Chapter II: Linear Programming Models (Resource Allocation Models)

2.1. Introduction
A model, which is used for optimum allocation of scarce or limited resources to competing products
or activities under such assumptions as certainty, linearity, fixed technology, and constant profit per
unit, is linear programming.
Linear Programming is one of the most versatile, powerful and useful techniques for making
managerial decisions. Linear programming technique may be used for solving broad range of
problems arising in business, government, industry, hospitals, libraries, etc. Whenever we want to
allocate the available limited resources for various competing activities for achieving our desired
objective, the technique that helps us is linear programming. As a decision making tool, it has
demonstrated its value in various fields such as production, finance, marketing, research and
development and personnel management. Determination of optimal product mix (a combination of
products which gives maximum profit), transportation schedules, Assignment problem, and many
more.
LP is also a mathematical modeling technique useful for economic allocation of ‘scarce’ or
‘limited’ resources, such as labour, material, machine, time, warehouse space, capital, energy, etc.,
to several competing activities, such as products, services, jobs, new equipment, projects, etc., on
the basis of a given criterion of optimality.
Scarce resources mean resources that are not infinite in availability during the planning period.
The criterion of optimality generally is either performance, return on investment, profit, cost, utility,
time, distance, etc.
LP model was developed primarily for solving military logistics problems. But now, it is being used
extensively in all functional areas of management, airlines, agriculture, military operations, oil
refining, education, energy, pollution control, transportation planning & scheduling, research &
development, health care systems, and etc. even though these applications are diverse, all LP
models consist of certain common properties & assumptions.
2.2. Terms Used in Linear Programming Problem
Linear programming is a method of obtaining an optimal solution or programme (say, product mix
in a production problem), when we have limited resources and a good number of competing
candidates to consume the limited resources in certain proportion. The term linear implies the
condition of proportionality and additivity. The programme is referred as a course of action
covering a specified period of time, say planning period. The manager has to find out the best
course of action in the interest of the organization. This best course of action is termed as optimal
course of action or optimal solution to the problem. A programme is optimal, when it maximizes or
minimizes some measure or criterion of effectiveness, such as profit, sales or costs.
Programming consists of a series of instructions and computational rules for solving a problem that
can be worked out manually or can feed into the computer. In solving linear programming problem,
we use a systematic method known as simplex method developed by American mathematician
George B. Dantzig in the year 1947.

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The candidates or activity here refers to number of products or any such items, which need the
utilization of available resources in a certain required proportion. The available resources may be of
any nature, such as money, area of land, machine hours, and man-hours or materials. But they are
limited in availability and which are desired by the activities / products for consumption.
2.3. A Standard Form of the Model
We can now formulate the mathematical model for this general problem of allocating resources to
activities. In particular, this model is to select the values for X1, X2. . . Xn so as to
Optimize (Maximize or Minimize) Z =C1X1 + C2X2 +………….. +CnXn
Subject to the restrictions
a11x1 +a12x2 +………………..+ a1nxn (≤, =, ≥) b1
a21x1 +a22x2 +………………..+a2nxn (≤, =, ≥) b2
. . .
. . .
. . .
am1x1 +am2x2+………………. + amnxn (≤, =, ≥) bm,
This table implies data needed for a linear programming model involving the allocation of resources
to activities.
Resource Usage per Unit of Activity Sign of Amount of
equalities Resources
Available

Resources Activity
Contribution C1 C2 . . . Cn
to Z per unit
of activity
1 2 . . . n
1 a11 a 12 . . . a 1n ≤ = ≥ b1
2 a21 a22 . . . a2n ≤ = ≥ b2
. . . . . . . . .
. . . . . . . . .
M am1 am2 . . . amn ≤ = ≥ bm

And
X1 ≥0, X2 ≥ 0. . . Xn ≥0

We call this standard form for the linear programming problem. Any situation whose mathematical
formulation fits this model is a linear programming problem.
Common terminology for the linear programming model can now be summarized.
The function being maximized or minimized, c1x1 +c2x2+………+ cjxn, is called the objective
function.

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 The restrictions normally are referred to as constraints. The first m constraints (those with a
function of all the variables ai1x1 +ai2x2 +…………..+ ainxn on the left-hand side) are sometimes
called functional constraints (or structural constraints). Similarly, the xn ≥ 0 restrictions are called
non-negativity constraints (or non-negativity conditions).
2.4. Structure Linear programming Models (LPM)
Linear Programming (LP) models are mathematical representations of LP problems. Some LP
models have a specialized format, whereas others have a more generalized format. Despite this, LP
Models have certain characteristics in common. Knowledge of these characteristics enables us to
recognize problems that are amenable to a solution using LP models and to correctly formulate an
LP model. The characteristics can be grouped into two categories: Components and Assumptions:
The components relate to the structure of a model, whereas the assumptions reveal the conditions
under which the model is valid.

Components Assumptions
1. Objective function 1. Linearity
2. Decision variables Model 2. Divisibility Model Validity
3. Constraints Structure 3. Certainty
4. Parameters & RHSV 4. Non-negativity

Components of LP model

1. The Objective Function- is the mathematical or quantitative expression of the objective of the
company/model. The objective in problem solving is the criterion by which all decisions are
evaluated. In LPMs a single quantifiable objective must be specified by the decision maker. For
example, the objective might relate to profits, or costs, or market share, but to only one of these.
Moreover, because we are dealing with optimization, the objective will be either maximization or
minimization, but not both at a time.
2. The Decision Variables - represent unknown quantities to be resolved for. These decision variables
may represent such things as the number of units of different products to be sold, the amount of Birr
to be invested in various projects, the number of ads to be placed with different media.
Since the decision maker has freedom of choice among actions, these decision variables are
controllable variables.
3. The constraints - are restrictions which define or limit the feasibility of a proposed course of action.
They limit the degree to which the objective can be pursued.
A typical restriction embodies scarce resources (such as labor supply, raw materials, production
capacity, machine time, storage space), legal or contractual requirements (e.g. Product standards,
work standards), or they may reflect other limits based on forecasts, customer orders, company
policies etc.
4. Parameters - are fixed values that specify the impact that one unit of each decision variable will
have on the objective and on any constraint it pertains to as well as to the numerical value of each
constraint.
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  The components are the building blocks of an LP model. We can better understand their
meaning by examining a simple LP model as follows.
Example:
Maximize: 4X1 + 7X2 + 5X3 (Profit) ___________________ objective function
Subject to:
2X1 + 3X2 + 6X3  300 labor hrs
5X1 + X2 + 2X3  200 lb raw material System constraints
3X1 + 5X2 + 2X3  360
X1 = 30 Individual constraints
X2  40
X1, X2, X3  0  Non-negativity constraints.
System constraints – involve more than one decision variables.
Individual constraints – involve only one decision variable.
None-negativity constraints specify that no variable will be allowed to take on a negative value. The
non-negativity constraints typically apply in an LP model, whether they are explicitly stated or not.
Assumption of LP Models

1. Linearity. The linearity requirement is that each decision variable has a linear impact on the
objective function and in each constraint in which it appears. Following the above example,
producing one more unit of product 1 adds Br. 4to the total profit. This is true over the entire range
of possible values of X1. The same applies to each of the constraints. It is required that the same
coefficient (from example, 2 lb. per unit) apply over the entire range of possible value so the
decision variable.
2. Divisibility. The divisibility requirement pertains to potential values of decision variables. It is
assumed that non-integer values are acceptable. For example: 3.5TV sets/hr would be acceptable 
7 TV sets/2hrs.
3. Certainty. The certainty requirement involves two aspects of LP models.
i) With respect to model parameters (i.e., the numerical values) – It is assumed that these
values are known and constant e.g. in the above example each unit of product 1 requires
2lab his is known and remain constant, and also9 the 300 lab/hr available is deemed to be
known and constant.
ii) All the relevant constraints identified and represented in the model are as they are.
4. Additivity: the value of the objective function & the total amount of each resource used
(supplied), must be equal to the sum of the respective individual contributions (profit or cost) by
decision variables.
5. Non-negativity. The non-negativity constraint is that negative values of variables are unrealistic
and, therefore, will not be considered in any potential solution; only positive values and zero
will be allowed.

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2.5. Formulating LP Models
Once a problem has been defined, the attention of the analyst shifts to formulating a model. Just as
it is important to carefully define a problem, it is important to carefully formulate the model that
will be used to solve the problem. If the LP model is ill formulated, ill-structured, it can easily lead
to poor decisions.
Formulating linear programming models involves the following steps:
1. Define the problem/problem definition
* To determine the # of type 1 and type 2 products to be produced per month so as to
maximize the monthly profit given the restrictions.
2. Identify the decision variables or represent unknown quantities
* Identify the unknown decision variables to be determined and assign symbols to them.

* Let X1 and X2 be the monthly qualities of Type 1 and type 2 products

3. Determine the objective function
* Once the variables have been identified, the objective function can be specified. It is
necessary to decide if the problem is maximization or a minimization problem and the
coefficients of each decision variable.
Note: a. the units of all the coefficients in the objective function must be the same. E.g. If the
contribution of type 1 is in terms of Br so does for type 2.
b. All terms in the objective function must include a variable each term have to have 1
variable.
c. All decision variables must be represented in the objective function.
4. Identifying the constraints
- System constraints: - more than one variable
- Individual constraints: - one variable
- Non-negative constraints
Identify all the restrictions or constraints in the problem and express them as linear equations or
inequalities of decision variables.

Example
1. A firm that assembles computer and computer equipment is about to start production of two
new microcomputers. Each type of micro-computer will require assembly time, inspection
time and storage space. The amount of each of these resources that can be devoted to the
production of microcomputers is limited. The manger of the firm would like to determine
the quantity of each microcomputer to produce in order to maximize the profit generated by
sales of these microcomputers.
Additional information
In order to develop a suitable model of the problem, the manager has met with design and
manufacturing personnel. As a result of these meetings, the manger has obtained the following
information:

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 Type 1 Type 2
Profit per unit Birr 60 Birr 50
Assembly time per unit 4hrs 10hrs
Inspection time per unit 2hrs 1hr
Storage space per unit 3cubic ft 3cubic ft
The manager also has acquired information on the availability of company resources. These weekly
amounts are:
Resource Resource available
Assembly time 100hrs
Inspection time 22hrs
Storage space 39 cubic feet
The manger also meet with the firm’s marketing manager and learned that demand for the
microcomputers was such that whatever combination of these two types of microcomputer is
produced, all of the output can be sold.
Required: Formulate the Linear programming model.
Solution:
Step 1: Problem Definition
- To determine the number of two types of microcomputers to be produced (and sold)
per week so as to maximize the weekly profit given the restriction.
Step 2: Variable Representation
- Let X1 and X2 be the weekly quantities of type 1 and type 2 microcomputers,
respectively.
Step 3: Develop the Objective Function

Maximize Z or max Z = 60X1 + 50X2

Step 4: Constraint Identification
System constraints: 4X1 + 10X2  100hrs Assembly time
2X1 + X2  22hrs inspector time
3X1 + 3X2  39 cubic feet Storage space
Individual constraint No
Non-negativity constraint X1, X2  0
In summary, the mathematical model for the microcomputer problem is:
Max Z = 60X1 + 50X2
Subject to: 4X1 + 10X2  100
2X1 + X2  22
X1 + 3X2  39
X1, X2  0
2. An electronics firm produces three types of switching devices. Each type involves a two-step
assembly operation. The assembly times are shown in the following table:

Assembly time per Unit (in minutes)

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 Section #1 Section #2
Model A 2.5 3.0
Model B 1.8 1.6
Model C 2.0 2.2
Each workstation has a daily working time of 7.5 hrs. The manager wants to obtain the greatest
possible profit during the next five working days. Model A yields a profit of Birr 8.25 per unit,
Model B a profit of Birr 7.50 per unit and Model C a profit of Birr 7.80 per unit. Assume that the
firm can sell all it produces during this time, but it must fill outstanding orders for 20 units of each
model type.
Required: Formulate the linear programming model of this problem.
Solution:
Step 1: Problem definition- to determine the number of three types of switching devices to be
produced and sold for the next 5 working days so as to maximize the 5 days profit.
Step 2: Variable representation
Let X1, X2 and X3 be the number of Model A, B and C switching devices respectively, to
be produced and sold.
Step 3: Develop objective function
Max Z: 8.25X1 + 7.50X2 + 7.80X3

Step 4: Constraint identification

2.5X1 + 1.8X2 + 2.0X3  2250 minutes Ass. time station 1 System constraint
3.0X1 + 1.6X2 + 2.2X3  2250 minutes Ass. time station 2
X1  20 Model A
X2  20 Model B Individual constraint
X3  20 Model C
X1, X2, X3 0 Non negativity
In summary:
Max Z: 8.25X1 + 7.50X2 + 7.80X3
Subject to

2.5X1 + 1.8X2 + 2.0X3  2250 minutes

3.0X1 + 1.6X2 + 2.2X3  2250 minutes
X1  20 model A
X2  20 model B
X3  20 model C
X1, X2, X3  0 non negativity
3. A diet is to include at least 140 mgs of vitamin A and at least 145 Mgs of vitamin B. These
requirements are to be obtained from two types of foods: Type 1 and Type 2. Type 1 food contains
10Mgs of vitamin A and 20mgs of vitamin B per pound. Type 2 food contains 30mgs of vitamin A
and 15 mgs of vitamin B per pound. If type 1 and 2 foods cost Birr 5 and Birr 8 per pound

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respectively, how many pounds of each type should be purchased to satisfy the requirements at a
minimum cost?
Vitamins
Foods A B
Type 1 10 20
Type 2 30 15
Solution:
Step 1: Problem definition
To determine the pounds of the two types of foods to be purchased to make the diet at a
minimum possible cost within the requirements.
Step 2: Variable representation
Let X1 and X2 be the number of pounds of type 1 and type 2 foods to be purchased,
respectively.
Step 3: Objective function
Min Z: 5X1 + 8X2

4. Constraints
10X1 + 30X2  140 System constraints
20X1 + 15X2  145
X1, X2 0 non-negativity constraints.

2.5. METHODS FOR THE SOLUTION OF A LINEAR PROGRAMMING PROBLEM

Linear Programming, is a method of solving the type of problem in which two or more candidates
or activities are competing to utilize the available limited resources, with a view to optimize the
objective function of the problem. The objective may be to maximize the returns or to minimize
the costs. The various methods available to solve the problem are:

1. The Graphical Method we use when we have two decision variables in the problem. To
deal with more decision variables by graphical method will become complicated, because
we have to deal with planes instead of straight lines. Hence in graphical method let us limit
ourselves to two variable problems.

2. The Simplex method. When the problem is having more than two decision variables,
simplex method is the most powerful method to solve the problem. It has a systematic
programme which can be used to solve the problem.
One problem with two variables is solved by using both graphical and simplex method, so as to
enable the reader to understand the relationship between the two.
2.5.1. Graphical Method

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In graphical method, the inequalities (structural constraints) are considered to be equations. This is
because; one cannot draw a graph for inequality. Only two variable problems are considered,
because we can draw straight lines in two-dimensional plane (X- axis and Y-axis). More over as we
have non-negativity constraint in the problem that is all the decision variables must have positive
values always the solution to the problem lies in first quadrant of the graph. Some times the value
of variables may fall in quadrants other than the first quadrant. In such cases, the line joining the
values of the variables must be extended in to the first quadrant. The procedure of the method will
be explained in detail while solving a numerical problem.
The characteristics of Graphical method are:
(i) Generally the method is used to solve the problem, when it involves two decision variables.
(ii) For three or more decision variables, the graph deals with planes and requires high imagination
to identify the solution area.
(iii) Always, the solution to the problem lies in first quadrant.
(iv)This method provides a basis for understanding the other methods of solution.

Steps for solving LPP

1. Formulation of mathematical modeling of LPP

2. Convert constraints inequalities into equalities

3. Draw the graph by intercepts

4. Identify the feasible area of the solution which satisfies all constrains.

5. Identify the corner points or extreme point in the feasible region

6. Identify the optimal point

7. Interpret the result

E.g.: 1. solving the micro-computer problem with graphic approach

Max Z = 60X1 + 50X2
Subject to
4X1 + 10X2  100
2X1 + X2  22
3X1 + 3X2  39
Non-negativity X1, X2  0

E.g. 2 solving for diet problem above

Min Z: 5X1 + 8X2

STC

10X1 + 30X2  140 System constraints

20X1 + 15X2  145

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 X1, X2  0 non-negativity constraints.
SPECIAL CASES IN GRAPHICS METHODS

1. Redundant Constraint

If a constraint when plotted on a graph doesn’t form part of the boundary

making the feasible region of the problem that constraint is said to be
redundant.

Example: A firm is engaged in producing two products A and B .Each unit of

product A requires 2Kg of raw material and 4 labor-hrs for processing. Whereas
each unit of product B requires 3Kg of raw materials and 3hrs of labor. Every
unit of product A needs 4hrs to packaging and every unit of product B needs
3.5hrs for packaging. Every week the firm has availability of 60Kg of raw
material, 96 labor-hours and 105 hrs in the packaging department. 1 unit of
product A sold yields $40 profit and 1 unit of B sod yields $35 profit.

Required: a. Formulate this problem as a LPP b. Find the optimal solution

Solution

________________________________________________________________
Products Resource
available

Resources A B
per week

_____________________________________________________________________

Raw materials (Kg) 2 3 60

Labor (hr) 4 3 96

Packaging (hr) 4 3.5 105

Profit per unit $40 $35

Let X1 =The No of units of product A produced per week

X2 =The No of units of product B produced per week

a. LPP Model

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 Max . Z=40 X 1 +35 X 2
St :
2 X 1 +3 X 2 ≤60
4 X 1 +3 X 2 ≤96
4 X 1 +3 . 5 X 2 ≤105
X 1 , X 2≥0

X2

(0, 32)

Labor: 4X1 +3X2 = 96

(0, 30)
Packaging: 4X1 +3.5X2 = 105
(0, 20) C (18,8)
Raw material: 2X1 +3X2 = 60
FR
X1
A (0, 0) D (24, 0) (26, 0) (30, 0)

 The packaging hr is redundant.

Corners Coordinates MinZ=40 X1 +

35X2

A (0, 0) 0

B (0, 20) 700

C (18, 8) 1000

D (24, 0) 960

X1 =18

X2=8 and

MinZ= 1000

Interpretation:

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The company should produce and sale 18 units of product A and 8 units of
product B per week so as to get a maximum profit of 1000.

 By this production plan the entire raw material will be consumed.

 2X1 +3X2 <60
2(18) +3(8) =60

60=60==> N o idle or unused raw material

 4X1 +3X2 <96

4(18) +3(8) <96

96=96 ==>the entire labor hour will be consumed

 4X1 +3.5X2 <105

100<105==>There is to be idle or unused capacity of 5hrs in the packaging
department.

Note:

The packaging hour’s constraint does not form part of the boundary making
the feasible region. Thus, this constraint is of no consequence and is therefore,
redundant. The inclusion or exclusion of a redundant constraint does not affect
the optimal solution of the problem.

2. Multiple optimal Solutions

/Alternative optimal solutions/

-This is a situation where by a LPP has more than one optimal solution.

Multiple optimal Solutions will be found if two corners give optimal solution,
then the line segment joining these points will be the solution.

==>We have unlimited number of optimal solution without increasing or

decreasing the objective function.

Example:

The information given below is for the products A and B.

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 _____________________________________________________________________

Machine hours per week

Maximum available

Department Product A Product B per week

__________________________________________________________________

Cutting 3 6 900

Assembly 1 1 200

Profit per unit $8 $16

_____________________________________________________________________

Assume that the company has a marketing constraint on selling products B and
therefore it can sale a maximum of 125units of this product.

Required:

a. Formulate the LPP of this problem

b. Find the optimal solution

Solution:

Let X1 =The No of units f product A produced per week

X2 =The No of units f product B produced per week

a. The LPP Model of the problem is:

Max . Z=8 X 1 +16 X 2

St :
3 X 1 +6 X 2 ≤900
X 1 +X 2 ≤200
X 2≤125
X 1 , X 2≥0

X2
X1=0
(0, 200) 13

(0,150)
 C (50, 125) X2=125 Marketing equation

Cutting: 3X1+6X2=900

FR X2=0

X1
E (200, 0) (300,0)

Corners Coordinates MaxZ=8 X1 +

16X2

A (0, 0) 0

B (0, 125) 2000

C (50, 125) 2400

D (100, 100) 2400

E (200, 100) 1600

Interpretation:

Both C and D are optimal solutions. Any point on the line segment CD will also
lead to the same optimal solution.

==>Multiple optimal solutions provide more choices for management to reach

their objectives.

3. Infeasible Solution

A solution is called feasible if it satisfies all the constraints and the constraints
and non-negativity condition. However, it is sometimes possible that the
constraints may be inconsistent so that there is no feasible solution to the
problem. Such a situation is called infeasibility.

Example:

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 MaxZ=20X1+30X2

St:

2X1+X2< 40

4X1+X2< 60

X1 > 30

X1, X2 > 0

Solution:

X2 X1=0
(0, 60) X1=30

4X1+X2= 60
(0, 40)

2X1+X2= 40 X2=0
X1

(15, 0) (20, 0) (30, 0)

Note:

-In the above graph, there is no common point in the shaded area.

-All constraints cannot be satisfied simultaneously and there is no feasible

solution to the problem.

4. Mix of constraints

Example:

MinZ=1500X1+2400X2

St:

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 4X1+1X2>24

2X1+3X2>42

X1+4X2 > 36

X1 < 14

X2< 14

X1, X2 > 0

24 Delivery time: X1=14

SUG: 4X1+X2 =24

A (2.5, 14) B (14, 14) Delivery time: X2=14

FR

D (12, 6) C (14, 5.5)

LG: X1+4X2=36

RUG: 2X1+3X2 =42

(6, 0) (14, 0) (21, 0) (36, 0)

5. Unbounded Solution

A solution is unbounded if the objective function can be improved without limit. The solution is
unbounded if there are no positive ratios in determining the leaving variable. A negative ratio
means that increasing a basic variable would increase resources! a zero ratio means that
increasing a basic variable would not use any resources. This condition generally arises because
the problem is incorrectly formulated. For example, if the objective function is stated as
 
maximization when it should be a minimization, if a constraint is stated when it should be , or
vice versa.

Or

When the value of decision variables in LP is permitted to increase infinitely

without violating the feasibility condition, then the solution is said to be
unbounded .Here, the objective function value can also be increased infinitely.

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However, an unbounded feasible region may yield some definite value of the
objective function.

It exists when the value of the objective function can be increased without limit. A graphical
example of this is shown in the figure below. This difficulty is usually due to either incorrectly
maximizing when the real goal is to minimize an objective function or using greater than constraints
when less than constraints are called for. Although the latter error also may occur in a minimization
problem, the problem will not be unbounded because of the non-negativity constraints (i.e., the
resulting solution will be 0, 0). Again, checking equalities or re-thinking the problem statement will
resolve the problem. The latter case may uncover another constraint that should have been included
in the original statement of the problem.

[Example:

Use the graphical method to solve the following LPP.

1. Max.Z=3X1+4X2

St:

X1-X2<-1==> -X1+X2>1 since the quantity solution is positive

-X1+X2<0

X1, X2 > 0
X2 X1-X2 =-1

X1+X2 =0

1 Unbounded
Feasible Region

X1
Fig: Unbounded Solution

SIMPLEX METHOD

INTRODUCTION

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The graphical method to solving LPPs provides fundamental concepts for fully
understanding the LP process. However, the graphical method can handle
problems involving only two decision variables (say X1 and X2).

In 19940’s George B.Dantzig developed an algebraic approach called the

Simplex Method which is an efficient approach to solve applied problems
containing numerous constraints and involving many variables that cannot be
solved by the graphical method.

The simplex method is an ITERATIVE or “step by step” method or repetitive algebraic approach
that moves automatically from one basic feasible solution to another basic feasible solution
improving the situation each time until the optimal solution is reached.

The simplex procedure for a maximization problem with all  constraints consists of the following
steps.
Step 1

Formulate LPP Model

Step2. Write the LPM in a standard form: when all of the constraints are written as equalities, the
linear program is said to be in standard form. We convert the LPM in to a standard form by
applying (introducing) the slack variables, S, which carries a subscript that denotes which constraint
it applies to. For example, S1 refers to the amount of slack in the first constraint, S2 to the amount
of slack in the second constraint, and so on. When slack variables are introduced to the constraints,
they are no longer inequalities because the slack variable accounts for any difference between the
left and right-hand sides of an expression. Hence, once slack variables are added to the constraints,
they become equalities. Furthermore, every variable in a model must be represented in the objective
function. However, since slack does not provide any real contribution to the objective, each slack
variable is assigned a coefficient of zero in the objective function.

A slake variable emerges when the LPP is a maximization problem.

Slack variables represent unused resource or idle capacity. Thus, they don’t
produce any product and their contribution to profit is zero.

Slack variables are added to the objective function with zero coefficients.

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Let that s1, s2, and s3 are unused assembly time, inspection time and storage
space respectively.

Max Z = 60X1 + 50X2 max Z= 60X1 + 50X2 + 0S1 + 0S2 + 0S3

Sub. to : 4X1 + 10X2  100 sub. to : 4X1 + 10X2 + S1 = 100
2X1 + X2  22 2X1 + X2 + S2 = 22 standard form
3X1 + 3X2  39 3X1 + 3X2 + S3 = 39
X1, X2  0 X1, X2, S1, S2, S3  0

Step 3. Develop the initial tableau: the initial tableau always represents the “Do Nothing” strategy,
so that the decision variables are initially non-basic.

In constructing the initial simplex tableau, the search for of the optimal solution
begins at the origin. Indicating that nothing can be produced

In general, whenever there are n variables and m constraints (excluding the

non-negativity), where m is less than n (m<n), n-m variables must be set
equal to zero before the solution can be solved algebraically.

a. Basic variables are variables with non-zero solution values.

Or: basic variables are variables that are in the basic solution. Basic
variables have 0 values in the Cj-Zj row.

b. Non-basic variables are variables with zero solution values.

Or: non-basic variables are variables that are out of the solution.

==>n=5 variables (x1 , x2, s1, s2, and s3) and m=3 constraints (Labor,
machine and marketing constraints), excluding non-negativity

Therefore, n-m=5-3=2 variables(x1 and x2) are set equal to zero in the 1st
simplex tableau. These are non-basic variables. 3 Variables (s1, s2, and s3) are
basic variables (in the 1st simplex tableau) because they have non-zero solution
values.

Step 4

Construct the initial simplex tableau,

19
a) List the variables across the top of the table and write the objective function coefficient of
each variable just above it.
b) There should be one row in the body of the table for each constraint. List the slack
variables in the basis column, one per raw.
c) In the Cj column, enter the objective function coefficient of zero for each slack variable. (Cj
- coefficient of variable j in the objective function)

Initial simplex tableau

quantity column
Real or decision variables column
Basic or Solution variable column

Slack variables columns

Solution
Profit per unit column

Profit per unit row

Constraint equation rows

Gross Profit row

Net Profit row /Indicator row/

20
 60 50 0 0
Cj
0

X1 X2 S1 S2
SV Q
S3

4 10 1 0 100 R1
0 S1
0
R2
2 1 0 1 22
0 S2
0
R3
3 3 0 0
0 S3 39
1

0 0 0 0
Zj 0
0

Cj - 60 50 0 0
Zj 0

Step 5:

Choose the “incoming” or “entering” variables

Note:

The entering variable is the variable that has the most positive value in the
Cj - Zj row also called as indicator row. Or the entering variable is the
variable that has the highest contribution to profit per unit.

a. X1 in our case is the entering variable

b. The column associated with the entering variable is called key or pivot
column ( X1 column in our case )
Step 6

Choose the “leaving “or “outgoing” variable

==> In this step, we determine the variable that will leave the solution for X1
(or entering variable)

Note:

21
 The row with the minimum or lowest positive (non-negative)
replacement ratio shows the variable to leave the solution.

Replacement Ratio (RR) = Solution Quantity (Q)

Corresponding values in pivot column

Note: RR>0

 The variable leaving the solution is called leaving variable or outgoing

variable.
 The row associated with the leaving variable is called key or pivot row (s3
column in our case)
 The element that lies at the intersection of the pivot column and pivot row is
called pivot element(No 1 in our case)
Step 7

 Repeat step 3-5 till optimum basic feasible solution is obtained. Optimum
basic feasible solution is occurred when the values in the Cj - Zj row are
become equal to zero or negative value. Or: repeat step 3-5 till no
positive value occurs in the Cj - Zj row.

Note:

 Divide each element of the pivot row by the pivot element to find new
values in the key or pivot row. All elements of old-row divided by Pivot-element
 Up-Dating all other rows. (Old-row element) - (Corresponding pivot column element *
updated corresponding pivot row element) = (New element)
 Perform row operations to make all other entries for the pivot
column equal to zero.
 Up-dating Zj & Cj - Zj rows. Each Zj, is obtained as the sum of the products of the Cj
column coefficients multiplied by the corresponding coefficient in the Jth column. (i.e.) the
Quantity column). It is then subtracted from Cj - Zj row values to get Cj - Zj values.

Test of optimality

 i. If all Cj - Zj < 0, then the basic feasible solution is optimal

(Maximization case)
 ii. If all Cj - Zj > 0, then the basic feasible solution is optimal
(Minimization case)

Variable to enter the basis

22
 i. A variable that has the most positive value in the C j - Zj row
(Maximization case)
ii. A variable that has the highest negative value in the C j - Zj row
(Minimization case)

Variable to leave the basis

The row with the non-negative and minimum replacement ratio

(For both maximization and minimization cases
i.e: RR > 0

2. Two incoming variables

/ Or Tie for entering variables/

In order to break this tie, the selection for the key column (entering variable)
can be made arbitrary. However; the number of solution can be minimized by
adopting the following rules:

1. If there is a tie between two decision variables, then the selection

can be made arbitrary.

2. If there is a tie between a decision variable and a slack (or surplus)

variable, then select the decision variable to enter into basis first.

3. If there is a tie between slack or surplus variable, then selection

can be made arbitrary.

Example:

Cj

X1 X2 S1
SV Q
S3

If the equation is max Z:

Zj 23
5 2
Cj - Z j
5 0
In such a case,X1 is the entering variable

Degeneracy

/Tie for leaving basic variable (key row)/

If there is a tie for the smallest ratio, this is a signal that degeneracy exists.
Degeneracy can occur right in the first (initial tableau).This normally happens
when the number of constraints is less than the number of variables in the
objective function. Problem can be overcome by trial and error method

5 8 2 0
Cj
0 0

X1 X2 X3 S1 Q
SV
S2 S3
RR
1/4 1 1 -2 10/1/4=40
8 X2 10 20/4=5 Tie for the smallest ratio in
0 0 10/2=5 degeneracy
indicates degeneracy
4 0 1/3 -1 10/2=5
0 S2 20 Tie for the smallest ratio
1 0 indicates degeneracy
10/2=5
2 0 2 2/5 Tie for the smallest ratio
0 S3 10 indicates degeneracy.
0 1 10/2=5

2 8 8
Zj 80 24
16 0 0

Cj - Z j 3 0 -6 -
16 0 0
Degeneracy could lead to a situation known as cycling, in which the simplex
algorithm alternatives back and forth between the same non-optimal solutions,
i.e, it puts a new variable in, then takes it out in the next tableau, puts it back
in ,and so on.

One simple way of dealing with the issue is to select either row (S2 or S3 in this
case) arbitrary. If we are unlucky and cycling does occur, we simply go back
and select the other row.

DUALITY

Every LPP has another LPP associated with it, which is called its dual. The
first way of starting a linear problem is called the primal of the problem.
The second way of starting the same problem is called the dual. The
optimal solutions for the primal and the dual are equivalent, but they are
derived through alternative procedures.

Duality Theory

Dual Problem: Given a (min, ≥) problem, we create a (max, ≤) problem by the following
transformations:

 Min Max and vice versa

 ≥ ≤ in the functional constraints and vice versa
 RHS Objective function coefficients
 Objective function coefficients RHS
 Constraint coefficients are transposed

Transpose: Interchange rows and columns of a matrix, table, etc.

a b c a d

d e f its transpose is  b e

c f

25
 0Problem P (Primal

Min C =5x1+3x2

s.t.

x1+3x2≥82

x1−4x2≥7

x1, x2≥0

Its dual is the following

0Problem D (Dual)

Max P= 8y1+7y2

s.t.

y1+3y2≤5

y1−4y2≤3

y1,y2≥0

SENSITIVITY ANALYSIS

Sensitivity analysis is an extension of linear programming beyond identifying the optimal solution.
It enables managers to answer “What if…?” questions concerning the impact of potential changes
to model parameters (constraints).

Sensitivity analysis, or post optimality analysis, as it is also referred to, carries the LP analysis
beyond the determination of the optimal solution. It begins with the final simplex tableau. Its
purpose is to explore how changes in any of the parameters of a problem, such as the coefficients
of the constraints, coefficients of the objective function, or the right-hand side values, would
affect the solution. This kind of analysis can be quite beneficial to a decision maker in a number of
ways.

In preceding units, the formulation and solution of linear programming problems treated the
parameters of a problem as if they were known and fixed. The goal of analysis was to determine
the optimal value of the decision variables in the context. Unfortunately, in practice, the
parameters of a problem often are no more than educated guesses. Consequently, the optimal
solution may or may not be optimal, depending on how sensitive that solution is to alternate
values of parameters. Hence, a decision maker usually would want to perform sensitivity analysis

26
before implementing a solution. If the additional analysis satisfies the decision maker that the
solution is reasonable, he or she can proceed with greater confidence in using the solution.
Conversely, if sensitivity analysis indicates that the solution is sensitive to changes that are within
the realm of possibility, the decision maker will be warned that more precise information on
parameters is needed.

Even if the parameters of a problem are known with a high degree of certainty, a decision maker
might still want to use sensitivity analysis in order to determine how changes in parameters would
affect the final solution. For instance, a manager may want to consider obtaining an additional
amount of some scarce resource that might be available, in which case the manager would want
to know the answers to questions such as:

1. Will an increase in the right-hand side of this constraint affect the objective function?
2. If so, how much of the resource can be used?
3. Given the answer to the preceding question, what will be the revised optimal solution?
Conversely, the decision maker might be facing a situation in which the amount of a scarce
resource available is less than the original amount, in which case the issues would be:

1. Will the decreased level of the resource have an impact on the value of the objective
function?
2. If yes, how much of an impact will it have, and what will be the revised optimal solution?
Of course, not all constraints pertain to scarce resources. However, the concept is the same: What
impact will a change in the right-hand side value of a constraint have on the optimal value of the
objective function and what impact will the change have on the optimal values of the solution
variables?

Similar questions can arise if there are changes contemplated in the coefficients of the objective
function. For instance, the marketing department may want to change the price of a product, and
that may alter the product’s coefficients in the objective function. Similarly, a change in a
manufacturing process may require a change in a constraint coefficients are beyond the scope of
this book

A Change in the RHS of A Constraint

The first step in determining how a change in the RHS (right hand side) of a constraint (e.g., the
amount of scarce resource that is available for use) would influence the optimal solution is to
examine the shadow prices in the final simplex tableau. These are the values in the Z row in the
slack columns. The final tableau for the microcomputer problem is shown in Table 6-1.

27
 C 60 50 0 0 0

Basis x1 x2 S1 S2 S3 Quantity

S1 0 0 0 1 6 -
16
3 24

x1 60
1
1 0 0 1 - 3

x2 9
50
2
0 1 0 -1 3

Z 60 50 0 10
40
3 740

C-Z 40
0 0 0 -10 - 3

Negatives of
shadow prices

Table 6-1 Shadow Prices in the microcomputer final tableau

40
The shadow prices are 0, 10, and 3 . Note that the negatives of the shadow prices appear in the
bottom row of the table. Because they differ only in sign, the values in the bottom row are
sometimes also referred to as shadow prices.

A shadow price is a marginal value; it indicates the impact that a one-unit change in the amount of
a constraint would have on the value of the objective function. More specifically, a shadow price
reveals the amount by which the value of the objective function would increase if the level of the
constraint was increased by one unit. Table 6-1 reveals that the shadow prices are $0 for S1 (i.e.,
the first constraint, assembly time), $10 for S2 (i.e., the second constraint, inspection time) and $
40 S
for 3 (i.e., the third constraint, storage space). This tells us that if the amount of assembly
3

time was increased by one hour, there would be no effect on profit; if inspection time was
increased by one hour, the effect would be to increase profit by $10; and if storage space was
40
increased by one cubic foot, profit would increase by $ 3 , or $13.33. The reverse also holds. That
is, by using the negative sign of each shadow price, we can determine how much a one-unit
decrease in the amount of each constraint would decrease profit. Hence, a one-unit decrease in
assembly time would have no effect because its shadow price is $0. However, a one-unit decrease

28
in inspection time would decrease profit by $10, and a one unit decrease in storage space would
decrease profit by $13.33. In effect, shadow prices are a manager’s “window” for gauging the
impact that changes have on the value of the objective function.

29