CHAPTER 4 LINEAR PROGRAMMING SENSITIVITY ANALYSIS

SOLUTIONS TO DISCUSSION QUESTIONS 4-1. In most real world situations that are modeled using LP, conditions are dynamic and changing. Hence, input data such as resource availabilities, prices, and costs used in the LP model are estimated, rather than known with certainty. In such environments, sensitivity analysis can be used to identify the ranges of values of these input data for which the current LP solution remains optimal. This is done without solving the problem again each time we need to examine a change in an input datas value. When all model values are deterministic, that is, known with certainty, sensitivity analysis may not be needed from the perspective of evaluating data accuracy. This may be the case in a portfolio selection model in which we select from among a series of bonds whose returns and cash-in values are set for long periods of time. 4-2. Sensitivity analysis is important in all decision modeling techniques. For example, it is important in breakeven analysis to test the models sensitivity to selling price, fixed cost, and variable cost. Likewise, it is important in inventory models in which we test the results sensitivity to changes in demand, leadtime, costs, and so on. 4-3. A change in a resources availability (right-hand-side) changes the size of a feasible region. An increase means more units of that resource are available, causing the feasible region to increase in size. A decrease means fewer units are available. Obviously, if more units of a binding resource are available, it may be possible for the optimal objective value to improve. In contrast, if more units of a non-binding resource are available, the additional units would just contribute to more slack and there would be no improvement in the optimal objective value. 4-4. A change in an objective function coefficient changes the slope of the objective function, with respect to that variable. The change in the slope may be sufficient to make a different corner point become the new optimal solution to the LP model. 4-5. Simultaneous changes in input data values are extremely logical in many contexts. For example, it may be possible to trade one type of resource for another, causing a decrease in the availability of one resource and an increase in the others availability. Likewise, market conditions may cause us to simultaneously reduce the price of all our products, not just in a single product. 4-6. We use the 100% rule to verify if the shadow prices in the current Sensitivity Report are still valid to analyze the impact of a proposed simultaneous change in input data values. To analyze a simultaneous change, we compute the ratio of each proposed change in a parameters value to the maximum allowable change in its value, as given in the Sensitivity Report. The sum of these ratios must not exceed 1 (or 100%) in order for the information given in the current Sensitivity Report to be valid. If the sum of the ratios does exceed 1, the current information may still be valid; we just cannot guarantee its validity. However, if the ratio does not exceed 1, the information is definitely valid. 4-7. The pricing-out procedure allows a firm to analyze if a new product will be profitable enough to be included in the optimal solution, without having to reformulate and solve the model after including this

5 4

4 8

additional variable. Alternatively, we can use the pricing-out procedure to determine the minimum profit contribution required from a new product in order for it to be included in the optimal production mix.
4 2

4-8. In most cases, when the Allowable Increase or Allowable Decrease column for the objective function coefficient of a variable has a value of zero in the Adjustable Cells table, this indicates the presence of alternate optimal solutions.
3 6

4-9. The shadow price of a resource indicates the marginal value of each additional unit of that resource to the firm. In an LP model with several resources, this information helps the firm to prioritize its resources in3 terms of their marginal value. 0 SOLUTIONS TO PROBLEMS
2 4

4-10.
1 8 : 5 .0 X + 2 .0 Y = 4 0 .0

: 1 2

2 .0

1 .0

3 .0

1 .0

0 .0

7 .0

6 : 3 .0 X + 6 .0 Y = 4 8 .0

P a y o f f : 0 0 O p t im : : : : 5 .0 X 3 .0 X 1 .0 X 2 .0 X a l D e c is io n s ( X ,Y ) : ( 6 .0 , + + + 2 .0 Y 6 .0 Y 0 .0 Y 1 .0 Y < = < = < = > = 4 0 .0 4 8 .0 7 .0 3 .0 5 .0 )

5 .0 1 0

3 .0

4 5 .0 2 0

(a) Changes in the OFCs change the slope of the payoff line. Changing the OFC for Y to $5 does not change the optimal corner point. However, the value of the objective function increases from $45 to $55. (b) Changing the unit profit of X to $1.50 flattens out the slope of the payoff line such that it becomes parallel to the binding constraint 3X+6Y48. The problem will now have multiple optimal solutions. (c) A two-unit increase to the RHS of the constraint enlarges the feasible region slightly. The same corner point (i.e., the intersection of the same two binding constraints) remains optimal, and the profit increases from $45 to $46.70.

1 1 4 1 0 8 1 0 2 9 6 9 0

4-11.

8 4 7 8 7 2 6 6 6 0 5 4 4 8 4 2 3 6 3 0 2 4 1 8 1 2 6 0 0 O : : : : p t im 1 .0 X 8 .0 X 3 .0 X 0 .0 X 1 0 2 0 3 0 4 0 5 0 6 0 7 0 8 0 9 0 1 0 0 1 1 0 : 8 .0 X + 2 .0 Y = 1 6 0 .0 P a y o f f : : 1 .0 X + 3 .0 Y = 9 0 .0 : 3 .0 X + 2 .0 Y = 1 2 0 .0 : 0 .0 X + 1 .0 Y = 7 0 .0

1 .0

2 .0

6 8 .5

a l D e c is io n s ( X ,Y ) : ( 2 5 .7 , 2 1 .4 ) + + + + 3 .0 Y 2 .0 Y 2 .0 Y 1 .0 Y > = > = > = < = 9 0 .0 1 6 0 .0 1 2 0 .0 7 0 .0

(a) If the cost of Y increases to $4, the slope of the payoff line changes, and the optimal corner point
changes as well, to a new solution of X = 90, Y = 0. The optimal cost increases to $90. (b) If we increase the RHS of the first constraint, the feasible region shrinks slightly and the objective function value worsens. The same corner point (i.e., the intersection of the same two binding constraints) remains optimal, but the cost increases to $73.70. (c) Changing the fourth constraint to Y 50 does not affect the optimal solution.

1 1 4 1 0 8 1 0 2 9 6 9 0

4-12.

8 4 7 8 7 2 6 6 6 0 5 4 4 8 4 2 3 6 3 0 : 2 4 1 8 1 2 6 0 0 O : : : : p t im 3 .0 X 1 0 .0 X 0 .0 X 2 .0 X + + 1 0 2 0 3 0 4 0 5 0 6 0 7 0 8 0 9 0 1 0 0 1 1 0 P a y o f f : 4 .0 X + : 3 .0 X + 7 .0 7 .0 Y = 2 4 5 .6 Y = 2 3 1 .0 0 .0 X + 2 .0 Y = 4 5 .0 : : 1 0 .0 X + 2 .0 Y = 2 0 0 .0 2 .0 X + 0 .0 Y = 7 5 .0

a l D e c is io n s ( X ,Y ) : ( 1 4 .7 , 2 6 .7 ) + + 7 .0 Y 2 .0 Y 2 .0 Y 0 .0 Y > = > = > = < = 2 3 1 .0 2 0 0 .0 4 5 .0 7 5 .0

(a) If the cost of X decreases to $2, the optimal corner point changes. The new optimal cost is
$206.50. (b) This change causes the feasible region to shrink slightly. The same corner point (i.e., the intersection of the same two binding constraints) remains optimal, but the cost increases to $264. (c) This change causes the current optimal corner point to disappear and be replaced by a new optimal corner point. The optimal cost increases to $250.50. 4-13. We use the Sensitivity Report given in Screenshot 4-6 to answer the following questions. (a) Each additional $ in radio advertising (up to $1,575) will increase the audience by 2.03. Hence, if management approves an increase of $200, audience coverage will increase by 406 to 67,646. (b) No. Since we are already placing 6.21 radio spots, this contractual agreement is not a binding constraint. (c) The audience reached for each afternoon radio spot would have to increase to at least 3,144.83 (= 2,800 + 344.83) in order for these spots to become attractive. Hence, the proposed strategy will not change the current optimal solution. (d) TV spots currently reach 5,000 contacts. Interestingly, the optimal number of TV spots to use does not change as long the number of contacts is between 0 and 6,620.69. Obviously, if the objective function coefficient is 0, it is not worthwhile to use any TV spots. The reasons why TV spots are part of the optimal solution even if the exposure is as low as 0.001 are the limits on the number of newspaper ads and the total radio budget. See if you can recognize this fact by altering the LP model in file 3-3.XLS on the CD-ROM that accompanies the textbook. 4-14. We use the Sensitivity Report given in Screenshot 4-7 to answer the following questions.

(a) Persons 30 or younger who live in a border state currently cost $7.50 each. This cost must decrease to $6.90 or less (= $7.50 - $0.60) before it is worthwhile to include these individuals in the survey. (b) Based on the shadow price for the total household constraint, each additional person who needs to be included in the survey will cause the cost to increase by $5.98. Hence, if the sample size is increased to 3,000, the total cost will increase to $19,352 (= $15,166 + 700 x $5.98). (c) Based on the reduced cost, each person 3150 not living in a border state who is included in the survey will increase the total cost of the survey by $0.45. (d) First, we check the 100% rule. (100/1000) + (50/700) 1. Hence, the shadow prices are valid. The revised total cost is $15,166 - 100 x $0.92 + 50 x $0.82 = $15,115. Note that the reduction in the 30 and younger requirement will cause the total cost to go down, while the increase in the 3150 requirement will cause the total cost to go up. 4-15. We use the Sensitivity Report given in Screenshot 4-8 to answer the following questions. (a) If the daily allowance of protein is reduced to 2.9 units, the total cost will decrease by 0.1 x $0.038 = $0.0038. (b) Revised cost of grain A = $0.33/1.05 = $0.314. Revised cost of grain B = $0.47/0.9 = $0.522. First, we check the 100% rule. (0.016/Infinity) + (0.052/Infinity) 1. Therefore, the current optimal solution remains optimal. The new total cost is $0.0529. (c) Check the 100% rule. (0.1/0.25) + (0.2/0.35) 1. The revised total cost changes by (0.2 x $0) (0.1 x $0.038), or a decrease of $0.0038. 4-16. See le P4-16.XLS for the Excel solution and Solver Sensitivity Report. (a) Four products (circuit boards, oppy drives, hard drives, and memory boards) are not included in the optimal production plan. The reduced costs indicate the minimum amounts by which the prot contributions of these products must increase before they would be included in the production mix. For example, the prot contribution of a circuit board should increase by at least $138.64 (i.e., from the current $135.50 to at least $274.14) before it becomes a viable product. (b) The current production plan requires only 62.07 hours of the available 100 hours on test device 3. Therefore, if the sister concern takes 35 hours of time on this test device, Quitmeyers optimal solution will not be affected. (c) Each additional hour of time (up to 47.83 hours) on test device 1 increases Quitmeyers prot by $1,284.52. This shadow price value, however, assumes that time on test device 1 costs only $15 per hour. The 20 additional hours at a cost of $25 per hour will therefore increase Quitmeyers prot by ($1,284.52 x 20), less the premium of ($10 x 20), or by $25,490.40. The new prot will be $220,995.23. The deal is worthwhile. (d) First, we check the 100% rule. (20/48) + (40/80) = 0.916 1. The current shadow prices are valid. By making this trade, Quitmeyers new prot will be $195,504.83 - 20 * $1,284.52 + 40 * $344.69 = $183,602.03, which is smaller than the current profit. Hence, the deal is not worthwhile. 4-17. See le P4-17.XLS for the Excel solution and Solver Sensitivity Report. (a) Several of the allowable increase and allowable decrease values for the objective function coefcients are zero. For example, see these values for the number of acres of wheat in the SE parcel. Also, several variables (crops) that are currently not in the crop plan (for example, wheat in the NW parcel) have zero reduced costs. The current solution is, therefore, not a unique optimal solution and there are alternate optimal solutions. (b) There are several ways in which we can get Solver to identify an alternate optimal solution.

Perhaps the easiest approach is to rearrange the order in which the variables and/or constraints are presented in the model. For example, see le P4-17.XLS sheet Alternate, in which some of the variables and constraints have been rearranged. When we solve the problem now using Solver, we get a solution with the same prot ($337,862.07), but with a different crop plan. Other optimal crop plans are also possible. (c) Increasing Barley sales by 10% would make the new limit 2,420 tons, or 1,100 acres. Based on the shadow price for this constraint, each additional acre of Barley (up to 108.57 acres) will increase Margarets prot by $37.59. The 100 additional acres will therefore increase prot by $3,758.60, to $341,620.67. (d) Each additional acre-feet of water will allow Margaret to increase total prot by $20.69. 4-18. See file P4-18.XLS for the Excel solution and Solver Sensitivity Report. (a) The decrease of $0.01 per pound is beyond the allowable decrease limit of $0.005 per pound. Therefore, the optimal solution will change. (b) The constraints prescribing the minimum daily requirements for ingredient A and ingredient D are binding. For each additional unit of ingredient A required in the mix, the cost will increase by $0.003. For each additional unit of ingredient D required in the mix, the cost will increase by $0.083. (c) A 20% decrease in the cost of mineral implies that the cost is now 0.8 x $0.17 =$0.136, a decrease of $0.034. Since this is within the allowable decrease limit, the current solution remains optimal. The revised total cost is $0.57. (d) The price of oats can fluctuate between $0.085 and $0.093 per pound for the current solution to remain optimal. 4-19. See file P4-19.XLS for the Excel solution and Solver Sensitivity Report. (a) Each additional gram of carbohydrates allowed in the meal will reduce the meal cost by $0.007. Each additional mg of iron required in the diet will cause the meal cost to increase by $0.074. (b) Each pound of milk used in the diet will cause the meal cost to increase by $0.148 (reduced cost). (c) Beans currently cost $0.58 per pound. Looking at the reduced cost, the price of beans would have to decrease by at least $0.261 (to $0.319) before Kathy can consider including it in the meal. (d) None of the allowable increase and allowable decrease values for the objective function coefcients is zero. Further, all items that are currently not in the meal (milk, fish, and beans) have non-zero reduced costs. The current solution is, therefore, a unique optimal solution.

4-20. We use the Sensitivity Report given in Screenshot 4-9 to answer the following questions. (a) Each additional pound of material will increase prot by $0.5. The 2 pounds will therefore cause prot to increase to $29. (b) Each additional hour of labor will increase prot by $1. The 1.5 hours will therefore cause prot to increase to $29.50. (c) First, we check the 100% rule. (1/2) + (1.5/4) = 0.875 < 1. The shadow prices are therefore valid. The new profit = $28 - 1.5 x $0.5 + 1 x $1 = $27.75. The deal is not worthwhile. (d) First, we check the 100% rule. (0.75/1) + (0.25/1) 1. The solution remains optimal and the shadow prices are valid. New profit = 2 x $4.75 + 4 x $4.75 = $28.50. (e) Decrease in current prot if 1 unit of the new product is produced = 1 x $1 +1 x $0.5 -2 x $0 = $1.50. Profit contribution of new product = $2. Hence, the net prot will increase by $0.50 for each unit produced of the new product.

4-21. See file P4-21.XLS for the Excel solution and Solver Sensitivity Report. (a) As we saw in Problem 3-45, there are approximately 2,791 medical patients and 2,105 surgical patients per year in the optimal solution. This translates to 61 medical beds and 29 surgical beds in the 90-bed addition. (b) There are no empty beds with this optimal solution. Each additional patient day (over the current 32,850) will permit Mt. Sinai to increase revenue by $276.82. That is, by acquiring another bed (or 365 patient days), the revenue can be increased by $101,039. (c) Labs have an unused capacity of 876.364. Acquiring more lab space is therefore not worthwhile. (d) X-ray capacity is being utilized to its fullest extent. Each additional x-ray that can be handled will increase revenue by $65.45. (e) The operating room has an unused capacity of 695.45. Acquiring more operating room is therefore not worthwhile. We use the information in Screenshots 4-10A and 4-10B to answer questions in Problems 4-22 and 4-23. 4-22. (a) The optimal production plan is to produce 540 Standard suitcases and 252 Deluxe suitcases, for a total prot of $7,668. At this point, no Luxury suitcases are scheduled for production. (b) Given the optimal production plan, we can determine whether or not the new polishing process will have sufcient capacity to support that plan. The constraint (in hours) is: 1/6 (Standard) + 1/4 (Deluxe) + 1/3 (Luxury) 170. Now we substitute the previous optimal production decision: 1/6 x 540 + 1/4 x 252 + 1/3 x 0 = 153 170. Therefore, there is sufcient capacity in the proposed polishing operation to sustain the optimal production plan. (c) The constraint for the waterproong process (in hours) would be: 1 (Standard) + 1.5 (Deluxe) + 1.75 (Luxury) 900. Substitution of the optimal production plan yields: 1 x 540 + 1.5 x 252 + 1.75 x 0 = 918 900. Therefore, the proposed waterproong process does not have the capacity to support the production plan. In order to determine the impact, it is necessary to go back to the original formulation and solve the problem again with the added constraint. 4-23. The prot contributions per unit for the two new products are: Compact: $30 - $5 - 0.5 x $10 - 0.75 x $6 - 0.75 x $9 - 0.2 x $8 = $7.15 Kiddo: $37.50 - $4.50 - 1.2 x $10 - 0.75 x $6 - 0.5 x $9 - 0.2 x $8 = $10.40 However, we need to remember that a positive prot contribution is not a sufcient condition for making the new product. This is because resources allocated to make the new product will have to be reallocated from existing products. We need to compute the value of these resources using the shadow prices, as follows: Compact: 0.5 x $4.38 + 0.75 x $0 + 0.75 x $6.94 + 0.2 x $0 = $7.395 Kiddo: 1.2 x $4.38 + 0.75 x $0 + 0.5 x $6.94 + 0.2 x $0 = $8.726 Since the prot contribution of $7.15 is smaller than the $7.395 value of the resources required, the Compact model is not attractive to make. However, the Kiddo model will more efciently convert resources to revenue (since the prot contribution of $10.40 exceeds the $8.726 value of the resources). We must therefore include the Kiddo product in the formulation and solve the problem again to determine the new production plan. We use the information in Screenshots 4-11A and 4-11B to answer questions in Problems 4-24 to 4-27. 4-24.

(a) The optimal production plan is to make 100 TiniTote, 35 TubbyTote, and 90 ToddleTote
strollers. The resulting prot is $2,086.25. The following constraints are binding: fabrication time, minimum production level for the TubbyTote model, and ratio of the ToddleTote model to the total production. (b) All 620 hours are being used fabrication. Only 415 of the 500 hours are being used in Sewing, while only 385 of the 480 hours are being used in Assembly. (c) Each additional hour of fabrication time (up to 110.50 hours) will allow Strollers-to-Go to increase prot by $3.60. Hence, the rm would be willing to pay a premium of up to $3.60 for each additional hour of fabrication time. In contrast, since sewing is a non-binding constraint, the rm would not be interested in obtaining any additional sewing time. (d) None of the products are being produced at their maximum level (demand). However, the TubbyTote model is being produced at its minimum level. 4-25.

(a) From the Sensitivity Report, the profit contribution of TiniTote can vary between $5.92 (= $9.25
- $3.33) and $14.25 (= $9.25 + $5) without affecting the current optimal production mix. Assuming labor costs do not change, this implies that material costs can vary between $0 (= $4 - $5, rounded up to $0) and $7.33 (= $4 + $3.33) without affecting the current optimal production mix. Note that a decrease in material cost translates to an increase in the prot contribution, and vice versa. (b) Given the optimal production plan, we can determine whether or not the new polishing process will have sufcient capacity to support that plan. The constraint (in hours) is: 1/6 (TiniTote) + 1/4 (TubbyTote) + 1/5 (ToddleTote) 48 Now we substitute the previous optimal production decision: 1/6 x 100 + 1/4 x 35 + 1/5 x 90 = 43.42 48. Therefore, there is sufcient capacity in the proposed polishing operation to sustain the optimal production plan.

4-26.

(a) Each additional hour of fabrication time (up to 110.50 hours) will allow Strollers-to-Go to
increase prot by $3.60. Hence, the rm would be willing to pay a premium of up to $3.60 for each additional hour of fabrication time, or up to $11.85 (= $8.25 + $3.60) per hour. If the rm can get additional time for $10.50 per hour, it should take it. Each hour obtained this way (up to 110.50 hours) will increase prot by $1.35 [= $3.60 - ($10.50 - $8.25)]. (b) The first two bundles (80 hours total) should denitely be purchased at $10.50 per hour since the prot would increase by 80 x $1.35 = $108. For the third bundle, we know that the rst 30.5 hours will cause prot to increase by 30.5 x $1.35 = $41.175. However, the shadow price of the last 9.5 hours of this bundle will be less than $3.60 (can you see why this is so?). In the worst case, if Strollers-to-Go has to pay $10.50 per hour for these hours too, and they remain unused, purchasing the third bundle becomes an unattractive option. The firm should therefore purchase only 2 bundles of 40 hours each.

4-27. The profit contribution per unit for the new products is: $72 - $5.75 - 3.5 x $8.25 - 1.75 x $8.5 - 1.5 x $8.75 = $9.375. However, we need to remember that a positive prot contribution is not a sufcient condition for making the new product. This is because resources allocated to make the new product will have to be reallocated from existing products. We need to compute the value of these resources using the shadow prices. If we assume that TwinTotes are not included in the 40% overall production limitation on ToddleTotes, the computation is as follows: 3.5 x $3.6 + 1.75 x $0 + 1.5 x $0 = $12.60. Since the profit

contribution of $9.375 is smaller than the $12.60 value of the resources required, the TwinTote model is not attractive to manufacture. Each TwinTote made will decrease prot by $3.225 (subject to round off). On the other hand, if we assume that TwinTotes are also included in the 40% overall production limitation on ToddleTotes, the computation is now as follows: 3.5 x $3.6 + 1.75 x $0 + 1.5 x $0 - 0.4 x $3.85 = $11.06. In this case also, since the prot contribution of $9.375 is smaller than the $11.06 value of the resources required, the TwinTote model is not attractive to manufacture. However, now each TwinTote made will decrease profit by only $1.685 (subject to round off). We use the information in Screenshots 4-12A and 4-12B to answer questions in Problems 4-28 to 4-32. 4-28. (a) The objective function represents the total profit to be made from the sale of all of the tables and chairs. The production plan includes all items in the product list: oak tables and chairs, cherry tables and chairs, and pine tables and chairs. (b) The binding constraints are: labor, cherry wood, oak wood, pine wood, minimum oak tables, and minimum cherry tables. (c) The unit profit of oak chairs can be any value between $35 to infinity without changing the production plan. (d) The amount of oak available can be any value between 900 to 2,468.93 pounds without changing the binding constraints. (e) The report shows evidence of multiple optimal solutions since there are zero values in several entries of the Allowable Increase/Decrease columns for objective coefficients. (f) The cherry wood will be completely consumed, and there will not be any left. (g) The total requirement for chairs was 25 (10 each oak and cherry, 5 pine). The total surplus of chairs is 145.31 (41.67 oak, 75.56 cherry, and 28.08 pine). 4-29.

(a) An increase of $8 (= $83 - $75) is beyond the allowable increase ($0) for this coefficient.
Therefore, we cannot evaluate the impact of this change with the current report. (b) A decrease of $15 is beyond the allowable decrease of $13.25 for this coefficient. Therefore, we cannot evaluate the impact of this change with the current report. (c) An increase of $15 in profit for the pine tables is within the allowable increase of $88.33. The production plan will not change, but profit will increase by $15 x 42.26, or $633.90. (d) An increase of $5 (= $95 - $90) is beyond the allowable increase ($0) for this coefficient. Therefore, we cannot evaluate the impact of this change with the current report. (e) This change would have no impact on either the production plan of the profit, since the proposed minimum is already exceeded in the current plan. (f) The proposed change would introduce a new constraint, limiting the maximum number of cherry chairs. Because the number of chairs currently being produced exceeds this limit, we cannot evaluate the impact of this change without solving the problem again. 4-30.

(a) Increase in labor hours = 240 hours, which is within the allowable increase of 373.30. The
production mix will not change, albeit with different values for the non-zero decision variables. The profit will increase by $10 x 240 = $2,400, to $12,400.

(b) The 200-lb. increase in cherry wood is within the allowable increase of 223.25. The production
mix will not change, albeit with different values for the non-zero decision variables. The profit will not change because the shadow price of this constraint is zero. (c) A decrease of 100 hours is beyond the allowable decrease of 37.21 hours. Therefore, we cannot evaluate the impact of this change with the current report. (d) The minimum production of oak chairs is not a binding constraint. There would be no change to the production plan or the profit. 4-31.

(a) First, we check the 100% rule: (15/infinity) + (15/infinity) 1. Therefore, the current solution

remains optimal. The profit decreases by (3 + 3) x $15 = $90. (b) First, we check the 100% rule: (40/infinity) + (40/infinity) 1. Therefore, the current solution remains optimal. The profit increases by $40 x 51.67 - $40 x 3 = $1,946.80. (c) These changes would exceed the allowable increase/decrease ranges for these coefficients. Therefore, we cannot evaluate the impact of this change with the current report. (d) First, we check the 100% rule: (20/88.33) + (10/13.25) = 0.98 1. Therefore, the current production plan remains optimal. The profit increases by $20 x 42.26 - $10 x 33.08 = $514.40. (e) An increase of $6 is beyond the allowable increase for the pine chairs OFC. Therefore, we cannot evaluate the impact of this change with the current report. 4-32.

(a) Assume that the labor hours stated in the problem are the hours available per week. If the
employee leaves, there will be 25 fewer hours of labor available. This change is within the allowable decrease of 37.21. Therefore, the production mix will not change, albeit with different values for the non-zero decision variables. Total profit will decrease by 25 x $10, or $250. (b) To determine whether this is a good trade, we first check the 100% rule: (35/37.21) + (1,200/1,250) = 1.90 > 1. This is well over the 100% rule, and the information on the current report may therefore not be valid. The problem would need to be solved again to find the new optimal solution. (Incidentally, in this specific problem, the shadow prices are valid even though the ratio of 1.90 is well over 1. The value of the resources taken by CabinetsRUs equals 35 hours of labor at $10/hr (= $350) plus 1,200 pounds of oak at $0/lb. (= $0), for a total value of $350. Classic Furniture should therefore take the $880 offer.) (c) To determine whether this is a worthwhile product, we have to compare its profit contribution to the value of the resources it will consume. The profit contribution is $3,000 - $6 x 450 - $12 x 15 = $120. The value of the resources it consumes is 450 x $0 + 15 x $10 = $150. Therefore this is not a viable product. (d) While the cherry and oak products would not be affected, this new constraint would currently be violated for the pine products. Therefore the problem would have to be reformulated to include the new constraint. We use the information in Screenshots 4-13A and 4-13B to answer questions in Problems 4-33 to 4-37. 4-33. (a) The objective function represents the total cost of making every sandwich. The current production plan includes every type of sandwich on the menu.

(b) The binding constraints are: bread available, tuna available, minimum number of tuna sandwiches, minimum number of ham sandwiches, minimum number of ham & cheese sandwiches, and the total number of sandwiches. (c) The cost of cheese sandwiches can vary between $2.12 and $3.02. (d) The quantity of tuna can vary between 124 and 154 oz. (e) This report does not show evidence of multiple optima. There are no zero values in the Allowable Increase/Decrease columns, and no items have zeroes in both the Final Value and Reduced Cost columns. (f) 2.40 hours of labor remain. 4-34.

(a) The $0.50 increase is within the allowable increase. The solution remains optimal. The total cost
increases by $0.50 x 10 = $5. (b) The $0.28 increase is beyond the allowable increase. Therefore, we cannot evaluate the impact of this change with the current report. (c) The $0.40 increase is within the allowable increase. The solution remains optimal. The total cost increases by $0.40 x 10 = $4. (d) The $0.60 decrease is within the allowable decrease. The solution remains optimal. The total cost decreases by $0.60 x 12 = $7.20. (e) This constraint is already being met and would not affect the current solution. There would be no impact on production plan or profit. (f) The $0.26 decrease is beyond the allowable decrease. Therefore, we cannot evaluate the impact of this change with the current report. 4-35.

(a) The 20-oz. increase is within the allowable increase. The production mix will not change, albeit
with different values for the non-zero decision variables. The total cost decreases by $0.08 x 20 = $1.60. (b) The 15-oz. decrease is within the allowable decrease. There would be no impact on the production plan or profit because the shadow price for this constraint is 0. (c) The 8-oz. decrease is beyond the allowable decrease. Therefore, we cannot evaluate the impact of this change with the current report. (d) The 8-unit increase is within the allowable increase. The production mix will not change, albeit with different values for the non-zero decision variables. The total cost increases by $0.38 x 8 = $3.04. (e) This change is within the allowable decrease. There would be no impact on the production plan or profit because the shadow price for this constraint is 0. (f) The 5-unit decrease is within the allowable decrease. The production mix will not change, albeit with different values for the non-zero decision variables. The total cost decreases by $2.36 x 5 = $11.80. 4-36.

(a) First, we check the 100% rule: (0.35/0.99) + (0.35/0.66) = 0.88 1. The solution remains
optimal, and total cost decreases by $0.35 x (10 + 12) = $7.70. (b) First, we check the 100% rule: (0.60/infinity) + (0.60/0.66) = 0.91 1. The solution remains optimal, and total cost increases by $0.60 x (12 + 8) = $12.00.

(c) First, we check the 100% rule: (0.40/0.38) + (0.30/infinity) = 1.05 1. The corresponding $0.40

decrease is beyond the allowable decrease for the cost of a tuna sandwich. Therefore, we cannot evaluate the impact of this change with the current report. (d) First, we check the 100% rule: (10/24) + (10/24) = 0.83 1. The production mix will not change, albeit with different values for the non-zero decision variables. Total cost decreases by $0.08 x 10 = $0.80. (e) First, we check the 100% rule: (16/18) + (16/infinity) = 0.89 1. There would be no impact on the production plan or profit because the shadow price for these constraints is 0. 4-37.

(a) An additional pound of tuna (16oz.) would decrease cost by $1.28 (= $0.08 x 16). This deal is not
worthwhile. (b) The allowable decrease for the constraint on the minimum number of ham sandwiches is 1.5; the allowable decrease on the constraint for the minimum number of ham and cheese sandwiches is 2. Tiger can substitute up to the allowable decrease and still be able to predict cost. (c) There are a total of 62 meat sandwiches. 62/18 = 3.44. Therefore, Tiger must include 4 jars of pickles.

Case: Coastal States Chemical and Fertilizers

See file P4-Coastal States.XLS for the solutions and Sensitivity Reports. 1. (a) 20% curtailment (see sheet 20%) Phosphoric Ammonium Ammonium Chlorin Causti Vinyl acid Urea phosphate nitrate e c soda chloride Number of tons 320 200 270 300 480 385 300 Contribution $60 $80 $90 $100 $50 $50 $65 (b) 40% curtailment (see sheet 40%) Phosphoric Ammonium Ammonium Chlorin Causti Vinyl acid Urea phosphate nitrate e c soda chloride Number of tons 320 200 270 300 411 0 300 Contribution $60 $80 $90 $100 $50 $50 $65

HF acid 320 $70 $174,650

HF acid 320 $70 $151,933

2. Current profit is $185,400 (see sheet 0%). As seen from the solutions to the 20% and 40% curtailment models, the natural gas shortage causes profits to decrease. 3. See sheet SR 20% (a) The shadow prices represent the amount by which profit would increase if the RHS of these constraints increased by 1 unit. (b) The 3.5% decrease is within the allowable decrease for all products, so the optimal solution would not change. However, the total profit will decrease by 3.5%. (c) First, we check the 100% rule: (80/1,120) + (50/880) + (30/770) + (80/560) + (100/513) + (160/410.667) + (400/infinity) = 0.89 1. Therefore the shadow prices are valid. The production

plan does not change, but the profit increases by: 80 x 42.813 + 50 x 58.125 + 30 x 65 + 160 x 3.125 + 80 x 35.625 + 100 x 27.5 = $14,381.29. (d) Every 1,000 ft3 of natural gas (up to 3,440) would increase Coastals profit by $3.125. The $1.50 premium reduces this amount to $1.625 per 1000 ft3. This is still advantageous to Coastal LA as it will add $1,625 to the total profit. If 3,000,000 cu. ft. were available, the profit would increase by $4,875. 4. See sheet SR 40% (a) The shadow prices represent the amount by which profit would increase if the RHS of these constraints increased by 1 unit. (b) The 3.5% decrease is within the allowable decrease for all products, so the optimal solution would not change. However, the total profit will decrease by 3.5%. (c) First, we check the 100% rule: (80/1,120) + (50/880) + (30/770) + (80/560) + (100/513) + (160/infinity) = 0.5 1. Therefore the shadow prices are valid. The production plan does not change, but profit increases by $11,573.50. (d) Every 1,000 ft3 of natural gas (up to 1,040) would increase Coastals profit by $3.333. The $1.50 premium reduces this amount to $1.833 per 1000 ft3. This is still advantageous to Coastal LA as it will add $1,833 to the total profit. In the case that 3,000,000 cu. ft. are available, we cannot determine the value of the natural gas beyond the allowable increase of 1,040,000 cu. ft. The problem would have to be solved again using the new quantity of available gas. (e) The reduced cost for caustic soda represents the amount that total profit would decrease if one ton of caustic soda was produced.