± 1 ˆ 2”€€€€ 2 ± 5 ± 1 € 2 ± 5 ± 5 €›
‹ 5 €› — Š
š™€€€€ 3 €› 2 š”€€€€ 3 €— 5 š–€€€
—
‰Ž§ š–€€€
šŸ€€€€ ¢ £
šŸ€€€€
‰Ž§ š–€€€
Œ
šŸ€€€€ Œ
— 5 €›
‰Ž§
š–€€€ 2 šŸ€€€€ 5 š––€€€‘
Š
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˜ 5 2
š–€€€€
Š
˜ š–€€€€
˜ š™€€€€
š”€€€€ 2
šŸ€€€€
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Utility Theory 797
5 €œ™ ± 5 €œ™
š–€€€€ Š
ˆ –€€€€ 5 ˆ ™€€€€ ± 1 ˆ 2”€€€€ 2 ± 5 ± 1 € 2 ± 5 ± 5 €œ™
Œ ±
Key Point
ƒ € ±
—
Œ
‹ 5 €œ™ — Š
š™€€€€ 3 €œ™ 2 š”€€€€ 3 €”™ 5 š›Ÿ€€€
¢ £
š–€€€€ š–Ÿ€€€
‰Ž§ š›Ÿ€€€
2š”€€€€ š–€€€€ šŸ€€€€
š™€€€€ €€ €œ™ €›€ €
Œ –”› ‹
¢ £ –”—
FIGURE 14.33
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
798 Chapter 14 Decision Analysis
14.15.3 USING UTILITIES TO MAKE DECISIONS
ƒ
Š
State of Nature
Company 1 2 Expected Utility
€€ €€€ €™€€
€›€ €œ™ €Ÿ—™ d
‡ €™ €™
‰Ž§ š™™€€€ Œ ‰Ž§ šœ€€€€
14.15.4 THE EXPONENTIAL UTILITY FUNCTION
± …
¢ £
Œ
Š
ˆ 5 2 2®
5 —Ÿ›—› c
Œ
–”–
‹
¢ £ ˆ ‘ 5 €
ˆ 5 €‘ € ˆ , €
©
Š
ƒ š© €™
ž š©®— €™
©
˜ ‹
© ¢ £
© ¢ £
–”–
—™¨
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Utility Theory 799
FIGURE 14.34
14.15.5 INCORPORATING UTILITIES IN DECISION TREES
¡ ‡ Œ †
¢ £
ƒ Ž
–”™ –”™
ƒ
Ž
Œ š– ©
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800 Chapter 14 Decision Analysis
FIGURE 14.35
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The Multicriteria Scoring Model 801
FIGURE 14.36
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14.17 The Multicriteria Scoring Model
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802 Chapter 14 Decision Analysis
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FIGURE 14.37
Key Cell Formulas
Cell Formula Copied to
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The Multicriteria Scoring Model 803
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804 Chapter 14 Decision Analysis
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Creating a Radar Chart
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The Analytic Hierarchy Process 805
14.18 The Analytic Hierarchy Process
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806 Chapter 14 Decision Analysis
FIGURE 14.41
Key Cell Formulas
Cell Formula Copied to
C5 51/D4 --
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The Analytic Hierarchy Process 807
FIGURE 14.42
‚
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Cell Formula Copied to
C7 5SUM(C4:C6) D7:E7
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
808 Chapter 14 Decision Analysis
FIGURE 14.43
Key Cell Formulas
Cell Formula Copied to
G11 5MMULT(C4:E4,$F$11:$F$13)/F11 G12:G13
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The Analytic Hierarchy Process 809
5
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810 Chapter 14 Decision Analysis
14.18.4 OBTAINING SCORES FOR THE REMAINING CRITERIA
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References 811
FIGURE 14.48
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14.19 Summary
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812 Chapter 14 Decision Analysis
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Questions and Problems 813
Questions and Problems
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State of Nature
Decision 1 2 3
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Size of Order Heavy Normal Light
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814 Chapter 14 Decision Analysis
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Questions and Problems 815
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(in $1000s) 0 15 30 45 60 75 90 105
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816 Chapter 14 Decision Analysis
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Questions and Problems 817
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818 Chapter 14 Decision Analysis
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Questions and Problems 819
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
820 Chapter 14 Decision Analysis
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Questions and Problems 821
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
822 Chapter 14 Decision Analysis
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Ability Skills Ability
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Case 14.1 823
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Price Safety
X Y Z X Y Z
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
824 Chapter 14 Decision Analysis
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Revenue Probability Revenue Probability
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Case 14.3 825
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826 Chapter 14 Decision Analysis
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Case 14.4 827
The Spreadsheet Wars CASE 14.4
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828 Chapter 14 Decision Analysis
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Index
A economic order quantity (EOQ)
models, 381
Arrival rates, 724–725
Assessments, honest, 502
Absolute cell references, 70
Accuracy, measurement of, 567–568 Employee Scheduling problem, Association
Additive effects, 578, 579–584 263 data mining, 501
Additive seasonal effects (Holt- existing financial spreadsheet rules (affinity analysis), 548–551
Winter’s method), 595–599 models, optimizing, 401 Assumption, steady-state, 742–743
Ad hoc sensitivity analysis, 157–164 Fixed-Charge problem, 283–284 Auditability, 65
Adjusted R statistic, 474 forming fair teams, 418–419 Automatic scaling, 86
Adjusting trend predictions with Generalized Network Flow Average group linkage, 553
seasonal indices, 609–615 problem, 210–211 AVERAGEIF() function, 417–418
Affinity analysis, 548–551 goal programming, 334–335 Averages
Aggarwal, A., 222 investment problems, 75–76 exponential smoothing, 575–578
Ahkam, S. N., 542 location problems, 385–386 linkage, 553
Algorithms make buy decisions, 71 moving, 569–572
backpropagation, 536 multiperiod cash-flow problem, weighted, 572–575
branch-and-bound (B&B), 254, 101, 105–106 Avery, R. B., 542
293–300 network flow problem, 391–393
evolutionary optimization, Portfolio Selection problem,
415–416 406–408 B
generalized reduced gradient production and inventory Backpropagation algorithm, 536
(GRG), 373 planning problem, 94 Balance-of-flow rules, 192
-means, 552 regression. Regression analysis Balancing objectives for enlightened
Minimal Spanning Tree problem, risk, 636–639 self-interest, 327
222 sensitivity, 141–145, 410–413, Balk, 733, 742
supervised learning, 501 780–787 Banks, J., 679
unsupervised learning, 501 simulation using Solver, 686–687, Barron, F. Hutton, 812
Alliance for Paired Donations (APD), 692–695 Base-case analysis scenarios, 637, 641
2 transportation problems, 82 Basic feasible solutions, 170
Allowable Decrease column, 155 transshipment problem, 195–196 Basic variables, 170
Allowable Increase column, 155 Traveling Salesperson problem, Bayes’ theorem, 793
Alternate optimal solutions, 34 423 Bazaraa, M., 39, 172, 424
Alternate RNG entry methods, what-if, 638 Bazerman, M., 12
647–648 worst-case, 637–638, 652–653 Bean, J., 301
Alternatives, 755, 756 Analysis of variances (ANOVA), Benefits
Altman, E. I., 542 464–465 of modeling, 3–4
Analysis Analytic hierarchy process (AHP), of simulation, 661–662
affinity, 548–551 805–811 Bernstein, Peter, 567
best-case, 637–638, 652–653 Analytics Berry, M., 559
blending problem, 87–89 business, 1, 2. Business Berry, W., 424
cluster, 551–557 analytics Best-case analysis, 637–638, 652–653
Contract Award problem, 287–288 tools, 7–10 Betts, Mitch, 14
Data Envelopment Analysis Analytic Solver Platform. Solver Big M, determining values for,
(DEA), 106–114 Anchoring effects, 10–11 280–281
data mining, 499–502. Data Andrews, B., 725 Binary independent variables, 478
mining Andrus, S., 290 Binary integer variables, 264
decision, 1–16. Decision Answer Report, 143–145 Binary variables
analysis Antecedents, 549 integer linear programming (ILP),
discriminant analysis (DA), Arcs 264
512–520 directed, 190 and logical conditions, 268–269
economic, 732 dummy/artificial, 218 setting up, 265
Ariely, D., 12 Binding constraints, 144, 148
829
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
830 Index
Black, M., 222 problem-solving processes, 7–10 hierarchical clustering, 556–557
Blackstone, Lee, 340 production optimization integer linear programming (ILP)
Blake, J., 301 (Kellogg’s), 116 MasterDebt Lockbox problem,
Blending problem, 82–89 U.S. Postal Service, 696 323–324
analysis, 87–89 Optimizing a Timber Harvest,
constraints, 83–85 321
decision variables, 83 C Power Dispatching at Old
implementing models, 86–87 Calculations Dominion, 322–323
objective function, 83 M/M/s model, 729 Removing Snow in Montreal,
reporting, 84–85 seasonal indices, 612 324–325
scaling, 84–86 value optimizations, 438 -means clustering, 553–556
solving problems, 87 Call Center Staffing at Vacations, Inc. -nearest neighbor ( -NN),
Blue Ridge Hot Tubs problem, case, 752–753 527–528
44–45 Calloway, R., 290 linear programming (LP), 21
analyzing changes in constraint Campbell, T. S., 559 logistic regression, 522–525
coefficients, 154–155 Candidate cells, 781 Maximal Flow problem, 214–216
Answer Report, 143–145 Capital Budgeting problem, 264–268 Minimal Spanning Tree problem,
conservative robust solution, 167, comparing optimal/heuristic 222–223
168 solutions, 268 M/M/s model, 730, 735–736
Limits Report, 156–157 constraints, 265 modeling and business analytics,
robust optimization, 165 decision variables, 265 15–16
sensitivity analysis example, implementing the model, 265–266 multiple objective linear
142–143 objective function, 265 programming (MOLP),
solver parameters for the relaxed, setting up binary variables, 265 340–351
255, 257 solving the model, 266–267 constraints, 341
Spider Plots and Tables, 157–161 Carlsen, A., 812 decision variables, 340
spreadsheet models, 49–52, 411 Carson, J., 695 defining the objectives,
Sensitivity Report, 145–156 Cases and examples 340–341
Blum, E., 424 association rules, 550–551 determining target values,
Bodin, L., 811 classification, 503–510, 532–535 342–344
Bodtke, Steve, 327 cluster analysis, 553 GP objectives, 345–347
Booth, D. E., 542 Data Envelopment Analysis implementing revised model,
Borders, 66 (DEA), 106–114 348
Boundary lines, plotting, 25 data mining (Detecting implementing the model,
Bounds Management Fraud), 564–565 341–342
integer linear programming (ILP), decision analysis, 755–756 MINIMAX objective, 347–348
250–252 Hang On or Give Up?, 824–825 solving the model, 348–351
representation of, 51–52 Should Larry Junior Go to Court summarizing target solutions,
Boyd, Kevin, 620 or Settle?, 825–826 344–345
Braklow, John W., 224 Spreadsheet Wars case, The, multiple objective optimization
Branch-and-bound (B&B) algorithm, 827–828 Planning Diets for the Food
254, 293–300 discriminant analysis, 514–520 Stamp Program, 368–369
bounding, 296, 296-299 goal programming, 327–337 Removing Snow in Montreal,
branching, 295–296, 286–287 analysis, 334–335 366–367
integer linear programming (ILP), decision variables, 328 Sales Territory Planning at Caro-
293–300 defining constraints, 328–329 Life, 369–370
Branches, event, 770 defining hard constraints, 329 naïve Bayes, 543–546
Brock, Frank, 4, 9 defining the objective, 331–332 network modeling
Brock Candy Company, 4 implementing the model, Hamilton and Jacobs, 241–242
Brown, G., 116 332–333 The Major Electric Corporation,
Bruce, P., 559 the nature of, 336 244–246
Built-in Solver, Excel, 64–65 objective functions, 330–331 Old Dominion Energy, 242–243
Bullseye Department Store case, 753 Planning Diets for the Food U.S. Express, 243–244
Business analytics, 1, 2, 7–10 Stamp Program, 368–369 nonlinear programming (NLP)
cases and examples, 15–16 Removing Snow in Montreal, Electing the Next President,
discriminant analysis (La Quinta 366–367 443–444
Motor Inns), 559–560 revising the model, 335–336 Making Windows at Wella,
Hallmark Cards, Inc., 812 Sales Territory Planning at Caro- 444–445
nonlinear optimization (Pacific Life, 369–370 Newspaper Advertising Insert
Gas and Electric Company), solving the model, 333–334 Scheduling, 445–446
424–425 summary of, 337 Tour de Europe, 442–443
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Index 831
optimization and linear comments, 53, 66 existing financial spreadsheet
programming, 44–45 constraints, 52, 53, 57–59, 405 models, optimizing, 401
queuing theory, 721 formulas, 162 goal programming, 337–338
Bullseye Department Store, 753 input/output, 5 location problems, 388
Call Center Staffing at objective function, 55–56 multiple objective linear
Vacations, Inc., 752–753 output. Output cells programming (MOLP),
May the (Police) Force Be With removal of, 48 351–352
You, 751–752 variables, 56–57 sensitivity analysis, 164
regression analysis, 447–449 Cell Value column, 144 Communication, 65
Diamonds Are Forever, 494–496 Certainty equivalent, 796 Comparisons
Fiasco in Florida, 496–497 Characteristics of decision normalizing, 806–807
Georgia Public Service problems, 755 pairwise, 805–806
Commission, The, 497–498 Charnes, C., 115 Complete linkage, 553
multiple regression, 469–470 Charts Computer models, 1
seasonality, 578–579 lift, 518, 525 Computing
sensitivity analysis, 142–143 radar, 803, 804 conditional probabilities, 791–793
sensitivity analysis and simplex strategy, 786–787 seasonal indices, 609–611
method, 142–143 tornado, 781–783 Conditional formatting, 161
Kamm Industries case, 187–188 Chart Tool command (Excel), 449 Conditional probabilities, 791–793
Nut case, 183–184 Chart Wizard dialog box, 508 Conditional value at risk constraint,
Parket sisters case, 184–186 Chevron, 2 682
simulation using Analytic Solver Chief information officer Conditions
Platform (CIO), 13 integrality, 247–248
Corporate Health Insurance, CHOOSE() function, 387 logical and binary variables,
639–641 Classification, 502 268–269
Death and Taxes, 712–713 cases and examples, 503–510 nonnegativity, 52, 60–61, 144
Foxridge Investment Group combining, 547 special conditions in linear
example, The, 717–720 comments on, 546–547 programming (LP), 34–38
Inventory Control example, data mining, 502–510 Confidence
667–683 partitioning, 510–511 intervals
Live Well, Die Broke, 711–712 trees, 528–535 constructing for population
Portfolio Optimization example, Clayton, E., 424 proportions, 659
689–695 Clemen, R. T., 620, 811 constructing for the true
Project Selection, 684–688 Clements, D., 620 population mean, 657–658
Reservation Management Cluster analysis, 551–557 for mean values of Y, 463
example, 662–667 Coefficients widths, 659
Sound’s Alive Company alternate optimal solutions, 148 of rules, 547
example, The, 713–717 changes in objective function, Configurations, queuing theory,
simultaneous changes in objective 155–156 722–723
functions, 155–156 constancy, 147–148 Confusion matrix, 515
solving LP problems in a of determination, 458. R2 Consequent, 549
spreadsheet statistic Consistency, 807–808
Baldwin Enterprises case, objective function, 24 Constancy, 147–148
136–137 sensitivity analysis, 141–142 Constraint cells, 52, 53, 57–59, 405
Putting the Link in Supply Colors, 66 Constraint R.H. Side column, 148
Chains, 134–136 Columns, 66 Constraints, 18, 19–20
Saving the Manatees case, Allowable Decrease, 155 adding, 59
138–140 Allowable Increase, 155 alldifferent, 422
Wolverine Retirement Fund, Cell Value, 144 binding, 144
137–138 Constraint R.H. Side, 148 blending problem, 83–84
summary of the LP model, 23 Objective Coefficient, 147 Capital Budgeting problem, 265
time series forecasting Reduced Cost, 152 changes in coefficients, 154–155
Forecasting COLAs, 631–632 Slack, 144 conditional value at risk
PB Chemical Company, 630–631 Combining constraint, 682
Strategic Planning at Fysco classifications, 547 Contract Award problem, 288–292
Foods, 633–634 forecasts, 619 creating equality, 168–169
trend models, 588 Comments Data Envelopment Analysis
Cebry, M., 696 cells, 53, 66 (DEA), 107–108
Cells on classification, 546–547 Employee Scheduling problem,
absolute cell references, 70 economic order quantity (EOQ) 260–261
candidate, 781 models, 381–382 Fixed-Charge problem, 280
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
832 Index
goal, 328–329 multicriteria decision making, Should Larry Junior Go to Court
hard, 326, 329 800–801 or Settle?, 825–826
implementing the risk, 104–105 multicriteria scoring model, Spreadsheet Wars case, The,
investment problems, 73 801–804 827–828
location problems, 384 obtaining scores for remaining, characteristics of decision
loosening, 38 810 problems, 755
make buy decisions, 68 Crossover, 415 computing conditional
missing, 287 Cummins, M., 301 probabilities, 791–793
multiperiod cash-flow problem, Cumulative distributions, output decision trees, 769–771
96–98 cells, 654–655 creating with Analytic Solver
multiple objective linear Cumulative probabilities, 655–656 Platform, 771–777
programming (MOLP), 341 Curves, level, 29–32 incorporating utilities in,
network flow problems, 192–193, 799–800
389–390 expected value of perfect
nonbinding, 144 D information (EVPI), 767–769
nonlinear sets, 372 Dantzig, G., 39 good decisions good outcomes,
observations about, 84–85 Darnell, D., 173 11–12, 754–755
plotting boundary lines, 25, 26–28 Data analysis, 65–70, 652–656 multicriteria
Portfolio Selection problem, 404 Data Envelopment Analysis (DEA), decision making, 800–801
production and inventory 106–114 scoring model, 801–804
planning problem, 90–91 analysis, 113–114 multistage decision problems,
project selection problems, constraints, 107–108 777–780
394–395 decision variables, 107 nonprobabilistic methods,
Quantity Discounts problem, 287 efficiency scores, 113 758–762
redundant, 34–36 implementing models, 108–110 payoff matrix, 756–758
representation of, 51 objective function, 107 probabilistic methods, 762–767
shadow prices for nonbinding, 149 solving problems, 110–113 problem-solving processes, 7–10
side, 200, 218, 290–292 Data mining, 499 questions and problems, 813–823
soft, 327 association rules (affinity analysis), rules, 758
transportation problems, 78 548–551 sample information, 788–791
USet, 165–166 association/segmentation, 501 sensitivity analysis, 780–787
value at risk constraint, 682 cases and examples utility theory, 794–800
Construction of utility functions, classification, 503–510 Decision making, 639
795–797 Detecting Management Fraud, Decision nodes, 769
Continuous random variables, 564–565 Decisions, make buy, 67–71
644–645 classification, 501, 502–510 Decision Tree dialog box, 772, 773
Continuous variables, 248 comments on, 546–547 Decision variables, 19
Contract Award problem, 287–293 partitioning, 510–511 blending problems, 83
analysis, 293 trees, 528–535 Capital Budgeting problem, 265
constraints, 289–290 cluster analysis, 551–557 Data Envelopment Analysis
objective function, 288–289 discriminant analysis (DA), (DEA), 107
side constraints, 290–292 512–520 Employee Scheduling problem,
solving the model, 292–293 -nearest neighbor ( -NN), 260
Converting variables, 507 525–528 Fixed-Charge problem, 279
Convex sets, 374 logistic regression, 520–525 goal programming, 328
Corel Quattro Pro, 47 naïve Bayes, 539–546 identifying, 22
Corner, J., 811 neural networks, 536–539 investment problems, 72
Corner points, 29, 32 overview of, 499–502 Line Balancing problem, 269–270
Corporate Health Insurance predictions, 501, 548 location problems, 383
example, 639–641 questions and problems, 560–564 make buy decisions, 68
Correlation dialog box, 507 time series, 557–558 multiperiod cash-flow problem,
Correlation matrices, 692 Dawes, R., 12, 812 95–96
Costs of misclassification, 517 Death and Taxes example, 712–713 multiple objective linear
COUNT() function, 571 Decision analysis, 1–16, 754 programming (MOLP), 340
COUNTIF() function, 505 analytic hierarchy process (AHP), network flow problems, 191, 388
COVAR() function, 402 805–811 nonnegativity conditions, 61
Coyle, R., 812 anchoring and framing effects, Portfolio Selection problem, 403
CPLEX, 46 10–11 production and inventory
Credit scoring, 502 cases and examples, 755–756 planning problem, 90
Criteria, 755 Hang On or Give Up?, 824–825 project selection problems,
criterion weights, 810 Prezcott Pharma, 823–824 393–394
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Index 833
representation of, 50
representing the bounds on,
E Examples. Cases and examples
Excel, 46
Economic analysis, 732
51–52 Economic order quantity (EOQ) built-in Solver, 64–65
transportation problems, 77 models, 376–382 Chart Tool command, 449
Defined benefit plans, 631 analysis, 381 Correlation dialog box, 507
Defined contribution plans, 631 comments, 381–382 macros in, 49
Defining “Best Fit” (regression implementing the model, 379 XLMiner, 499
analysis), 451–452 solving the model, 379–380 Existing financial spreadsheet
Degeneracy, 156 Edwards, J., 12 models, optimizing, 398–401
Demand nodes, 190 Effects, seasonal, 579–584 analysis, 401
Dendrograms, 553–556 Efficiency scores, Data Envelopment comments, 401
Dependent variables, 5, 449–450 Analysis (DEA), 113 implementing the model, 398–399
Descriptive models, 6, 7 Efficient frontier, 407, 689 optimizing the spreadsheet model,
Descriptive statistics, 505, 506 Electing the Next President case, 399–400
Design guidelines for spreadsheets, 443–444 Expected monetary value (EMV)
65–66 Elkington, John, 339 decision rule, 763–764, 765
DeSilva, A., 696 Ellenbogen, Bill, 327 Expected opportunity loss (EOL),
Detecting Management Fraud case, Employee Scheduling problem, 764, 765, 769
564–565 259–263 Expected regret, 764–765
Determination, coefficients of, 458 analysis, 263 Expected value of perfect
Determinations of product mix, 17 constraints, 260–261 information (EVPI), 767–769
Deviational variables, 329 decision variables, 260 Expected value of sample
Deviations, mean absolute deviation implementing the model, 261–262 information, 790–791
(MAD), 568 objective function, 260 Exponential smoothing, 575–578,
DeWitt, C., 424 solving the model, 263 591–595
Diagrams, scatter, 448 Engine option, 380 Exponential utility function, 798–799
Dialog boxes Engine tab (Solver), 62 Expressing nonlinear relationships,
Chart Wizard, 508 Enumeration, corner points, 32 480–484
Correlation, 507 Eppen, G., 39 Extrapolation
Decision Tree, 772, 773 Equality constraints, creating using models, 567
Fit Options, 648 slack variables, 168–169 moving averages, 569–572
Options, 648 Equal to constraint, 19 predictions, 463
Regression, 455 Equipment replacement problem, Extreme points, 29
Diamonds Are Forever case, 201–204
494–496 Erickson, W., 115
Diaz, A., 224 Erlang, A. K., 721 F
Dictionaries, variables, 504 Errors F1 score, 518
Dietrich, J. K., 559 estimation, 452 Feasibility, Generalized Network
DiLisio, F., 696 mean absolute percent error Flow problem and, 211–214
Directed arcs, 190 (MAPE), 568 Feasible regions, 25, 28–29
Discrete random variables, 669 mean squared error (MSE), 464, convex, 374
Discriminant analysis (DA), 512–520 568 integers, 249
Distributions predictions, 461–463 nonlinear, 371
fitting to sample data, 648 root mean square error (RMSE), Feasible solutions (simplex method),
output cells 568 169–171
cumulative, 654–655 Error sum of squares (ESS), 452, 459 Federal Express, 13
frequency, 653–654 Estimation errors, 452 Fiasco in Florida case, 496–497
performance, 633 Euclidean distance, 512 Files, macros, 49
Poisson, 724, 725, 729 Evaluating the fit, regression Financial planning, 18
Psi, 648 analysis, 456–458 Finlay, P., 12
random number generator (RNG), Evans, J., 695 First-in, first-out (FIFO), 722, 729, 735
643, 644 Events Fit Options dialog box, 648
of values, 450 branches, 770 Fitting distributions to sample data,
Doheny, Kathleen, 744 nodes, 770, 772–775 648
Donald, J., 301 Evolutionary optimization, 371 Fitzsimmons, James A., 560
Double exponential smoothing algorithms, 415–416 Fixed-Charge problem, 278–285
(Holt’s method), 591–595 forming fair teams, 416–419 analysis, 283–284
Double moving averages, 589–591 questions and problems, 425–442 constraints, 280
Dummy/artificial Traveling Salesperson problem, decision variables, 279
arcs, 218 419–423 determining values for Big M,
nodes, 218 280–281
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
834 Index
IF() functions, 284–285 Frequency distributions, output Graham, William W., 224
implementing the model, 281–282 cells, 653–654 Grant, Nancy, 206
objective function, 279–280 Frontier, efficient, 407, 689 Graphical approach to LP problems,
solving the model, 282–283 Frontline Systems, Inc., 47, 642 25–34
Fixed-cost problems, 278 Functions Graphs, regression analysis, 447–448
Fleming, Jon, 221 AVERAGEIF(), 417–418 Greater than or equal to constraint,
Flow CHOOSE(), 387 19
network models and integer COUNT(), 571 Gross, D., 743
solutions, 200–201 COUNTIF(), 505 Gross, George, 425
network problems, 189–190 COVAR(), 402 Grossman, T., 12
total, 218 IF(), 284–285, 387 Guided Mode, 64
Fluctuation, 448 IFERROR(), 418 Guidelines for spreadsheets, 65–66
Flury, B., 559 INDEX, 110, 421 Gupta, V., 223
Forecasting LOOKUP(), 387 GUROBI Optimizer, 46
with additive seasonal effects, MAX(), 387
583–584 MIN(), 387
combining, 619 PsiCurrentOpt(), 111 H
with double moving averages, PsiOptValue(), 111, 112, 113 Hall, Gene Sand, 425
590–591 PsiUniform(Lower, Upper), 165 Hall, R., 12, 743
with exponential smoothing random number generator (RNG), Hamilton and Jacobs case, 241–242
models, 576–578 642, 643 Hand, D. J., 559
with Holt’s method, 594–595 SUMIF(), 99, 194, 417 Hang On or Give Up? case, 824–825
with Holt-Winter’s method, 599, SUMPRODUCT(), 80, 104, 262 Hansen, P., 224
603 SUMXMY2(), 571 Hard constraints, 326, 329
importance of, 567 TREND(), 456, 457, 462, 606 Hardin, J., 12
initializing models, 584 utility, 794–795 Harris, C., 743
with linear trend models, 605–606 VLOOKUP(), 194–195 Hassler, Stephen M., 224
with moving average models, Fylstra, D., 424 Hastie, R., 12, 812
571–572 Headings of reports, 145
with multiplicative seasonal Heat maps, 161
effects, 586–587 G Heian, B., 812
with quadratic trend models, Gale, J., 812 Helmer, Mark C., 353
608–609 Gallwey, Timothy, 639 Heuristic solutions for models, 80–81
with seasonal indices, 611–612 Gardner, E., 620 Hickle, R., 695
with seasonal regression models, Gass, S., 352, 811 Hierarchies
618 General integer variables, 264 analytic hierarchy process (AHP),
time series, 567. Time Generalized Network Flow problem, 805–811
series forecasting 205–214 clustering, 553
with weighted average models, analysis, 210–211 Hilal, S., 115
575 and feasibility, 211–214 Hirsch, Fred, 717
Forecasting COLAs case, 631–632 implementing the model, 208–210 Holland, J. H., 424
Forehand, G., 12 LP model for the recycling Holnback, Roger, 327
Foreign exchange trading at Baldwin problem, 207–208 Holt’s method, 591–595
Enterprises, 136–137 Generalized reduced gradient (GRG) Holt-Winter’s method
Forgione, G., 12 algorithm, 373 for additive seasonal effects,
Forming fair teams, 416–419 Georgia Public Service Commission, 595–599
analysis, 418–419 The (case), 497–498 for multiplicative seasonal effects,
solving the model, 418 Georgoff, D., 620 599–603
spreadsheet models, 417–418 Gilliam, R., 743 Honest assessments, 502
Formulas Glassey, R., 223 Howard, R. A., 812
cells, 162 Global optimal solutions, 374–376 Hube, Karen, 662
creation of, 48 Glover, F., 223 Hyperplanes, 469
linear programming (LP) models, Goal programming, 326–327 Hypothetical data, 488, 512
21–23 cases and examples, 327–337
random number generator (RNG), comments, 337–338
642 objectives, 345–347 I
Foxridge Investment Group questions and problems, 353–366 Ideal solutions, 330
example, The, 717–720 references, 352 IFERROR() function, 418
Framing effects, 10–11 Good decisions, 11–12, 754–755 IF() functions, 284–285, 387
Franz Edelman Awards, 2 Gould, F., 39 Ignizio, J., 352
Freeland, J., 301 Gradients, reduced, 413 Ikura, Yoshiro, 425
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Index 835
Independent variables, 5 confidence, 659 Lightner, C., 301
binary, 478 constructing for a population Limits Report, 156–157
multicollinearity, 475 proportion, 659 LINDO, 46
observations, 566. Time constructing for the true Linear combinations, 22
series population mean, 657–658 Linear programming (LP), 17, 21
regression analysis models, for mean values of Y, 463 Blue Ridge Hot Tubs problem,
471–474 widths, 659 44–45, 49–52
INDEX function, 110, 421 for new values of Y, predictions, cases and examples, 21
Indices, adjusting trend predictions 461–463 Data Envelopment Analysis
with seasonal, 609–615 Intuitive solutions to LP problems, (DEA), 106–114
Individual retirement accounts 24–25 degeneracy, 156
(IRAs), 18 Inventory Control example, 667–683 difference between nonlinear
Industrial and Commercial Bank of Investment problems, 72–76 programming (NLP), 371
China (ICBC), 2 analysis, 75–76 effect of change, 33–34
Infeasibility, 37–38 constraints, 73 formulating models, 21–23
Infinite populations, 651 decision variables, 72 general form of, 23–24
Inflating R statistics, 474 implementing models, 73–75 graphical approach to problems,
Inflow, 192 objective function, 73 25–34
Information systems (IS), 13 solving problems, 75 implementing in spreadsheets,
Input cells, 5 Iterative solution procedures, 326 47–48
Input X-Range option, 472, 473 intuitive solutions to problems,
Installing Analytic Solver Platform, 24–25
54 J network modeling, 198
Institute for Operations Research Jarvis, J., 39, 172 problem solutions, 46
and the Management Sciences Jockey, 742 for the recycling problem, 207–208
(INFORMS), 2 Jones, Howie, 21, 44, 47, 148, 173, 247 relaxation, 248–249
Insurance rating, 502 scaling, 86
Integer linear programming (ILP), sensitivity analysis, 141–142
247 K Solver, 52–54
binary variables, 264 Keegan, J., 116 solving problems in spreadsheets,
bounds, 250–252 Keeney, R., 812 47
branch-and-bound (B&B) Kelton, W., 695 special conditions in, 34–38
algorithm, 293–300 Kendall notation, 727 spreadsheet solvers, 46–47
cases and examples, 321–325 Keown, A., 352 summary of the example problem,
conditions, 247–248 Khoshnevis, B., 695 23
logical conditions and binary Kimes, Sheryl E., 560 Linear regression analysis, 450–451
variables, 268–269 Kirkwood, C., 811 Linear trend models, 603–606
problems Klingman, D., 223 Line graphs, creating, 569
Capital Budgeting, 264–268 -means clustering, 552 Linkage, 553
Contract Award, 287–293 -nearest neighbor ( -NN), 525–528 average, 553
Employee Scheduling, 259–263 Kolesar, P., 424, 743 average group, 553
Fixed-Charge, 278–285 Krajewski, L., 486 complete, 553
Line Balancing, 269–278 Kroger Company, 2 single, 553
Minimum Order/Purchase Size, Kutner, M., 485 Links in supply chain cases and
285–286 Kwak, N. K., 353 examples, 134–136
other ILP, 258 Linoff, G., 559
Quantity Discounts, 286–287 Live Well, Die Broke example,
solving the relaxed, 249–250 L 711–712
solving using Solver, 255–258 Labe, R., 559 Local area networks (LANs), 221, 642
questions and problems, 302–320 Labels, adding, 160 Local optimal solutions, 374–376
references, 301 Lagrange multipliers, 413 Location problems, 382–388
relaxation, 248–249 Lanzenauer, C., 115 alternate solutions, 386–387
rounding, 252–254 Lasdon, L., 424 analysis, 385–386
stopping rules, 254–255 Law, A., 695 comments, 388
Integer values, 248 Least squares, method of, 452 constraints, 384
Interactive simulation, 652, 660–661 Leaves, 770 decision variables, 383
Interactive simulation mode, 652 Left-hand-side (LHS), 20, 48, 98 defining the objective, 383
Interarrival time, 725 Less than or equal to constraint, 19 implementing the model, 384–385
Intercept cell, 455 Level curve optimization, 29–32 solving the model, 385–386
Intergrality conditions, 247–248 Lift charts, 518, 525 Loflin, Carolyn, 173
Intervals Lift ratio, 550 Loflin, Wayne, 173
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
836 Index
Logical conditions and binary Memoryless property, 725 with finite population, 734–738
variables, 268–269 Mental models, 3 with finite queue length,
Logistic regression, 520–525 Merkhofer, M. W., 812 732-–734
Logistics, 18 Methods multicriteria scoring, 801–804
LOOKUP() function, 387 alternate RNG entry, 647–648 network flow problem, 390–391
Loosening constraints, 38 extrapolation, 567 physical, 3
Lotus 1-2-3, 47 Holt’s, 591–595 Portfolio Selection model, 404–406
Lower bounds, 23, 51–52, 251 Holt-Winter’s for additive Predictive, 6, 7
seasonal effects, 595–599 Prescriptive, 6, 7
Holt-Winter’s for multiplicative project selection problems,
M seasonal effects, 599–603 395–396
Mabert, Vincent A., 620 least squares, 452 quadratic trend, 606–609
Macros, 49 nonprobabilistic, 758–762 queuing theory, 721–722, 727–728
Maderos, Jose, 201 probabilistic, 758, 762–767 regression analysis, 449–450,
Mahalanobis distance measure, 513 risk analysis, 636–639 470–476
Major Electric Corporation case, the, simplex, 62, 168–172 replications, 673
244–246 time series forecasting, 567 rescaling, 85–86
Make buy decisions, 67–71 Ward’s, 553 reviewing, 61–62
analysis, 71 M/G/1 model, 738–741 scale, 3
constraints, 68 Microsoft Excel, 47 scores, 810–811
decision variables, 68 MIN() function, 387 seasonal patterns, 567
models, 69–70 Minimal Spanning Tree problem, simulation using Analytic Solver
objective function, 68 221–223 Platform, 645–648
solving problems, 70–71 Minimax decision rule, 760–762 spreadsheet, 1
Making Windows at Wella case, MINIMAX objective, 347–348 time series forecasting, 567
444–445 Minimum cost network flow Traveling Salesperson problem,
Makridakis, S., 620 problems, 191 422–423
Management science (MS), 12, 13, 14 Minimum Order/Purchase Size trend, 587–588
Mann, L., 743 problem, 285–286 valid, 3
Manufacturing, 17–18 Minimum spanning tree problem, visual, 3
Marcus, A., 695 189 Modes
Markland, R., 301, 302 M/M/s model, 729–732 Guided, 64
Markowitz, H., 424 with finite population, 734–738 interactive simulation, 652
MasterDebt Lockbox problem case, with finite queue length, 732-–734 Modifiability, 65
323–324 Modeling, 1–16, 46 Monitor Value property, 113, 162
Mathematical models, 3–7 approach to decision making, 3 Montgomery, D., 485
Mathematical programming (MP), characteristics and benefits of, 3–4 Moore, D., 12
17–18 computer models, 1 Moore, L., 424
characteristics of problems, 18–19 seasonality with regression Morrison, D. F., 559
techniques, 20–21 models, 609 Mortality rate, 712
Matrices special considerations, 218–221 Moving averages, 569–572
correlation, 692 trends using regression, 603 double, 589–591
pairwise comparison, 805–806 Models weighted, 572–575
payoff matrix, 756–758, 759 computer, 1 Multicollinearity, 475
MAX() function, 387 Descriptive, 6, 7 Multicriteria
Maximal Flow problem, 214–218 economic order quantity (EOQ), decision making, 800–801
Maximax decision rule, 759 376–382 scoring model, 801–804
Maximin decision rule, 760 existing financial spreadsheet, Multiperiod cash-flow problem,
Maximization problems, 251 optimizing, 398–401 94–106
May the (Police) Force Be with You extrapolation, 567 analysis, 101, 105–106
case, 751–752 forming fair teams, 418 constraints, 96–98
McKay, A., 115 goal programming, 335–336 decision variables, 95–96
McKeown, Davis, 327 linear programming (LP), 21–23 implementing models, 98–100
M/D/1 model, 742 linear trend, 603–606 modifying to account for risk,
Mean absolute deviation (MAD), 568 location problems, 384–385 102–104
Mean absolute percent error make buy decisions, 69 objective function, 96
(MAPE), 568 mathematical, 3, 4–6 risk constraints, 104–105
Means, populations, 657–658 M/D/1, 742 solving problems, 100–101, 105
Mean squared error (MSE), 464, 568 mental, 3 Multiple objective linear
Mean squared regression (MSR), 464 M/G/1, 738–741 programming (MOLP), 338,
Measuring accuracy, 567–568 M/M/s, 729–732 339
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Index 837
cases and examples, 340–351 decision variables, 191, 388 location problems, 382–388
constraints, 341 defining the objective, 388–389 nature of NLP problems, 371–372
decision variables, 340 generalized, 205–214 network flow problem, 388–393
defining the objectives, 340–341 implementing the model, 193–195, analysis, 391–393
determining target values, 390–391 constraints, 389–390
342–344 nonlinear, 388–393 decision variables, 388
GP objectives, 345–347 objective function, 191 defining the objective, 388–389
implementing revised models, solving the model, 391–393 implementing the model,
348 Network modeling, 189 390–391
implementing the model, balance-of-flow rules, 192 solving the model, 391–393
341–342 cases and examples optimizing existing financial
MINIMAX objective, 347–348 Hamilton and Jacobs, 241–242 spreadsheet models, 398–401
solving the model, 348–351 The Major Electric Corporation, Portfolio Selection problem,
summarizing target solutions, 244–246 401–410
344–345 Old Dominion Energy, 242–243 project selection problems,
comments, 351–352 U.S. Express, 243–244 393–397
defining the objectives, 340–341 minimum cost network flow constraints, 394–395
Multiple objective optimization, 326, problems, 191 decision variables, 393–394
338–339 problems defining the objective function,
cases and examples Equipment replacement, 394
Planning Diets, 368–369 201–204 implementing the model,
Removing Snow in Montreal, flow, 189 395–396
366–367 Generalized Network Flow, solving the model, 396–397
Sales Territory Planning at Caro- 205–214 questions and problems, 425–442
Life, 369–370 Maximal Flow, 214–218 references, 424
questions and problems, 353–366 Minimal Spanning Tree, 221–223 sensitivity analysis, 410–413
references, 352 shortest path, 196–201 solution strategies for NLP
Multiple regression, 467–469, Transportation/Assignment, problems, 373–374
470–476 204–205 Solver options, 413–415
cases and examples, 469–470 Transshipment, 189–196 Nonlinear relationships, 480–484
Multiple R statistic, 460 questions and problems, 225–240 Nonnegativity conditions, 60–61, 144
Multiple simulations, 664–666 references, 223–224 Nonprobabilistic methods, 758–762
Multiplicative effects, 578 side constraints, 200 Nonstationary time series, 567
Multiplicative seasonal effects, 584– special considerations, 218–221 Norback, J., 12
587, 599–602 Neural networks, 536–539 Normalized data, 500
Holt-Winter’s method for, Newspaper Advertising Insert Normalizing comparisons, 806–807
599–602 Scheduling case, 445–446 Notation, Kendall, 727
stationary data with, 584–587 Nodes, 189 Numbers
Multipliers, Lagrange, 413 adding event, 772–775 negative, 190
Multistage decision problems, decision, 769 positive, 190
777–780 demand, 190
Murdick, R., 620 dummy/artificial, 218
Mutation, 415 event, 770, 772–775 O
supply, 190 Objective cells, 52, 55–56
terminal, 770 Objective Coefficient column, 147
N transshipment, 190 Objective function, 20, 22
Naïve Bayes, 539–546 Nonbasic variables, 170 adding, 59
National Broadcast Network Nonbinding constraints, 144, 149 blending problems, 83
Company (NBNC), 2 Nonlinear objectives, 371, 372 Capital Budgeting problem, 265
Nature of goal programming, Nonlinear programming (NLP), 371 cells, 52, 53
336–337 cases and examples changes in coefficients, 145–147
Nauss, R., 301, 302 Electing the Next President, coefficients, 24
Negative numbers, 190 443–444 Contract Award problem, 288–289
Nemhauser, G., 301 Making Windows at Wella, creation of formulas, 48
Neter, J., 485 444–445 Data Envelopment Analysis
Net present value (NPV), 264 Newspaper Advertising Insert (DEA), 107
Network flow problems, 189, Scheduling, 445–446 Employee Scheduling problem,
388–393 Tour de Europe, 442–443 260
analysis, 195–196, 391–393 economic order quantity (EOQ) Fixed-Charge problem, 279–280
characteristics, 189–191 models, 376–382 goal programming, 330–331
constraints, 192–193, 389–390 local global solutions, 374–376 investment problems, 73
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
838 Index
make buy decisions, 68 Organization of date for models in Pon, Lisa, 639
multiperiod cash-flow problem, 96 spreadsheets, 47–48, 50 Population parameters, 451
network flow problems, 191, Outcomes, good decisions good, analysis of variances (ANOVA),
388–389 11–12 464–465
nonlinear programming (NLP), Outflow, 192 assumptions for statistical tests,
394 Output cells, 5 465–466
plotting, 29 cumulative distributions, 654–655 statistical tests for, 464–467,
production and inventory frequency distributions, 653–654 478–479
planning problem, 90 tracking, 649–650 Populations
project selection problems, 394 Overfitting data in samples, 470, 501 constructing confidence intervals,
representation of, 50–51 657–658
simultaneous changes in infinite, 651
coefficients, 155–156 P proportions, 659
Solver, 55–56 Pairwise comparison matrix, 805–806 Portfolio Optimization example,
transportation problems, 78 Parallel curves, 29 689–695
Objectives Parameters, population, 451 Portfolio Selection problem, 401–410
determining target values for, analysis of variances (ANOVA), analysis, 406–408
342–344 464–465 constraints, 404
location problems, 383 assumptions for statistical tests, decision variables, 403
nonlinear, 372 465–466 handling conflicting objectives,
Portfolio Selection problem, statistical tests for, 464–467, 408–410
403–404 478–479 implementing the model, 404–406
Observations, 566. Time Partitioning, data mining objectives, 403–404
series classification, 510–511 Positive numbers, 190
Old Dominion Energy case, 242–243 Patel, N., 559 Powell, Warren B., 224
Olson, D., 695 Patterns Power Dispatching at Old Dominion
One Hundred Percent (100%) Rule, modeling seasonal, 567 case, 322–323
The, 155 seasonality, 578–579 Precision, 517
Operations research (OR), 12, 13, 14 Payoff matrix, 756–758, 775–776 Predictions
Opportunities, 7 PB Chemical Company case, 614–615 adjusting trends with seasonal
Optimization, 17 Peck, E., 485 indices, 609–615
adding, 59 Peck, Ken E., 224 confidence intervals for mean
calculating values, 451 Peiser, R., 301 values of Y, 463
characteristics of problems, 18–19 Percentage deviations, 330 data mining, 501, 548
decision analysis, 780 Perfect information, expected value errors, 460–461
enumerating corner points, 32 of, 767–769 extrapolation, 463
evolutionary, 371 Performance intervals for new values of Y,
existing financial spreadsheet distributions, 637 461–463
models, 398–401 simulation, 638–639 regression analysis, 460–463,
expressing problems Personal financial planning, 471–472, 477
mathematically, 19–20 applying simulation in, 662 Predictive models, 6, 7
level curves, 29–32 Phillips, D., 224 Premiums, risk, 796
mathematical, 17–18 Phillips, N., 223 Prescriptive models, 6, 7
non-smooth problems, 387 Physical models, 3 Prices
Portfolio Optimization example, Pindyck, R., 620 meaning of reduced costs, 152–154
689–695 Planes, 469 shadow, 148, 149, 150, 151, 164
robust, 164–168 Planning Diets for the Food Stamp Probabilities
sensitivity analysis, 410–413 Program case, 368–369 conditional, 790, 791–793
simulation using Analytic Solver Plotting cumulative, 655–656
Platform, 674–680 boundary lines, 25 decision analysis, 789–790
Solver Tables, 163 double moving averages, 591 scores, 518
Spider Plots, 160 first constraints, the, 26 utility theory, 794
Optimizing a Timber Harvest case, objective functions, 29 Probabilistic methods, 758, 762–767
321 scatterplots, 448, 449, 510, 569 Problems, 7
Options second constraints, the, 27–28 analysis
engine, 380 Spider Plots, 157–161 multiperiod cash-flow problem,
Input X-Range, 473 third constraints, the, 28 101, 105–106
nonlinear programming (NLP), univariate plots, 509 production and inventory
413–415 Points, 29, 32 planning problem, 94
Solver, 62–63 Poisson distributions, 724, 725, 730 transportation problems, 82
Options dialog box, 650, 651, 652 Polynomial regression, 479–484 transshipment problem, 195–196
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Index 839
blending problem, 82–89 multicriteria scoring model, maximization, 251
analysis, 87–89 801–804 minimum cost network flow, 191
constraints, 83–85 multistage decision problems, minimum spanning tree, 189
decision variables, 83 777–780 multiperiod cash-flow, 94–106
implementing models, 86–87 nonprobabilistic methods, network modeling, 189–190
objective function, 83 758–762 Equipment replacement,
reporting, 84–85 payoff matrix, 756–758 201–204
scaling, 84–86 probabilistic methods, 762–767 Generalized Network Flow,
solving problems, 87 rules, 758 205–214
Blue Ridge Hot Tubs problem, sample information, 788–791 Maximal Flow, 214–218
44–45, 49–52 sensitivity analysis, 780–787 Minimal Spanning Tree,
analyzing changes in constraint utility theory, 794–800 221–223
coefficients, 154–155 decision variables minimum spanning tree, 189
Answer Report, 143–145 blending problems, 83 shortest path problem, 196–201
conservative robust solution, investment problems, 72 Transportation/Assignment,
167, 168 multiperiod cash-flow problem, 204–205
example problem, 142–143 95–96 Transshipment problem,
Limits Report, 156–157 network flow problems, 191 189–196
robust optimization, 166 production and inventory nonlinear programming (NLP)
sensitivity analysis example, planning economic order quantity (EOQ)
142–143 problem, 90 models, 376–382
Sensitivity Report, 145–156 transportation problems, 77 local global solutions,
Spider Plots and Tables, 157–161 equipment replacement problem, 374–376
spreadsheet models, 49–52 201–204 location, 382–388
characteristics of optimization, evolutionary optimization nature of, 371–372
18–19 forming fair teams, 416–419 network flow, 388–393
data mining Traveling Salesperson, 419–423 portfolio selection, 401–410
association rules (affinity expressing mathematically, project selection, 393–397
analysis), 548–551 19–20 solution strategies for, 373–374
classification, 502–510 feasible regions, 25 objective function
classification trees, 528–535 forming fair teams blending problems, 83
cluster analysis, 551–557 analysis, 418–419 investment problems, 73
comments on classification, solving the model, 418 multiperiod cash-flow problem,
546–547 spreadsheet models, 417–418 96
discriminant analysis (DA), generalized network flow, 205–214 network flow problems, 191
512–520 integer linear programming (ILP) production and inventory
-nearest neighbor ( -NN), Capital Budgeting, 264–268 planning problem, 90
525–528 Contract Award, 287–293 transportation problems, 78
logistic regression, 520–525 Employee Scheduling, 259–263 optimizing existing financial
naïve Bayes, 539–546 Fixed-Charge, 278–285 spreadsheet models, 398–401
neural networks, 536–539 Line Balancing, 269–278 production and inventory
overview of, 499–502 Minimum Order/Purchase Size, planning problem, 89–93
partitioning, 510–511 285–286 analysis, 94
predictions, 548 other ILP, 258 constraints, 90–91
time series, 557–558 Quantity Discounts, 286–287 decision variables, 90
decision analysis solving the relaxed, 249–250 implementing models, 91–93
analytic hierarchy process solving using Solver, 255–258 objective function, 90
(AHP), 805–811 investment, 72–76 solving problems, 93–94
characteristics of decision linear programming (LP) regression analysis
problems, 755 Blue Ridge Hot Tubs problem, binary independent variables,
computing conditional 44–45, 49–52 478
probabilities, 791–793 example problem, 21 making predictions, 460–463,
creating decision trees, 771–777 graphical approach to problems, 477
decision trees, 769–771 25–34 multiple regression, 467–469
example, 755–756 intuitive solutions to problems, polynomial regression, 479–484
expected value of perfect 24–25 selecting the model, 470–476
information (EVPI), 767–769 problem solutions, 46 solving using regression tools,
good decisions good solving problems in 454–456
outcomes, 754–755 spreadsheets, 47 solving using Solver, 452–454
multicriteria decision making, summary of the example statistical tests, 464–467, 478–479
800–801 problem, 23 shortest path, 196–198
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
840 Index
LP model of example problems, transportation problems, 76–82 Production and inventory planning
198 transshipment problem, 193–195 problem, 89–94
network flow models and summaries analysis, 94
integer solutions, 200–201 graphical solution to LP constraints, 90–91
spreadsheet model and solution, problems, 33 decision variables, 90
198–200 LP model for the example implementing models, 91–93
simulation using Analytic Solver problem, 23 objective function, 90
Platform, 635 time series forecasting solving problems, 93–94
additional uses of, 662 adjusting trend predictions with Product mix, determining, 17
benefits of, 661–662 seasonal indices, 609–615 Profiles, risk, 779–780
Corporate Health Insurance combining forecasts, 619 Project Selection example, 684–688
example, 639–641 double exponential smoothing Project selection problems, 393–397
data analysis, 652–656 (Holt’s method), 591–595 constraints, 394–395
interactive simulation, 660–661 double moving averages, decision variables, 393–394
Inventory Control example, 589–591 defining the objective function,
667–683 exponential smoothing, 575–578 394
methods of risk analysis, Holt-Winter’s method for implementing the model, 395–396
636–639 additive seasonal effects, solving the model, 396–397
Portfolio Optimization example, 595–599 Proportions, population, 659
689–695 Holt-Winter’s method for PsiCurrentOpt() function, 111
preparing the model for, multiplicative seasonal Psi distributions, 651
645–648 effects, 599–603 PsiOptValue() function, 111, 112
Project Selection example, linear trend models, 603–606 PsiUniform(Lower, Upper) function,
684–688 measuring accuracy, 567–568 165
random number generator modeling seasonality with
(RNG), 642–645 regression models, 609
random variables and risk, moving averages, 569–572 Q
635–636 quadratic trend models, 606–609 Quadratic trend models, 606–609
reasons to analyze risk, 636 seasonality, 578–579 Quantity Discounts problem,
Reservation Management seasonal regression models, 286–287
example, 662–667 615–618 formulating the model, 286–287
running, 649–652 stationary models, 568–569 the missing constraints, 287
spreadsheet simulation, 641–642 trend models, 587–588 Questions and problems.
uncertainty of sampling, weighted moving averages, Problems
657–659 572–575 data mining, 560–564
Solver transportation, 76–82 decision analysis, 813–823
blending problems, 89 analysis, 82 decision analysis and modeling,
solving problems, 63–64 constraints, 78 14–15
transshipment problem, 195 decision variables, 77 evolutionary optimization,
solving problems heuristic solutions for, 80–81 425–442
blending problem, 87 implementing models, 78–80 goal programming, 353–366
Data Envelopment Analysis objective function, 78 integer linear programming (ILP),
(DEA), 110–113 solving problems, 81–82 302–320
investment problems, 75 transportation/assignment multiple objective optimization,
make buy decisions, 70–71 problems, 204–205 340–353
multiperiod cash-flow problem, transshipment problem, 189–196 network modeling, 225–240
100–101, 105 analysis, 195–196 nonlinear programming (NLP),
production and inventory characteristics for network flow 425–442
planning problem, 93–94 problems, 189–190 optimization and linear
Solver, 63–64 constraints for network flow programming, 39–44
transportation problems, 81–82 problems, 192–193 queuing theory, 745–751
spreadsheets decision variables for network regression analysis, 486–496
blending problems, 82–89 flow problems, 191 sensitivity analysis and simplex
Blue Ridge Hot Tubs problem, implementing models in method, 173–183
49–52 spreadsheets, 193–195 simulation using Analytic Solver
investment problems, 72–76 network flow problems, 189–190 Platform, 696–711
multiperiod cash-flow problem, objective function for network solving LP problems in a
94–106 flow problems, 191 spreadsheet, 116–134
production and inventory understanding, 21–22 time series forecasting, 621–630
planning problem, 89–94 Problem-solving processes, 7–9 Queuing theory, 721
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Index 841
arrival rates, 724–725 nonlinear programming (NLP), Reporting
cases and examples, 730 424 Answer Report, 143–145
Bullseye Department Store, 753 optimization and linear blending problem, 84–85
Call Center Staffing at programming, 39 headings, 145
Vacations, Inc., 752–753 queuing theory, 743 Limits Report, 156–157
May the (Police) Force Be With regression analysis, 485 Sensitivity Report, 145–156
You, 751–752 sensitivity analysis and simplex shadow prices, 150
characteristics of systems, 723–727 method, 172 Rescaling models, 85–86
Kendall notation, 727 simulation using Analytic Solver Research and development (R&D),
M/D/1 model, 742 Platform, 695 264
M/G/1 model, 738–741 solving LP problems in a Reservation Management example,
M/M/s model, 729–732 spreadsheet, 115 662–667
with finite population, 734–738 time series forecasting, 620 Residuals, 452
with finite queue length, Regions, feasible, 25, 28–29 Restrictions, 18
732–734 Regression analysis, 447 Reviewing models, 61–62
models, 727–728 cases and examples, 447–449 Revising the model, goal
purpose of models, 721–722 Diamonds Are Forever, 494–496 programming, 335–336
questions and answers, 745–751 Fiasco in Florida, 496–497 Riedwyl, H., 559
references, 743 Georgia Public Service Right-hand-side (RHS), 20
service rates, 725–727 Commission, The, 497–498 changes in values, 148
simulation and steady-state multiple regression, 469–470 configuring spreadsheets, 147
assumption, 742–743 defining “Best Fit,” 451–452 Risk, 636
system configurations, 722–723 evaluating the fit, 456–458 analysis, 636
Quinn, P., 743 models, 449–450, 603 base-case, 637–638
problems methods, 636–639
binary independent variables, reasons to, 638
R 478 what-if analysis, 638
Radar charts, 803, 804 making predictions, 460–463, worst-case, 637–638
Random number generator (RNG), 477 aversion value, 408
641, 642–645 multiple regression, 467–469 conditional value at risk
alternate entry methods, 647–648 polynomial regression, 479–484 constraint, 682
creating, 669–670 selecting the model, 470–476 measures of, 682–683
Random variables, 635 solving using regression tools, multiperiod cash-flow problem,
continuous, 644–645 454–456 102–104
discrete, 644–645 solving using Solver, 452–454 premiums, 796
risk and, 635–636 statistical tests for population profiles, 779–780
simulation using Analytic Solver parameters, 464–467, 478–479 random variables and, 635–636
Platform, 638–649 questions and problems, 486–494 simulation using Solver, 638–639,
Random variations, 449 R statistic, 458–460 682–683
Ranges, X-Range, 473 seasonal regression models, value at risk constraint, 682
Ratios, lift, 550 599–603 Ritzman, L. J., 486
Recall (or sensitivity) measures, 517 simple linear, 450–451 Ritzman, L. P., 486
Receiving nodes, 190 Regression sum of squares (RSS), 459 Robust optimization, 164–168
Recommender systems, 549 Regret, expected, 764–765 Robust solutions, 165
Recycling problem, 207–208 Reid, R., 620 Rogers, Ray, 717
Reduced Cost column, 152 Relationships, 378 Roles of test data, 547
Reduced costs, meaning of, 152–154 linear, 692 Rolling back a decision tree,
Reduced gradients, 413 nonlinear, 480–484, 692 770–771
Redundant constraints, 34–36 statistical, 449 Root mean square error (RMSE), 568
Reeves, C. R., 424 Relaxation Rounding, integer linear
References integer linear programming (ILP), programming (ILP), 252–254
absolute cell, 70 248–249 Roush, W., 115
data mining, 559 solving, 249–250 Routing, 18
decision analysis, 811–812 Reliability, 65 Rows, 66
goal programming, 352 Removing Snow in Montreal case, R statistic, 458–460.
integer linear programming (ILP), 324–325, 366–367 Coefficient of determination
301 Renege, 742 adjusted, 474
modeling and business analytics, Replications inflating, 474
12 models, 673 Rubin, D., 172
networking modeling, 223–224 selecting number of, 650–651 Rubinfeld, D., 620
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
842 Index
Rules adjusting trend predictions with Corporate Health Insurance,
association, 548–551 seasonal indices, 609–615 639–641
balance-of-flow, 192 modeling with regression models, Death and Taxes, 712–713
confidence of, 549 609 Foxridge Investment Group
decision analysis, 758 multiplicative effects, 584–587 example, The, 717–720
expected monetary value (EMV) multiplicative seasonal effects, Inventory Control example,
decision, 763–764, 770 599–603 667–683
lift ratio of, 550 stationary models with, 584–587 Live Well, Die Broke, 711–712
maximax decision, 759 time series forecasting, 578–579 Portfolio Optimization example,
maximin decision, 760 Seasonal patterns, models, 567 689–695
minimax decision, 760–762 Seasonal regression models, Project Selection, 684–688
stopping, 254–255 615–618 Reservation Management
support of, 549 Segmentation, 501, 551–557 example, 662–667
The 100% Rule, 155 Semmel, T., 301 Sound’s Alive Company
Running simulation using Analytic Sending nodes, 190 example, The, 713–717
Solver Platform, 649–652 Sensitivity analysis, 141, 656 data analysis, 652–656
Russell, R., 695 ad hoc, 157–164 interactive simulation, 660–661
analyzing changes in constraint methods of risk analysis, 636–639
coefficients, 154–155 optimization, 674–680
S Answer Report, 143–145 preparing the model for, 645–648
Sales Territory Planning at Caro-Life approaches to, 142 questions and problems, 696–711
case, 369–370 cases and examples, 142–143 queuing theory, 742–743
Sample data, fitting distributions to, decision analysis, 780–787 random number generator (RNG),
648 Limits Report, 156–157 642–645
Sample information in decision nonlinear programming (NLP), random variables and risk,
making, 788–791 410–413 635–636
Samples, overfitting data in, probabilistic methods, 765–767 reasons to analyze risk, 636
470, 501 purpose of, 141–142 risk, 682–683
Sample sizes, confidence interval robust optimization, 164–168 running, 649–652, 666
widths, 659 Sensitivity Report, 145–156 spreadsheet simulation, 641–642
Sampling simulation using Analytic Series, time, 557–558 uncertainty of sampling, 657–659
Solver Platform, 657–659 Servers, adding, 731, 734, 737–738 Single linkage, 553
Savage, S., 695 Services Single-stage decision problems, 777
Savage, Sam L., 695 rates, 725–727 Sinkey, J. F., 559
Saving the Manatees case, 138–140 time, 725 Skinner, D., 812
Scale models, 3 Set Size, 166 Slack column, 144
Scaling Shading, 66 Slack variables, creating equality
automatic, 86 Shadow prices, 148, 164 constraints, 168–169
blending problem, 84–85 for nonbinding constraints, 149 Slope cell, 452
and linear models, 86 other uses of, 151–152 Smith, S., 424
Scatter diagrams, 448 reporting, 150 Smoothing, exponential, 575–578
Scatterplots, 448, 449, 510, 569 value of additional resources, 151 Solutions
Schedules, queuing theory, 721 Sherali, H., 172 global optimal, 374–376
Schindler, S., 301 Shetty, C., 424 local optimal, 374–376
Schmidt, C., 39 Shmueli, G., 559 regression problems, 454
Schneiderjans, Marc J., 353 Shogan, A., 39, 115, 172 Solution strategies for NLP
Scholtes, S., 695 Shortest path problem, 196–201 problems, 373–374
Schrage, M., 12 Should Larry Junior Go to Court or Solver, 46, 54–64
Scores Settle? case, 825–826 additive seasonal effects, 582
credit scoring, 502 Side constraints, 200, 218, 290–292 blending problems, 88
models, 810–811 Simple linear regression analysis, constraint cells, 52, 57–59
multicriteria scoring model, 450–451 creating decision trees with,
801–804 Simplex method, 62, 168–172 771–777
new data, 520 Simulation using Analytic Solver Data Envelopment Analysis
obtaining for remaining criteria, Platform, 635 (DEA), 110
810 additional uses of, 662 economic order quantity (EOQ)
probability, 522 analysis, 680–682 models, 380
Seasonality benefits of, 661–662 Excel built-in, 64–65
additive seasonal effects (Holt- cases and examples exponential smoothing, 577
Winter’s method), 595–599 Holt’s method, 594
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Index 843
Holt-Winter’s method, 598, 602 transportation problems, 81–82 starting points, 373, 376
installation, 54 Traveling Salesperson problem, States of nature, 755, 758
integer linear programming (ILP) 422–423 Stationary models, time series
problems, 255–258 Sonntag, C., 12 forecasting, 568–569
linear programming (LP), 52–54 Sorensen, Steve, 416 with additive seasonal effects,
location problems, 385 Sound’s Alive Company example, 579–584
Maximal Flow problem, 217 The, 713–717 with multiplicative seasonal
multiplicative seasonal effects, 586 Spanning trees, 221 effects, 584–587
network flow problem, 392 Special conditions in linear Stationary time series, 567
nonlinear programming (NLP), programming (LP), 34–38 Statistics
413–415 Special considerations, network descriptive, 505
nonnegativity conditions, 60–61 modeling, 218–221 multiple R, 460
objective cell, 52, 55–56 Specificity, 517 R , 458–460
optimal solutions, 376 Spider Plots, 157–161 statistical relationships, 449
options, 62–63 Spreadsheets, 1 statistical tests, population
Portfolio Selection problem, 406 additive seasonal effects, 581 parameters, 464–467,
quadratic trend models, 614 blending problems, 82–88 478–479
recycling problem, 212 Blue Ridge Hot Tubs problem, Steady-state assumption, queuing
regression analysis, 454–456 49–52 theory, 742–743
reviewing models, 61–62 Data Envelopment Analysis Step sizes, 373
seasonal indices, 614 (DEA), 106–114 Steuer, R., 352
seasonal regression models, 619 design guidelines, 65–66 Stopping rules, 254–255
solving problems, 63–64 double moving averages, 590 Strategic Planning at Fysco Foods
Spider Plots, 158 Equipment replacement problem, case, 633–634
spreadsheet, 46 202–204 Strategy charts, 786–787
Standard LP/Quadratic Engine, existing financial models, Strategy tables, 784–785
143 optimizing, 398–401 Structural variables, 169
tables, 161–164 exponential smoothing, 577 Subramanian, R., 115
tornado charts, 781–783 Holt’s method, 593 SUMIF() function, 99, 194, 417
transshipment problem, 195 Holt-Winter’s method, 597, 601 Summaries
Traveling Salesperson problem, investment problems, 72–76 branch-and-bound (B&B)
422 linear trend models, 604 algorithm, 299–300
variable cells, 52, 56–57 Maximal Flow problem, 216–218 goal programming, 337
viewing the model, 52–53 multiperiod cash-flow problem, graphical solution to LP problems,
weighted average models, 574 94–106 33
Solving problems multiplicative seasonal effects, LP model for the example
Analytic Solver Platform, 692–695 585 problem, 23
blending problem, 87 network modeling, 198–200 multiple objective linear
Data Envelopment Analysis production and inventory programming (MOLP), 351
(DEA), 110–113 planning problem, 89–94 of nonlinear regression, 484
economic order quantity (EOQ) quadratic trend models, 604 of optimal reduced cost values,
models, 379–380 random number generator (RNG), 154
goal programming, 333–334 647 shortest path problems, 204
investment problems, 75 right-hand-side (RHS), 147 SUMPRODUCT() function, 70, 104,
location problems, 385–386 seasonal indices, 613 262
make buy decisions, 70–71 seasonal regression models, 616 SUMXMY2() function, 571
multiperiod cash-flow problem, simulation using Solver, Sunk costs, 278
100–101, 105 641–642 Supply Chains case, 134–136
multiple objective linear solvers, 46–47 Supply nodes, 190
programming (MOLP), transportation problems, 76–82 Support of rules, 549
348–351 transshipment problem, 193–195 SustainAbility, 339
network flow problem, 391–393 weighted average models, 573 System configurations, queuing
nonlinear programming, 396–397 Spreadsheet Wars case, The, theory, 722–723
production and inventory 827–828
planning problem, 93–94 Sprint Corp., 13
project selection problems, Standard error predictions, 460–461 T
396–397 Standard LP/Quadratic Engine Tables
regression analysis, 452–454 (Solver), 143 creating Solver, 161–164
relaxation, 249–250 Starting creating Spider, 157–161
Solver, 63–64 Analytic Solver Platform, 642 strategy, 784–785
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
844 Index
Target values, 329 Transportation/Assignment payoff matrix, 757–758
multiple objective linear problem, 204–205 risk aversion, 408
programming (MOLP), Transportation problems, 76–82 at risk constraint, 682
342–344 analysis, 82 target, 329, 342–344
summaries, 344 constraints, 78 Variable cells, 52, 53, 56–57, 406
Task panes, Solver, 54 decision variables, 77 Variables
Tavakoli, A., 301 heuristic solutions for, 80–81 adding, 59
Taylor, B., 352, 424 implementing models, 78–80 basic, 170
Techniques, mathematical objective function, 78 binary, 264
programming (MP), 20–21 solving problems, 81–82 branching, 295–296, 296–298
Templates, queuing, 728 Transshipment nodes, 190 continuous, 248
Terminal nodes, 770 Transshipment problem, 189–196 conversion, 507
Test data, role of, 547 Traveling Salesperson problem, decision, 19, 50
Text boxes, 66 419–423 dependent/independent, 5
Theories analysis, 423 deviational, 329
queuing theory. Queuing solving the model, 422–423 dictionaries, 504
theory spreadsheet model for, 420–422 independent. Independent
utility theory, 794–800 Trees variables
Time classification, 528–535 logical conditions and binary,
interarrival, 725 decision, 769–780, 799–800 268–269
queue, 725 spanning, 221 matching, 521
series, 557 TREND() function, 456, 457, 462, 606 nonbasic, 170
service, 725 Trends normalized data, 500
Time series forecasting, 566–567 adjusting predictions with observations, 566. Time
adjusting trend predictions with seasonal indices, 609–615 series
seasonal indices, 609–615 linear trend models, 603–606 random, 635–636, 644–645
cases and examples, 630–634 modeling using regression, 603 reduced costs, 153
combining forecasts, 619 models, 587–588 slack, 168–169
double exponential smoothing quadratic trend models, 606–609 structural, 169
(Holt’s method), 591–595 Trials, maximum number of, 651 uncertainties, 639
double moving averages, Triple bottom line (3BL), 339 Variations
589–591 regression analysis, 449
exponential smoothing, 575–578 unsystematic, 449
Holt-Winter’s method, 595–603 U Vemuganti, R., 224
linear trend models, 603–606 Unbounded solutions, 34, 36–37 Viewing
measuring accuracy, 567–568 Uncertainties, 142, 639, 641 cell comments, 53
methods, 567 Uncertainty of sampling, 657–659 Solver, 54
modeling, 603, 609 Univariate plots, 509 worksheets, 651
moving averages, 569–572 Unsystematic variations, 449 Vigus, B., 116
quadratic trend models, 606–609 Upper bounds, 23, 251 Visual models, 3
questions and problems, 621–630 USet constraint, 166 VLOOKUP() function, 194
seasonality, 578–579 US Express case, 243–244 Vollman, T., 424
seasonal regression models, Utility function, 794
615–618 Utility of a payoff, 794
stationary models, 568–569, Utility theory, 794–800 W
579–584 Wagner, H., 172
trend models, 587–588 Ward’s method, 553
weighted moving averages, V Weatherford, Larry, 717
572–575 Valid models, 4 Weighted moving averages,
Tools Values 572–575
analytics, 47 assigning, 451 Weights, criterion, 810
Decision Tree, 775 calculating optimization, 452 Welker, R. B., 559
identifying robust solutions, 165 conditional value at risk Wendell, R., 224
regression, 454–456 constraint, 682 Wenstop, F., 812
Tornado charts, 781–783 distribution, 450 What-if analysis, 638
Total flow, 218 expected value of perfect Wheelwright, S., 620
Total sum of squares (TSS), 458 information (EVPI), 767–769 Whybark, C., 424
Tour de Europe case, 442–443 expected value of sample Williams, H., 115
Tracking output cells, 649–650 information, 790–791 Wilson, J., 12
Transient period, 742 integers, 248 Winston, W., 39, 172
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Index 845
Wolsey, L., 301
Wolverine Retirement Fund case,
classification trees, 532–539
cluster analysis, 551–557
Y
Younger, M., 485
137–138 -nearest neighbor ( -NN), Yurkiewicz, Dr. Jack, 184,
Wood, K., 116 525–528 713, 827
Worksheets, viewing, 651 logistic regression, 520–525
Worst-case analysis, 637–638, 652–653 naïve Bayes, 539–546
neural networks, 536–539
time series, 557
Z
Zahedi, F., 812
X Xpress-MP, 46 Zweidler, D., 695
XLMiner, 499 X-Range, 457, 606
Chart Wizard dialog box, 508
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
This is an electronic version of the print textbook. Due to electronic rights restrictions,
some third party content may be suppressed. Editorial review has deemed that any suppressed
content does not materially affect the overall learning experience. The publisher reserves the right
to remove content from this title at any time if subsequent rights restrictions require it. For
valuable information on pricing, previous editions, changes to current editions, and alternate
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