Linear Programming Locational Breakeven CoG Method

Linear Programming - Definitions

An optimization technique that is useful for allocating scarce resources among competing demands. A model consisting of linear relationships representing a firms objective and resource constraints LP is a mathematical modeling technique used to determine a level of operational activity in order to achieve an objective, subject to restrictions called constraints

Formulating and Analyzing an LP Problem

1. Define the decision variables
2. Write out the objective function 3. Write out the constraints 4. Plot the constraints (Graphic Analysis) 5. Identify the feasible region (Graphic Analysis) 6. Plot an objective function line 7. Find the visual solution 8. Find the algebraic solution 9. Slack and surplus variables

Feasible Region
Area on the graph that contains the solutions that satisfy ALL the constraints simultaneously, including nonnegativity restrictions
Rules to identify feasible points for a given constraint:

For the = constraint, only the points on the line are feasible For the <= constraint, the points on line and the points below or to the left of the line are feasible For the >= constraint, the points on the line and the points above or to the right of the line are feasible solutions

Types of LP

Types of LP

Types of LP

Case!
You are operations manager at a world-class chocolate production unit. 2 basic types of chocolate brands. 3 resources are crucial in the production: a) Caramelization equipment (hours of use) b) Packaging hours c) Exotic nuts imported from Brazil The following data represents next weeks situation for you.

Product

Resource
Caramelizing Packaging Exotic nuts

Pipe1
4 hr 2 hr 2 lb

Pipe2
6 hr 2 hr 1 lb

Res. availability
48 hr 18 hr 16 lb

Contribution to profits per carton (1000 bars) is $340 for choc 1 and $400 for Choc 2. Find out how much of each type of chocolates should be produced to maximize contribution to profits

Example - 1
A transport company has two types of trucks, Type A and Type B. Type A has a refrigerated capacity of 20 m3 and a non-refrigerated capacity of 40 m3 while Type B has the same overall volume with equal sections for refrigerated and non-refrigerated stock.

A grocer needs to hire trucks for the transport of 3,000 m3 of refrigerated stock and 4,000 m3 of non-refrigerated stock.

The cost per kilometer of a Type A is $30, and $40 for Type B. How many trucks of each type should the grocer rent to achieve the

minimum total cost?

Example - 2
A company makes two products (X and Y) using two machines (A and B). Each unit of X that is produced requires 50 minutes processing time on machine A and 30 minutes processing time on machine B. Each unit of Y that is produced requires 24 minutes processing time on machine A and 33 minutes processing time on machine B. At the start of the current week there are 30 units of X and 90 units of Y in stock. Available processing time on machine A is forecast to be 40 hours and on machine B is forecast to be 35 hours. The demand for X in the current week is forecast to be 75 units and for Y is forecast to be 95 units. Company policy is to maximise the combined sum of the units of X and the units of Y in stock at the end of the week. Formulate the problem of deciding how much of each product to make in the current week as a linear program. Solve this linear program graphically.

Example - 3
A farmer has a 320 acre farm on which she plants two crops: corn and wheat. For each acre of corn planted, his expenses are $50 and for each acre of wheat planted, his expenses are $100. Each acre of corn requires 100 bushels of storage and yields a profit of $60; each acre of wheat requires 40 bushels of storage and yields a profit of $90. If the total amount of storage space available is 19,200 bushels and the farmer has only $20,000 on hand, how many acres of each crop should she plant in order to maximize his profit? What will his profit be if she follows this strategy?