QUESTION 10-23

Hilliard Electronics
Answer:
LP formulation:
Maximize labour hours = 8X1 + 13X2 + 16X3 1200
subject to

X1 40

(max production for 64MB chips)

X2 50

(max production 256MB chips)

X3 60

(max production 512MB chips)

where
X1 = 64MB chip
X2 = 256MB chip
X3 = 512MB chip

For Goal programming:

The deviational variables can be defined as:
d1 = underachievement of X1 production for special order
d1+ = overachievement of X1 production for special order
d2 = underachievement of X2 production for special order
d2+ = overachievement of X2 production for special order
d3 = underachievement of maximum monthly sales target X1
d3+ = overachievement of maximum monthly sales target X1
d4 = underachievement of maximum monthly sales target X2
d4+ = overachievement of maximum monthly sales target X2
d5 = underachievement of maximum monthly sales target X3
d5+ = overachievement of maximum monthly sales target X3
d6 = idle time for production (underutilization)
d6+ = overtime in the production (overutilization)

Management is concerned about fulfilling orders from its best customers, providing sufficient
chips to at least equal the sales estimates set by Mr Blank and to avoid underutilization of the
production capacity.
Priority 1: fulfilling special orders for X1 & X2
Priority 2: meeting the maximum monthly sales target for X1, X2 and X3
Priority 3: avoid underutilization of production capacity

The new objective function and constraints are:

Minimize P1 (d1 + d2) + P2 (d3 + d4 + d5) + P3 d6+
subject to
X1 + d1 - d1+ = 30

(order constraint X1)

X2 + d2 - d2+ = 35

(order constraint X2)

X1 + d3 - d3+ = 40

(sales constraint X1)

X2 + d4 - d4+ = 50

(sales constraint X2)

X3 + d5 - d5+ = 60

(sales constraint X3)

8X1 + 13X2 + 16X3 + d6 - d6+ = 1200

(capacity constraint)

Conclusion:
In order to fulfil orders from its best customers, for 30 units of 64MB chips and 35 units of
256MB chips, produce X1=40, X2=50 & X3=60, Hilliards Electronics have to stretch its
labour hours to 730 hours. Therefore, in order to fulfil the preferred customer's orders and
produce chips at the maximum unit of the monthly estimates, the company has to offer
overtime to its employees in the total of 730 hours (on top of the idle labour hours of 1,200
hours, a total of 1,930 hours).
To conclude, the solution is to produce 40 64MB chip (X1) , 50 256MB chip (X2) and 60
512MB chip (X3) with an additional 730 hours of labour hours (overtime).

QUESTION 10-25
Attache Program at Army War College
Answer:
LP formulation:
Maximize time = X1 + X2 + X3 + X4 168
subject to

(available hours)

X3 30

(study hours)

X1 49

(sleeping hours)

X4 20

(social hours)

X1,X2,X3,X4 0

where
X1 = number of hours of sleep per week
X2 = number of personal hours
X3 = number of hours of class/studying
X4 = number of hours of social time off base

For Goal programming:

The deviational variables can be defined as:
d1 = idle time for class and study (underachievement)
d1+ = extra time for class and study (overachievement)
d2 = idle time for sleeping (underachievement)
d2+ = extra time for sleeping (overachievement)
d3 = idle time for socializing (underachievement)
d3+ = extra time for socializing (overachievement)

Priority 1: fulfilling time of study (30 hours per week)

Priority 2: not sleeping more than 7 hours per day (at most 49 hours per week)
Priority 3: spending social time at least 20 hours per week.

The new objective function and constraints are:

Minimize P1(d1 +d1+) + P2d2+ + P3d3
subject to
X1 + X2 + X3 + X4 =168

(capacity constraint)

X3 + d1 - d1+ = 30

(study hours constraint X3)

X1 + d2 - d2+ = 49

(sleeping hours constraint X1)

X4 + d3 - d3+ = 20

(social hours constraint X4)

The optimal solution indicates 30 hours of study, 49 hours of sleep, 20 hours of social hours
and 69 hours of personal time.

QUESTION 10-26
Financial Planner (Investment)
Answer:
LP formulation:
Maximize return = X1 + X2 + X3 25000

(return on investment)

subject to

X2 75000

(at least 30% in Bonds)

X3 0.5(X1+X2)

(real estate investment limit)

X1 150000

(stocks investment)

X2 150000

(bonds investment)

X3 150000

(real estate investment)

X1,X2,X3 0

where
X1 = stocks
X2 = bonds
X3 = real estate

For Goal programming:

The deviational variables can be defined as:
d1 = limitation of investment in Bonds (underutilization)
d1+ = exceeded investment in Bonds (overutilization)
d2 = limitation of investment in Real Estate (underutilization)
d2+ = exceeded investment in Real Estate (overutilization)
d3 = available investment for Stocks (underutilization)
d3+ = exceeded investment for Stocks (overutilization)

d4 = available investment for Bonds (underutilization)

d4+ = exceeded investment for Bonds (overutilization)
d5 = available investment for Real Estate (underutilization)
d5+ = exceeded investment for Real Estate (overutilization)

***Priority is equal for all constraints

The new objective function and constraints are:
Minimize P1(d1 +d1+) + (d2 +d2+) + d3+ + d4+ + d5+
subject to
X1 + X2 + X3 =250000

(investment budget)

0.13X1 + 0.08X2 + 0.1X1 = 25000

(minimal return on investment)

X2 + d1 - d1+ = 75000

(minimum investment in Bonds)

0.5X1 + 0.5X2 - 1X3 + d2 - d2+ = 0

(investment requirement for Real Estate)

X1 + d3+ = 150000

(investment limit for Stocks)

X1 + d4+ = 150000

(investment limit for Bonds)

X1 + d5+ = 150000

(investment limit for Real Estate)

The optimal solution would be to invest $91,666.66 in Stocks, $75,000 in Bonds and
$83,333.34 in Real Estate. This investment will give an extra return of the initial expected
10% return ($25,000) totalling $26,250.