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BU275, Spring 2023, Class 18

Business Decision Models

Linear Programming: Formulation and Applications

Peruvemba S. Ravi
Applications of Linear Programming
1 A Product Mix Problem
2 A Diet Problem
3 An Investment Problem
4 A Marketing Problem
5 A Transportation Problem
6 A Blending Problem
7 A Multiperiod Scheduling Problem
Problem 1
• A Product Mix Problem
Quick-Screen Shirts: Problem Definition
Four-product T-shirt/sweatshirt manufacturing company.
•Must complete production within 72 hours
•T-shirt or sweatshirt, front and back/front
•Truck capacity = 1,200 standard sized boxes.
•Standard size box holds12 T-shirts.
•One-dozen sweatshirts box is three times size of standard box.
•$25,000 available for a production run.
•500 dozen blank T-shirts and 500 dozen blank sweatshirts in
stock.
•How many dozens (boxes) of each type of shirt to produce?
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Quick-Screen Shirts (four products)

Data
Resource requirements for the product mix example.

Blank Processing Time Cost($) Profit ($)

(h r) per dozen
ou per Dozen per Dozen
Sweatshirt—F 0.10 $36 $90
Sweatshirt—B/F 0.25 48 125
T-shirt—F 0.08 25 45
T-shirt—B/F 0.21 35 65
Model Construction (1 of 2)
Decision Variables:
x1 = sweatshirts, front printing
x2 = sweatshirts, back and front printing
x3 = T-shirts, front printing
x4 = T-shirts, back and front printing
Objective Function:

Maximize Z $90 x1  $125 x2  $45 x3  $65 x 4

Model Construction (2 of 2)
Model Constraints:

0.10 x1  0.25 x2  0.08 x3  0.21x 4 72 hr

3 x1  3 x2  x3  x 4 1,200 boxes
$36 x1  $48 x2  $25 x3  $35 x 4 $25,000
x1  x2 500 dozen sweatshirts
x3  x4 500 dozen T - shirts
Problem 2
• A Diet Problem
Data and Problem Definition
Breakfast Food Calories Fat Cholesterol Iron Calcium Protein Fiber Cost
(g) (mg) (mg) (mg) (g) (g) ($)
1. Bran cereal (cup) 90 0 0 6 20 3 5 0.18
2. Dry cereal (cup) 110 2 0 4 48 4 2 0.22
3. Oatmeal (cup) 100 2 0 2 12 5 3 0.10
4. Oat bran (cup) 90 2 0 3 8 6 4 0.12
5. Egg 75 5 270 1 30 7 0 0.10
6. Bacon (slice) 35 3 8 0 0 2 0 0.09
7. Orange 65 0 0 1 52 1 1 0.40
8. Milk—2% (cup) 100 4 12 0 250 9 0 0.16
9. Orange juice (cup) 120 0 0 0 3 1 0 0.50
10. Wheat toast (slice) 65 1 0 1 26 3 3 0.07

Breakfast to include at least 420 calories, 5 milligrams of iron, 400 milligrams of

calcium, 20 grams of protein, 12 grams of fiber, and must have no more than 20
grams of fat and 30 milligrams of cholesterol.
Model Construction – Decision Variables
x1 = cups of bran cereal
x2 = cups of dry cereal
x3 = cups of oatmeal
x4 = cups of oat bran
x5 = eggs
x6 = slices of bacon
x7 = oranges
x8 = cups of milk
x9 = cups of orange juice
x10 = slices of wheat toast
Model
Minimize Z 0.18 x1  0.22 x2  0.10 x3  0.12 x 4  0.10 x5  0.09 x6
 0.40 x7  0.16 x8  0.50 x9  0.07 x10
subject to: 90 x1  110 x2  100 x3  90 x 4  75 x5  35 x 6  65 x7
 100 x8  120 x9  65 x10 420 calories
2 x2  2 x3  2 x 4  5 x5  3 x6  4 x8  x10 20 g fat
270 x5  8 x6  12 x8 30 mg cholesterol
6 x1  4 x2 2 x3  3 x 4  x5  x7  x10 5 mg iron
20 x1  48 x2  12 x3  8 x 4  30 x5  52 x7  250 x8
 3 x9  26 x10 400 mg of calcium
3 x1  4 x2  5 x3  6 x 4  7 x5  2 x6  x7
 9 x8  x9  3 x10 20 g protein
5 x1  2 x2  3 x3  4 x 4  x7  3 x10 12
xi 0, for all j
Problem 3
• An Investment Problem
Problem Definition
An investor has $70,000 to divide among several instruments. Municipal
bonds have an 8.5% return, C D’s a 5% return, t-bills a 6.5% return, and
growth stock 13%.
The following guidelines have been established:
1.No more than 20% in municipal bonds
2.Investment in CDs should not exceed the total amount invested in the three
other instruments
3.At least 30% invested in treasury bills and C Ds
4.Total amount invested in CDs and treasury bills should be at least 20%
higher than the total amount invested in municipal bonds and growth stocks.
5.All $70,000 should be invested.
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Model
Maximize Z $0.085 x1  0.05 x2  0.065 x3  0.130 x4
subject to:

x1 $14,000
x2  x1  x3  x4 0
x2  x3 $21,000
 1.2 x1  x2  x3  1.2 x4 0
x1  x2  x3  x4 $70,000
x1, x2 , x3 , x 4 0
where
x1 = amount ($) invested in municipal bonds
x2 = amount ($) invested in certificates of deposit
x3 = amount ($) invested in treasury bills
x4 = amount ($) invested in growth stock fund
Problem 4
• A Marketing Problem
Data and Problem Definition
Blank Exposure Cost
(people/ad or commercial)
Television commercial 20,000 $15,000
Radio commercial 12,000 6,000
Newspaper ad 9,000 4,000

• Budget limit $100,000

• Television time available for four commercials
• Radio time available for 10 commercials
• Newspaper space available for 7 ads
• Resources for no more than 15 commercials and/or ads
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Model
Maximize Z 20,000 x1  12,000 x2  9,000 x3
subject to:

15,000 x1  6,000 x2  4,000 x3 100,000

x1 4
x2 10
x3 7
x1  x2  x3 15
x1, x2 , x3 0

where
x1 = number of television commercials
x2 = number of radio commercials
x3 = number of newspaper ads
Problem 5
• A Transportation Problem
Problem Definition and Data
Warehouse supply of Television Retail store demand for television
Sets: sets:

1 - Cincinnati 300 A - New York 150

2 - Atlanta 200 B - Dallas 250
3 - Pittsburgh 200 C - Detroit 200
Total 700 Total 600

Unit Shipping Costs:

From Warehouse To Store(A) To Store(B) To Store(C)

1 $16 $18 $11
2 14 12 13
3 13 15 17
Model
Minimize Z $16 x1A  18 x1B  11x1C  14 x2A  12 x 2B  13 x 2C 
13 x3A  15 x3B  17 x3C
subject to:

x1A  x1B  x1C 300

x2A  x2B  x2C 200
x3A  x3B  x3C 200
x1A  x2A  x3A 150
x1B  x2B  x3B 250
x1C  x2C  x3C 200
All xij 0
Problem 6
• A Blending problem
Determine the optimal mix of the three components in each grade of motor oil
that will maximize profit.

The company wants to produce at least 3,000 barrels of each grade of motor oil.
Maximum Barrels
Component Cost/barrel
Available/Day
1 4,500 $12
2 2,700 $10
3 3,500 $14

Grade Component Specifications Selling Price/Barrel

At least 50% of 1
Super $23
Not more than 30% of 2
At least 40% of 1
Premium $20
Not more than 25% of 3
At least 60% of 1
Extra $18
At least 10% of 2
Variables
Decision variables: The quantity of each of the three
components used in each grade of gasoline (9 decision
variables); xij = barrels of component i used in motor oil
grade j per day, where i = 1, 2, 3 and j = s (super), p
(premium), and e (extra).
Blend specification constraint
Blend specification constraint for super, which must contain
50% of component 1.

x1s Convert to standard form, a

0.50 linear function on the left side
x1s  x2s  x3s and numeric value on the right.

Multiply both sides by the denominator and collect terms

x1s 0.50( x1s  x2s  x3s )
0.5 x1s  0.5 x2s  0.5 x3s 0
Model
Maximize Z 11x 13x  9x  8x 10x  6x  6x
1s 2s 3s 1p 2p 3p 1e
 8x  4x
2e 3e

subject to: x  x  x 4,500 bbl.

1s 1p 1e
x  x  x 2,700 bbl.
2s 2p 2e
x  x  x 3,500 bbl.
3s 3p 3e
0.50x  0.50x  0.50 x 0
1s 2s 3s
0.70x  0.30x  0.30 x 0
2s 1s 3s
0.60x  0.40x  0.40x 0
1p 2p 3p
0.75x  0.25x  0.25x 0
3p 1p 2p
0.40x  0.60x  0.60 x 0
1e 2e 3e
0.90x  0.10x  0.10x 0
2e 1e 3e
Model

x1s  x2s  x3s 3,000 bbl.

x1p  x2 p  x3 p 3,000 bbl. all xij 0
x1e  x2e  x3e 3,000 bbl.
Problem 7
• A Multiperiod Scheduling Problem
Determine the optimal number of units to produce in each week in
regular time and overtime. All demand needs to be met.

Production Capacity: 160 computers per week

50 more computers with overtime
Assembly Costs: $190 per computer regular time;
$260 per computer overtime
Inventory Holding Cost: $10
computer per week
Order schedule: Week Computer Orders
1 105
2 170
3 230
4 180
5 150
6 250
Decision Variables
Decision Variables:
rj = regular production of computers in week j
(j = 1, 2, …, 6)
oj = overtime production of computers in week j
(j = 1, 2, …, 6)
ij = extra computers carried over as inventory in week j
(j = 1, 2, …, 5)
Model
Minimize Z $190 (r  r  r  r  r  r )  $260 (o  o
1 2 3 4 5 6 1 2
 o  o  o  o ) 10 (i  i  i  i  i )
3 4 5 6 1 2 3 4 5
subject to:
r j 160 computers in week j  j 1, 2, 3, 4, 5, 6 
oj 150 computers in week j  j 1, 2, 3, 4, 5, 6 
r1  o1  i1 105 week 1
r2  o2  i1  i 2 170 week 2
r3  o3  i 2  i 3 230 week 3
r4  o4  i 3  i 4 180 week 4
r5  o5  i 4  i 5 150 week 5
r6  o6  i 5 250 week 6
r j , o j , i j 0