Example 1.6 The diet problem Green Farm uses at least 800 kg of special feed daily.

The special feed is a mixture of corn and soybean meal with the following compositions: kg per kg of feedstu Feedstu Protein Fiber Cost ($ per kg) Corn 0.09 0.02 0.30 Soybean 0.60 0.06 0.90 The dietary requirements of the total feed stipulate at least 30% protein and at most 5% ber. Green Farm wishes to determine the daily minimum-cost feed mix. Formulate the problem as an LP problem.
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Solution Decision variables: x1 = Amount (kg) of corn in the daily mix x2 = Amount (kg) of soybean in the daily mix Constraints: Daily amount requirement: x1 + x2 800 Dietary requirements: Protein: 0.09x1 + 0.60x2 0.3(x1 + x2) Fiber: 0.02x1 + 0.06x2 0.05(x1 + x2) Objective: minimize 0.3x1 + 0.9x2

Thus, the complete model is minimize subject to 0.3x1 + 0.9x2 x1 + x2 800 0.21x1 + 0.3x2 0 0.03x1 + 0.01x2 0 x1, x2 0

Example 1.8 Bank Loan Policy The ABC bank is in the process of formulating a loan policy involving a total of $12 million. Being a full-service facility, the bank is obliged to grant loans to dierent clientele. The following table provides the types of loans, the interest rate charged by the bank, and the probability of bad debt from past experience: Type of loan Personal Car Home Farm Commercial Interest rate Prob of Bad Debt 0.140 0.10 0.130 0.07 0.120 0.03 0.125 0.05 0.100 0.02

Bad debts are assumed unrecoverable and hence no interest revenue. Competition with other nancial institutions in the area requires that the bank allocate at least 40% of the total funds to farm and commercial loans. To assist the housing industry in the region, home loans must equal at least 50% of the personal, car and home loans. The bank also has a stated policy specifying that the overall ratio for bad debts on all loans may not exceed 0.04. How should funds be allocated to these types of loans to maximize the net rate of return?

Solution Let x1, x2, x3, x4, x5 (in million dollars) be the amount of funds allocated to Personal loan, Car loan, Home loan, Farm loan and Commercial loan respectively. Net return: Personal: (0.9x1)(0.14) 0.1x1 = 0.026x1. Car: (0.93x2)(0.130) 0.07x2 = 0.0509x2. Home: (0.97x3)(0.120) 0.03x3 = 0.0864x3. Farm: (0.95x4)(0.125) 0.05x4 = 0.06875x4. Commercial: (0.98x5)(0.100)0.02x5 = 0.078x5. Total Fund: x1 + x2 + x3 + x4 + x5 12 Competition: x4 + x5 0.4 x1 + x2 + x3 + x4 + x5 0.4x1 + 0.4x2 + 0.4x3 0.6x4 + 0.6x5 0
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Housing industry: x3 0.5(x1 + x2 + x3) 0.5x1 + 0.5x2 0.5x3 0 Overall bad debt: 0.1x1 + 0.07x2 + 0.03x3 + 0.05x4 + 0.02x5 0.04 x1 + x2 + x3 + x4 + x5 0.06x1 + 0.03x2 0.01x3 + 0.01x4 0.02x5 0 The LP forumulation: maximize 0.026x1 + 0.0509x2 + 0.0864x3 + 0.06875x4 + 0.078x5 subject to x1 + x2 + x3 + x4 + x5 12 0.4x1 + 0.4x2 + 0.4x3 0.6x4 + 0.6x5 0 0.5x1 + 0.5x2 0.5x3 0 0.06x1 + 0.03x2 0.01x3 + 0.01x4 0.02x5 0 x1, x2, x3, x4, x5 0
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Example 1.9 (Work Scheduling Problem) A post oce requires dierent numbers of full-time employees on dierent days of the weeks. The number of full-time employees required on each day is given below: Number of Employees Day 1 = Monday 17 Day 2 = Tuesday 13 Day 3 = Wednesday 15 Day 4 = Thursday 19 Day 5 = Friday 14 Day 6 = Saturday 16 Day 7 = Sunday 11 Union rules state that each full-time employee must work ve consecutive days and then receive two days o. The post oce wants to meet its daily requirements with only full-time employees.

Formulate an LP that the post oce can use to minimize the number of full-time employees that must be hired. Let xj be the number of employees starting their week on Day j. The formulation of the LP becomes: x1 x1 + x2 x1 + x2 + x1 + x2 + x1 + x2 + x2 + xj 0, +x4 + x5 + + x5 + + +x4 +x4 + x5 +x4 + x5 + +x4 + x5 + integer. x6 + x7 x6 + x7 x6 + x7 + x7 x6 x6 + x7 17 13 15 19 14 16 11

x3 x3 x3 x3 x3 xj

Note The additional constraint that xj must be an integer gives rise to a linear integer programming problem. Finding optimal solutions to general integer programming problems is typically dicult.