Narsee Monjee Institute of Management Studies

Operations Research MBA Banking Trimester III 2012-13

Linear programming

Problems

1. The ABC Company has been a producer of picture tubes for television sets and certain printed
circuits for radios. The company has just expanded into full scale production and marketing of AM
and AM-FM radios. It has built a new plant that can operate 48 hours per week. Production of an
AM radio in the new plant will require 2 hours and production of an AM-FM radio will require 3
hours. Each AM radio will contribute Rs 40 to profits while an AM-FM radio will contribute Rs 80
to profits. The marketing department, after extensive research has determined that a maximum of
15 AM radios and 10 AM-FM radios can be sold each week.
(a) Formulate a linear programming model to determine the optimum production mix of AM
and FM radios that will maximize profits.
(b) Solve the above problem using the graphic method.

2. Vitamins V and W are found in two different foods F 1 and F 2 . One unit of food F 1
contains 2 units of vitamin V and 5 units of vitamin W. One unit of food F 2 contains
4 units of vitamin V and 2 units of vitamin W. One unit of food F 1 and F 2 cost Rs. 30
and 25 respectively. The minimum daily requirements (for a person) of vitamin V and
W is 40 and 50 units respectively. Assuming that anything in excess of daily
minimum requirement of vitamin V and W is not harmful, find out the optimal

1
 mixture of food F 1 and F 2 at the minimum cost which meets the daily minimum
requirement of vitamins V and W. Formulate this as a linear programming problem.
Ans Food 1 Food 2 Min. daily reqmt.
X1 X2
Vitamin V 2 4 40
Vitamin W 5 2 50
Cost (Rs.) 30 25
Minimize Z = 30 X1 + 25 X2
Subject to :
2X1 + 4X3 ≥ 40
5X1 + 2X2 ≥ 50
X1, X2, ≥ 0

2
Dual: Max. Z = 40Y1 + 50Y2
Sunject to: 2Y1 + 5Y2 ≤ 30
4Y1 + 2Y2 ≤ 25
Yi ≥ 0
Dual Solution

3
 3. Use graphical method to solve the following LP problem
Maximise Z = 3x1 + 3x 2
subject to the constraints
x1 - x2 ≤ 1
x1 + x2 ≥ 3
and x1, x2 ≥ 0

Solution:
The problem is depicted graphically in Fig. The solution space is shaded and is bound by A
and B from below.
X2

3
A (0,3)
Unbound
ed X1 - X2 = 1
Feasible
Region
B (2,1)
2

X1 + X2 = 3

1234X1

It is noted here
1 that the shaded convex region (solution space) is unbounded. The two
corners of the region are A = (0, 3) and B = (2, 1). The values of the objective function at
these corners are:
Z(A) = 6 and Z(B) = 8.
But there exist
0 number of points in the shaded region for which the value of the objective
function is more than 8. For example the point (10,12) lies in the region and the function
value at this point is 70 which is more than 8. Thus both the variables x 1 and x 2 can be
made arbitrarily large and the value of Z also increased. Hence, the problem has an
unbounded solution.
Remark: An unbounded solution does not mean that there is no solution to the given LP
problem, but implies that there exist an infinite number of solutions.

4. (Problem with inconsistence system of constraints) Use graphical method to solve the
following LP problem:
Maximise Z = 6x 1 - 4x 2

4
subject to the constraints
2x 1 + 4x 2 ≤ 4
4x 1 + 8x 2 ≥ 16
and x1, x2 ≥ 0

Solution:
The problem is shown graphically in Fig. The two inequalities that form the constraint set
are inconsistent. Thus, there is no set of points that satisfies all the constraints. Hence, there
is no feasible solution to this problem.

X2

4X1 + 8X2 = 16

2 2X1 + 4X2 = 4

1234X1

1
5. Solve graphically the following LPP:
Maximise Z = 8x 1 + 16x 2
Subject to x 1 + x 2 ≤ 200
0
x 2 ≤ 125
3x 1 + 6x 2 ≤ 900 x1, x2 ≥ 0

Solution:
The constraints are shown plotted on the graph in Figure. Also, iso-profit lines have been
graphed. We observe that iso-profit lines are parallel to the equation for third constraint 3x 1
+ 6x 2 = 900. As we move the iso-profit line farther from the origin, it coincides with the
portion BC of the constraint line that forms the boundary of the feasible region. It implies
that there are an infinite number of optimal solutions represented by all points lying on the
line segment BC, including the extreme points represented by B (50, 125) and C (100, 100).
Since the extreme points are also included in the solutions, we may disregard all other

5
solutions and consider only these ones to establish that the solution to a linear programming
problem shall always lie at an extreme point of the feasible region.
The extreme points of the feasible region are given and evaluated here.
Point x1 x2 Z = 8x 1 + 16x 2
0 0 0 0
A 0 125 2000
B 50 125 2400
C 100 100 2400 } Maximum
D 200 0 1600
The point B and C clearly represent the optima.
In this example, the constraint to which the objective function was parallel, was the one
which formed a side of the boundary of the space of the feasible region. As mentioned in
condition (a), if such a constraint (to which the objective function is parallel) does not form
an edge or boundary of the feasible region, then multiple solutions would not exist.

X2

200

Optimal Solutions

A B X2 = 125

150
C

FEASIBLE
100 REGION Iso-profit lines

D E
100200300X1

50

6. A firm produces three products A, B, and C, each of which passes through three departments:
Fabrication, Finishing and Packaging. Each unit of product A requires 3, 4 and 2; a unit of product
B requires 5, 4 and 4, while each unit of product C requires 2, 4 and 5 hours respectively in the
three departments. Everyday, 60 hours are available in the fabrication department, 72 hours are
0 available in the finishing department, and 100 hours in the packaging department.
The unit contribution of product A is Rs. 5, of product B is Rs. 10 and of product C is Rs. 8.
Required:
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 a. Formulate the problem as an LPP and determine the number of units of each of the products
that should be made each day to maximize the total contribution. Also determine if any
capacity would remain unutilized.
b. If the optimal solution obtained does not require the production of some product, explain as to
why such product would not be produced. In this context indicate the quantity (quantities) of
other product/s that would be foregone for producing such product.
c. What would be the effect on the solution of each of the following:
i. Obtaining an order for 6 units of product A which has to be met.
ii. An increase of 20% capacity in the fabrication department.
d. The firm is contemplating introduction of a new product D with a likely profit margin of Rs. 8.
The product shall consume 3 hours each in the fabrication and finishing departments and 2
hours in the packaging department. Should the firm introduce this product?

Solution:

6.

a. X1 = 0, X2 = 8, X3 = 10. Unutilized capacity = 18 hours in the packaging department.

b. X1 is not produced as producing 1 unit of X1 will reduce the objective function by 3.6667
If one were to produce 1 unit of X1, then X2 will reduce by .3333 units and X3 will reduce by .
6667 units. Surplus packaging hours will increase by 2.6667.

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c. If an order for 6 units of product were to be met, then X2 will become 8-6*.3333 = 6.0002; X3 will
become 10 – 6*.6667 = 5.9998 and packaging hours left over will be 18+6*2.6667 = 34.0002; Z =
160 – 6*3.6667 = 138.
ii. An increase of 20% capacity in the fabrication department will result in an increase in the
objective function by 12*.6667 = 8.0004 (20% increase = .2*60 = 12);
increase in production of X2 by 12*.3333 = 3.9996;
decrease in X3 by 12*.3333 = 3.9996
packaging hours will increase by 12*.3333 = 3.9996
New solution will be X2 = 11.9996; X3 = 6.0004; S3 = 21.9996 and Z = 168.0002.
d. Contribution of D = 8. Worth of resources consumed by D = 3*.6667 + 3*1.6667 = 7.0002 ≤ 8.
Therefore firm should produce product D.

7. A manufacturing company is engaged in producing three types of products: A, B and

C. The production department produces, each day, components sufficient to make 50
units of A, 25 units of B and 30 units of C. The management is confronted with the
problem of optimizing the daily production of products in assembly department
where only 100 man-hours are available daily to assemble the products. The
following additional information is available.

Type of Product Profit Contribution per Assembly Time per

Unit of Product (Rs) Product (hrs)
A 12 0.8
B 20 1.7
C 45 2.5
The company has a daily order commitment for 20 units of products A and a total of 15 units of
products B and C. Formulate this problem as an LP model so as to maximize the total profit.
Plant A Plant B Plant C
X1 X2 X3
Maximise Z = 12 X1 + 20 X2 + 45 X3
Subject to :
X1 <= 50
X2 <=25
X1 >=20
X3 <=30
X2 + X3 >=15
0.8 X1 + 1.7 X2 + 2.5 X3 <=100
X1, X2, X3 >=0

8. A company has two plants, each of which produces and supplies two products: A and B. The
plants can each work up to 16 hours a day. In plant 1, it takes three hours to prepare and pack
1,000 gallons of A and one hour to prepare and pack one quintal of B. In plant 2, it takes two hours
to prepare and pack 1,000 gallons of A and 1.5 hours to prepare and pack a quintal of B. In plant 1,
it costs Rs 15,000 to prepare and pack 1,000 gallons of A and Rs 28,000 to prepare and pack a
quintal of B, whereas these costs are Rs 18,000 and Rs 26,000, respectively in plant 2. The
company is obliged to produce daily at least 10 thousand gallons of A and 8 quintals of B.
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 Formulate this problem as an LP model to find out as to how the company should organize its
production so that the required amounts of the two products be obtained at minimum cost.
Ans
Plant 1 Plant 2
Product A X1 X2
Product B X3 X4
Minimise Z = 15000 X1 + 18000 X2 + 28000X3 + 26000 X4
Subject to :
3X1 + X3 <= 16
2X2 + 1.5X4 <=16
X1 + X2 >=10
X3 + X4 >=8
X1, X2, X3,X4>=0

9. An electronic company is engaged in the production of two components C1 and C2 used in radio
sets. Each unit of C1 costs the company Rs 5 in wages and Rs 5 in material, while each of C 2 costs
the company Rs 25 in wages and Rs 15 in material. The company sells both products on one-
period credit terms, but the company’s labour and material expenses must be paid in cash. The
selling price of C1 is Rs 30 per unit and of C 2 it is Rs 70 per unit. Because of the strong monopoly
of the company for these components, it is assumed that the company can sell at the prevailing
prices as many units as it produces. The company’s production capacity is, however, limited by
two considerations. First, at the beginning of period 1, the company has an initial balance of Rs
4,000 (cash plus bank credit plus collections from past credit sales). Second, the company has
available in each period 2,000 hours of machine time and 1,400 hours of assembly time. The
production of each C1 requires 3 hours of machine time and 2 hours of assembly time, whereas
the production of each C2 requires 2 hours of machine time and 3 hours of assembly time.
Formulate this problem as an LP model so as to maximize the total profit to the company.
C1 C2
X1 X2
Maximise Z = 20 X1 + 30 X2
Subject to :
10X1 + 40X2 <= 4000
3X1 + 2X2 <= 2000
2X1 + 3X2 <= 1400
X1, X2 >=0

10. A company has two grades of inspectors 1 and 2, who are to be assigned for a quality control
inspection. It is required that at least 2,000 pieces be inspected per 8 – hour day. Grade 1 inspector
can check pieces at the rate of 40 per hour, with an accuracy of 97 per cent. Grade 2 inspector
checks at the rate of 30 pieces per hour with an accuracy of 95 per cent. The wage rate of a Grade
1 inspector is Rs 5 per hour while that of a Grade 2 inspector is Rs 4 per hour. An error made by an
inspector costs Rs 3 to the company. There are only nine Grade 1 inspectors and eleven Grade 2
inspectors available in the company. The company wishes to assign work to the available
inspectors so as to minimize the total cost of the inspection. Formulate this problem as an LP
model so as to minimize daily inspection cost.
Grade 1 Grade 2
X1 X2
Minimize 68.8 X1 + 68 X2
Subject to:
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 320X1 + 240 X2 >=2000
X1<=9
X2<=11
X1, X2 >=0

11. Let us assume that you have inherited Rs. 1,00,000 from your father-in-law that can
be invested in a combination of only two stock portfolios, with the maximum
investment allowed in either portfolio set at Rs. 75,000. The first portfolio has an
average rate of return of 10%, whereas the second has 20%. In terms of risk factors
associated with these portfolios, the first has a risk rating of 4 (on a scale from 0 to
10), and the second has 9. Since you wish to maximise your return, you will not
accept an average rate of return below 12% or a risk factor above 6. Hence, you then
face the important question. How much should you invest in each portfolio?
Formulate this as a Linear Programming Problem.
Ans: Maximise Z = 0.1X1 + 0.2X2
Subject to : 4X1 + 9X2 ≤ 6(X1 + X2)
0.1X1 + 0.2X2 ≥ 0.12(X1 + X2)
X1 + X2 ≤ 1,00,000
X1 ≤ 75,000
X2 ≤ 75,000
X1 , X2 >=0

12. An electronic company produces three types of parts for automatic washing machines. It purchases
casting of the parts from a local foundry and then finishes the part on drilling, shaping and
polishing machines.
The selling prices of parts A, B and C, respectively are Rs 8, Rs 10 and Rs 14. All parts made can
be sold. Castings for parts A, B and C, respectively cost Rs 5, Rs 6 and Rs 10. The shop possesses
only one of each type of machine. Costs per hour to run each of the three machines are Rs 20 for
drilling, Rs 30 for shaping and Rs 30 for polishing. The capacities (parts per hour) for each part on
each machine are shown in the following table:
Capacity Per Hour
Machine Part A Part B Part C
Drilling 25 40 25
Shaping 25 20 20
Polishing 40 30 40

The management of the shop wants to know how many parts of each type it should produce per
hour in order to maximize profit for an hour’s run. Formulate this problem as an LP model so as to
maximize total profit to the company.
Ans
A B C
X1 X2 X3
Maximize Z = 0.25 X1 + X2 + 0.95 X3
Subject to :
X1/25 + X2/40 + X3/25 <=1
X1/25 + X2/20 + X3/20 <=1
10
 X1/40 + X2/30 + X3/40 <=1
X1, X2, X3 >=0

13. A media campaign has to be designed for a new footwear company with an ad budget of Rs. 20
lakhs. The media, cost and its effectiveness are displayed in the table below:
Advertisin Cost per Estimated
g Media unit (RS) no. of
exposure
Newspaper 20,000 100,000
Radio 40,000 500,000
Television 100,000 1,000,000
The client wishes that at least 5,000,000 exposure must be achieved. Also newspaper advertising
should not exceed 500,000. Design a media plan.
Ans: X1 : No.of releases in newspaper
X2 : No. of releases on radio
X3 : No. of releases on Television

Maximise Z = 100,000 X1 + 500,000X2 + 1000,000X3

Subject to: 20,000 X1 + 40,000X2 + 100,000X3 ≤ 2000,000
100,000 X1 + 500,000 X2 + 1000,000 X3 ≥ 5000,000
20,000 X1 ≤ 500,000
X1, X2, X3 ≥ 0

14. A company engaged in producing tinned food, has 300 trained employees on the rolls, each of
whom can produce one can of food in a week. Due to the developing taste of the public for this
kind of food, the company plans to add existing labour force by employing 150 people, in a phased
manner, over the next 5 weeks. The newcomers would have to undergo a two week training
program before being put to work. The training to be given by employees from among existing
ones and it is known that one employee can train three trainees. Assume that there will be no
production from trainers and the trainees during the training period as the training is off-the-job.
However the trainees would be remunerated at the rate of Rs 300 per week, the same rate as for the
trainers.
The company has booked following orders to supply during the next five weeks :

Week 1 2 3 4 5
No of cans 280 298 305 360 400
Assume that
The production in any week would not be more than the number of cans ordered for , so that every
delivery of the food would be ‘fresh’
Formulate this problem as an LP model to develop a training schedule that minimizes the labour
costs over the five week period.
Ans:
Minimize Z= 5X1 + 4X2 + 3X3 + 2X4 + X5
Subject to
300 – X1/3 >=280
300 – X1/3 – X2/3 >=298
300 + X1 – X2/3 – X3/3 >=305
300 + X1 + X2 – X3/3 – X4/3 >=360

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 300 + X1 + X2 + X3 – X4/3 – X5/3 >=400
X1 + X2 + X3 + X4 + X5 =150
X1,X2,X3,X4 & X5>=0

15. A firm plans to purchase at least 200 tons of scrap containing high grade Metal H and Low grade
metal L. The firm wants to end up with at least 100 tons of H and not more than 35 tons of L. The
contents of scrap from two dealers A and B is given in the table
Metal Supplier A Supplier B
H 25% 75%
L 10% 20%
Cost (per
200 400
ton)
Formulate the buying plan to minimise the cost.
Let X1 tons from Supplier A and X2 tons from Supplier B
Minimise Z = 200X1 + 400X2
Subject to : X1+X2>=200
0.25X1+0.75X2>=100
0.1X1+0.2X2 <=35
X1, X2, >=0

16. A public limited company is planning its capital structure that will consist of equity
capital, 15% debentures and term-loan. Debentures are to be repaid on face value,
interest rate is payable half yearly and annualised cost of issue of debenture is 1/2%.
Interest on term-loan is 18% p.a. to be paid annually while the cost of equity is
estimated at 20%. It is decided not to have outsiders funds more than 2 times of
equity funds; also the amount of term-loan must be at least 50% of the debenture
amount. Formulate a suitable linear programming model so as to minimise average
cost of capital of the company.

Ans: Equity Debentures Term Loan

X1 X2 X3
Minimize Z= 0.2X1 + 0.155X2 + 0.18X3
Subject to
X2 + X3 ≤ 2X1
X3 ≥ 0.5X2
X1,X2,X3, ≥ 0

17. Smart Ltd. makes two types of adhesives – Quik and Tuff. The table gives the raw material
consumed by the two brands.:
Raw material Price Quik Tuff
(Rs / ton)
N 600 350 200
A 400 50 100
P 400 50 100
I 200 550 600
1000kg 1000kg

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 Quik can be blended at 1000 Kg per hour, whereas Tuff at 1250 Kg per hour. The respective selling
prices are Rs. 1010 and Rs. 845. (per Ton)Variable costs are Rs. 500 per hour of plant production
time. The Maximum availability of raw materials is given below.
Raw material Max. available
(kg)
N 1000
A 300
P 250
I 1800
Find the optimum product mix to maximise profits.
Ans
Maximize Z = 150 X1+
125X2
Subject to 350X1+200X2<=100
0
50X1+100X2<=300
50X1+100X2<=250
550X1+600X2<=180
0
X1,X2>=0

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18. A company has four machines on which three jobs have to be done. Each job can be assigned to
one and only one machine. The cost of each job on each machine is given in the following Table.

P Q R S
A 18 24 28 32
Job B 8 13 17 19 Formulate this
problem C 10 15 19 22 as an LP model
to find out the job assignments which will minimize the cost.
Ans: Let the allocation of jobs to machines be as under:
P Q R S Supply
A X11 X12 X13 X14 1
Job B X21 X22 X23 X24 1
C X31 X32 X33 X34 1
Demand 1 1 1 1

Minimse Z = 18 X11 + 24X12 + 28 X13 + 32 X14 + 8 X21+ 13 X22 + 17X23 + 19X24 + 10X31 + 15 X32 +
19X33 + 22X34
Subject to:
X11 + X12 + X13 + X14 = 1
X21 + X22+ X23 + X24 = 1
X31 + X32 + X33 + X34 = 1
X11 + X21 + X31 ≤ 1
X12 + X22 + X32 ≤ 1
X13 + X23+ X33 ≤ 1
X14 + X24 + X34 ≤ 1
X11, X12, X13, X14, , X21, X22, X23, X24, X31, X32, X33, X34, ≥ 0

19. A manufacturer has distribution centers at X , Y, & Z. these centers have availability 40, 20 and 40
units of his product. His retail outlets at A, B, C, D & E require 25, 10, 20, 30 & 15 units
respectively. The transportation cost ( in Rs) per unit between each center and outlet are given
below.

Retail
Distribution
outlets B C D E
Centers
A
X 55 30 40 50 50
14
 Y 35 30 100 45 60
Z 40 60 95 35 30

Formulate this problem as an LP model to find out how many units from each distributers should be
transported to which retail outlets so as to minimize cost.
Ans: Let the allocation of units from the distributor to the retail outlets be as under:
Retail
Distribution
outlets B C D E Availability
Centers
A
X X11 X12 X13 X14 X15 40
Y X21 X22 X23 X24 X25 20
Z X31 X32 X33 X34 X35 40
Requiremen
25 10 20 30 15
t

Minimse Z = 55 X11 + 30 X12 + 40 X13 + 50 X14 + 50X15 + 35 X21+ 30 X22 + 100 X23 + 45X24 +60 X25 +
40X31 + 60 X32 + 95X33 + 35 X34 + 30X35
Subject to: X11 + X12 + X13 + X14 + X15 = 40
X21 + X22+ X23 + X24 + X25 = 20
X31 + X32 + X33 + X34 + X35 = 40
X11 + X21 + X31= 25
X12 + X22 + X32 = 10
X13 + X23+ X33 = 20
X14 + X24 + X34 = 30
X15 + X25 + X35 = 15
X11, X12, X13, X14, X15, X21, X22, X23, X24, X25, X31, X32, X33, X34, X35 ≥ 0

20. Manager of an oil refinery has to decide the optimum mix of two possible blending processes of
which inputs and outputs per production run are given in the table.
Input Output
Process Crud Crude Gasoline Gasoline
eA B X Y
I 5 3 5 8
II 4 5 4 4
The maximum amounts of Crude A and B available are 200 units and 150 units respectively.
Market requirements show that at least 100 units of Gasoline X and 80 units of Gasoline Y must be
produced. Profits per production run from Process I and Process II are Rs. 4000 and Rs. 5000
respectively. Determine the optimum production runs of each process to maximise profits.

Maximise Z = 4000X1 + 5000X2

Subject to : 5 X1 + 4X2 <=200
3X1 + 5X2 <=150
15
 5 X1 + 4X2 >=100
8X1 + 4X2 >=80 X1 , X2 >=0
21. A cooperative farm owns 100 acres of land and has Rs 25,000 in funds available for
investment. The farm members can produce a total of 3500 man-hours worth of labour
during the months September-May and 4000 man-hours during June-August. Cash
income can be obtained from the three main crops and two types of livestock: dairy
cows and laying hens. No investment funds are needed for the crops. However, each
cow will require an investment outlay of Rs 3200 and each hen will require Rs 15.

Moreover, each cow will require 1.5 acres of land, 100 man-hours during the summer
and 50 man-hours during June-Aug. Each cow will produce a net annual cash income
of Rs 3500 for the farm. The corresponding figures for each hen are: no acreage, 0.6
man-hours during September-May; 0.4 man-hours during June-August, and an annual
net cash income of Rs 200. The chicken house can accommodate a maximum of 4000
hens and the size of the cattle-shed limits the members to a maximum of 32 cows.
Estimated man-hours and income per acre planted in each of the three crops are:
Paddy Bajra Jowar
Man-hours
September-May 40 20 25
June-August 50 35 40
Net annual cash income (Rs) 1200 800 850
The cooperative farm wishes to determine how much acreage should be planted in
each of the crops and how many cows and hens should be kept to maximise its net
cash income.

LP model formulation: The data of the problem is summarised as follows:

Constraints Crop Total
Cow Hens Paddy Bajra Jowar availability
Man-hours
Sept-May 100 0.6 40 20 25 3500
June-Aug 50 0.4 50 35 40 4000
Land 1.5 - 1 1 1 100
Cow 1 - - - - 32
Hens - 1 - - - 4000
Investment Outlay 3200 15 25000
Net annual
Cash income (Rs) 3500 200 1200 800 850
Decision variables: Let
x 1 and x 2 = number of dairy cows and laying hens respectively
x 3 , x 4 and x 5 = average of paddy crop, bajra crop and jowar crop respectively

The LP model
Maximise (net cash income) Z = 3500 x 1 + 200x 2 + 1200x 3 + 800x 4 + 850x 5

subject to the constraints

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(i) Man-hours constraints
100x 1 + 0.6x 2 + 40x 3 + 20x 4 + 25x 5  3500 (Sept.-May duration)
50x 1 + 0.4x 2 + 50x 3 + 35x 4 + 40x 5  4000 (June-Aug. duration)

(ii) Land availability constraints

1.5x 1 + x 3 + x 4 + x 5  100

(iii) Livestock constraints

x 1  32 (dairy cows)
x 2  4000 (laying hens)

(iv) Funds availability constraint

3200x 1 + 15x 2  25000
and x1, x2, x3, x4, x5  0

22. A firm is engaged in producing two products : P1 and P2. The relevant data are given here:
Per Unit Product P1 Product P2
(i) Selling price Rs 200 Rs 240
(ii) Direct materials Rs. 45 Rs. 50
(iii) Direct wages
Dept A 8 hrs @ Rs. 2 / hr 10 hrs @ Rs 2 /hr
Dept B 10 hrs @ Rs 2.25 / hr 6 hrs @ Rs 2.25 /hr
Dept C 4 hrs @ Rs 2.5 / hr 12 hrs @ Rs 2.5 / hr
(iv) Variable overheads Rs. 6.50 Rs 11.50
Fixed overhead = Rs 2,85,000 per annum
No of employees in the three departments: Dept A = 20
Dept B = 15
Dept C = 18
No. of hours / employee / week = 40 in each department
No. of weeks per annum = 50

(a) Formulate the given problem as a linear programming problem and solve graphically to determine
(i) the product mix as will maximize the contribution margin of the firm
(ii) the amount of contribution margin and profit obtainable per year
(a) From the graph, do you observe any constraint that is redundant? Which one, if yes?

17
Yes the constraint 8X1 + 10 X2 <=40000 is redundant.

23. Solve graphically:

Minimise Z = 6x 1 + 14x 2
Subject to
5x 1 + 4x 2 ≥ 60
3x 1 + 7x 2 ≤ 84
x 1 + 2x 2 ≥ 18
x1, x2 ≥ 0

Solution:
The restrictions in respect of the given problem are depicted graphically in Figure 4.6. The
feasible area has been shown shaded. It may be observed here that although the iso-cost line
is parallel to the second constraint line represented by 3x 1 + 7x 2 = 84, and this constraint
does provide a side of the area of feasible solutions, yet the problem has a unique optimal
solution, given by the point D. Here condition (b) mentioned earlier, is not satisfied. This is
because, being a minimisation problem, the optimal movement of the objective function
would be towards the origin and the constraint forms a boundary on the opposite side. Since
the constraint is not a binding one, the problem does not have multiple optima.

18
 X2

15

B
12

6
FEASIBLE
REGION
D C
612182430 X1
3

We can show the uniqueness of the solution by evaluating various extreme points as done
0
here.
Point x1 x2 Z = 6x 1 + 14x 2
A 8 5 118
B 84/23 240/23 168
C 28 0 148
D 18 0 108 Minimum
The optimum solution is 108 units for x 1 = 18 and x 2 = 0.

24. Cashewco has two grades of cashew nuts: Grade I – 750 kg and Grade II – 1,200 kg. These are to
be mixed in two types of packages of one kilogram each- economy and special. The economy
pack consists of grade I and grade II cashews in the proportion of 1:3, while the special pack
combines the two in equal proportion. The profit margin on the economy and special packs is,
respectively, Rs. 5 and Rs. 8 a pack.
(a) Formulate this as a linear programming problem.
(b) Ascertain graphically the number of packages of economy and special types to be made that will
maximize the profits.

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Would your answer be different if the profit margin on a special pack be Rs. 10? Yes. It would change. X1
= 0, X2 = 1500, Z = 15000.
Upper bound is 10 Therefore solution changes for 10 and above.

25. A local travel agent is planning a charter trip to a major sea resort. The eight day/seven-night
package includes the fare for round-trip travel, surface transportation, and boarding and loading
and selected tour options. The charter trip is restricted to 200 persons and past experience indicates
that there will not be any problem for getting 200 persons. The problem for the travel agent is to
determine the number of Deluxe, Standard, and Economy tour packages to offer for this charter.
These three plans differ according to seating and service for the fight, quality of accommodations,
meal plans and tour options. The following table summarizes the estimated prices for the three
packages and the corresponding expenses for the travel agent. The travel agent has hired an aircraft
for the flat fee of Rs 2,00,000 for the entire trip.
Prices and Costs for Tour Packages per Person

Tour Plan Price Hotel Costs Meals & Other Expenses

(Rs) (Rs) (Rs)
Deluxe 10,000 3,000 4,750
Standard 7,000 2,200 2,500
Economy 6,500 1,900 2,200

In planning the trip, the following considerations must be taken into account:
(i) At least 10 per cent of the packages must be of the deluxe type.
(ii) At least 35 per cent but no more than 70 per cent must be of the standard type.
(iii) At least 30 per cent must be of the economy type.
(iv) The maximum number of deluxe packages available in any aircraft is restricted to 60.

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 (v) The hotel desires that at least 120 of the tourists should be on the deluxe and standard
packages together.
The travel agent wishes to determine the number of packages to offer in each type so as to maximize
the total profit.
(a) Formulate this problem as a linear programming problem.
(b) Restate the above linear programming problem in terms of two decision variables, taking
advantage of the fact that 200 packages will be sold.
(c) Find the optimum solution using graphical method for the restated linear programming
problem and interpret your results.

Ans : 20 – D , 100 – S, 80 – E
Profit = 280000 – 13000 = 267000.

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