CHAPTER TWO

FORMULATION OF MEDIUM AND LARGE LP PROBLEMS

2.1 Diet problem.
2.2 Work scheduling problem.
2.3 Capital budgeting problem
2.4 Production scheduling problem
2.5 Transportation problem.
2.6 Marketing problem.

Introduction

The chapter will show how a large number of real-life problems can be tackled using linear
programming. Examples in areas of production mix, labour scheduling, job assignment, production
scheduling, marketing, transportation, and finance will be discussed. The principles developed here are
definitely applicable to larger problems.

2.1 Diet Problem

My diet requires that all the food I eat come from one of the four “basic food groups” (chocolate cake,
ice cream, soda, and cheese cake). At present the following four foods are available for consumption:
brownies, chocolate ice cream, cola, and pineapple cheesecake. Each brownie costs 50/=, each scoop
of chocolate ice cream costs 20/=, each bottle of cola costs 30/=, and each piece of pineapple
cheesecake costs 80/=. Each day, I must ingest at least 500 calories, 6 grams of chocolate, 10 grams
of sugar and 8 grams of fat. The nutritional content per unit of each food is shown in the table below.
Formulate a linear programming model that can be used to satisfy my daily nutritional requirements at
minimum cost.
Calories Chocolate Sugar Fat
(gms) (gms) (gms)
Brownie 400 3 2 2
Chocolate Ice Cream (1 scoop) 200 2 2 4
Cola (1 bottle) 150 0 4 1
Pineapple Cheesecake (1 piece) 500 0 4 5

Decision variables:

x1 = number of brownies eaten daily.

x2 = number of scoops of chocolate ice cream eaten daily.
x3 = bottles of cola drunk daily.
x4 = pieces of pineapple cheesecake eaten daily.

Final LP Model

Min z = 50x1 + 20x2 + 30x3 + 80x4 Objective function

s.t. 400 x1 + 200 x2 + 150 x3 + 500 x4 ¿ 500 Calorie constraint
3 x1 + 2 x2 ¿ 6 Chocolate constraint
2 x1 + 2 x2 + 4 x3 + 4 x4 ¿ 10 Sugar constraint
2 x1 + 4 x2 + x3 + 5 x4 ¿ 8 Fat constraint
xi ¿ 0; i = 1,2,3,4

1
2.2 Work Scheduling Problem

A post office requires different numbers of full-time employees on different days of the week. The
number of full time employee required on each day is given in the table below. Union rules state that
each full time employee must work five consecutive days and then receive two days off. For example,
an employee who works Monday to Friday must be off on Saturday and Sunday. The post office wants
to meet its daily requirements using only full time employees. Formulate an LP model that the post
office can use to minimize the number of full time employees that must be used.
Day Mon Tues Wed Thur Fri Sat Sun
No. of Employees 17 13 15 19 14 16 11

Decision variables:

xi = number of employees starting their work schedule on day i. (day 1 = Monday; day 2 = Tuesday; and
so on)

Final LP model

Min z = x1 + x2 + x3 + x4 + x5 + x6 + x7 Objective function

s.t. x1 + x4 + x5 + x6 + x7 ¿ 17 Mon Constraint
x1 + x2 + x5 + x6 + x7 ¿ 13 Tues Constraint
x1 + x2 + x3 + x6 + x7 ¿ 15 Wed Constraint
x1 + x2 + x3 + x4 + x7 ¿ 19 Thur Constraint
x1 + x2 + x3 + x4 + x5 ¿ 14 Fri Constraint
x2 + x3 + x4 + x5 + x6 ¿ 16 Sat Constraint
x3 + x4 + x5 + x6 + x7 ¿ 11 Sun Constraint
xi ¿ 0; i=1,2,…,7

2.3 Capital Budgeting Problem

Kobil Uganda Ltd is considering five different investment opportunities. The cash outflows and net
present values (in million dollars) are given in the table below. Kobil Uganda Ltd has $40 million
available for investment at the present time (time 0); it estimates that one year from now (time 1) $20
million will be available for investment. Kobil Uganda Ltd may purchase any fraction of each
investment. In this case, the cash outflows and NPV are adjusted accordingly. For example, if Kobil
Uganda Ltd purchases one fifth of investment 3, then a cash outflow of 1/5(5) = $1 million would be
required at time 0, and a cash outflow of 1/5(5) = $1 million would be required at time 1. The one fifth of
share of investment 3 would yield an NPV of 1/5(16) = $3.2 million. Kobil Uganda Ltd wants to
maximize the NPV that can be obtained by investing in investments 1 – 5. Formulate an LP that will
help achieve this goal. Assume that any funds left over at time 0 cannot be used at time 1.
Inv. 1 Inv. 2 Inv. 3 Inv. 4 Inv.5
Time 0 cash outflow 11 53 5 5 29
Time 1 cash outflow 3 6 5 1 34
NPV 13 16 16 14 39

Notes:
Total investment at time 0 cannot exceed $40 million
Total investment at time 1 cannot exceed $20 million.
It is not possible to purchase more than 100% of investment i = 1, 2,3,4,5

2
Decision Variables:

xi = fraction of investment i purchased by Kobil Uganda Ltd (i = 1,2,3,4,5)

Final LP Model

Max z = 13x1 + 16x2 + 16x3 + 14x4 + 39x5 Objective function

s.t. 11x1 + 53 x2 + 5 x3 + 5x4 + 29x5 ¿ 40 Time 0 Constraint
3x1 + 6 x2 + 5 x3 + x4 + 34x5 ¿ 20 Time 1 Constraint
x1 ¿ 1 Inv. 1 Constraint
x2 ¿ 1 Inv. 2 Constraint
x3 ¿ 1 Inv. 3 Constraint
x4 ¿ 1 Inv. 4 Constraint
x5 ¿ 1 Inv. 5 Constraint
xi ¿ 0; i=1,2,…,5

Multiperiod Financial Problem

Akright must determine investment strategy for the firm during the next three years. At present (time 0),
$100,000 is available for investment. Investments A,B,C,D and E are available. The cash flow
associated with investing $1 in each investment is given in the table below.

For example, $1 invested in investment B requires $1 cash outflow at time 1and returns $0.5 at time 2
and $1 at time 3. To ensure that the company’s portfolio is diversified, Akright requires that at most
$75,000 be placed in any single investment. In addition to investment A – E, Akright can earn interest at
8% per year by keeping uninvested cash in money market funds. Returns from investments may be
immediately reinvested. For example, the positive cash flow received from investment C at time 1 may
immediately be reinvested in investment B. Akright cannot borrow funds, so the cash available for
investment at any time is limited to cash on hand. Formulate an LP that will maximize cash on hand at
time 3.
Cash Flow of Time
Investment 0 1 2 3
A -1 0.5 1 0
B 0 -1 0.5 1
C -1 1.2 0 0
D -1 0 0 1.9
E 0 0 -1 1.5

Notes:
- cash outflow
+ cash inflow

Decision Variables

A,B,C,D,E
St (dollars invested in money market funds at time t = 0,1,2)

Final LP Model

3
 Max z = B + 1.9D + 1.5E + 1.08S2 Objective function
s.t. A +C +D + S0 = 100,000 Time 0 Constraint
0.5A + 1.2C + 1.08 S0 = B+S1 Time 1 Constraint
A + 0.5B + 1.08S1 = E+S2 Time 2 Constraint
A ¿ 75000 Inv. A Constraint
B ¿ 75000 Inv. B Constraint
+C ¿ 75000 Inv. C Constraint
+D ¿ 75000 Inv. D Constraint
+E ¿ 75000 Inv. E Constraint

A,B,C,D,E,S0,S1,S2 ¿ 0

2.4 Production Scheduling Problem

CAL is a chain of computer service stores. The number of hours of skilled repair time that CAL requires
during the next five month is as follows:
Month 1 (January) : 6,000 hrs
Month 2 (February) : 7,000 hrs
Month 3 (March) : 8,000 hrs
Month 4 (April) : 9,500 hrs
Month 5 (May) : 11,000 hrs

At the beginning of January, 50 skilled technicians work for CAL. Each skilled technician can work up to
160 hours per month. In order to meet future demands, new technicians must be trained. It takes one
month to train a new technician. During the month of training, a trainee must be supervised for 50 hours
by an experienced technician. Each experienced technician is paid $2,000 a month (even if he or she
does not work the full 160 hours). During the month of training, a trainee is paid $1,000 a month. At the
end of each month, 5% of CAL’s experienced technicians quit to join Plum Computers. Formulate an
LP whose solution will enable CAL to minimize the labor cost incurred in meeting the service
requirements for the next five months.

Decision Variables:

xt = number of technicians trained during month t.

yt = number of experienced technicians at the beginning of period t.

Final LP Model:

Min z = 1000(x1 + x2 + x3 + x4 + x5) + 2000(y1 + y2 + y3 + y4 + y5)

s.t. 160y1 – 50x1 ¿ 6000; y1 = 50
160y2 – 50x2 7000;
¿ 0.95y1 + x1 = y2
160y3 – 50x3 ¿ 8000; 0.95y2 + x2 = y3
160y4 – 50x4 9500;
¿ 0.95y3 + x3 = y4
160y5 – 50x5 ¿ 11000; 0.95y4 + x4 = y5
xt, yt ¿ 0; t = 1,2,3,4,5

4
2.5 Transportation Problem

Top Speed Bicycle Company manufactures and markets a line of 10 speed bicycles nationwide. The
firm has final assembly plants in two cities in which labor costs are low, New Orleans and Omaha. Its
three major warehouses are located near the large market areas of New York, Chicago, and Los
Angeles.

The sales requirements for the next year at the New York warehouse are 10,000 bicycles, at the
Chicago warehouse 8,000 bicycles, and at the Los Angeles warehouse 15,000 bicycles. The factory
capacity at each location is limited. New Orleans can assemble and ship 20,000 bicycles; the Omaha
plant can produce 15,000 bicycles per year. The cost of shipping one bicycle from each factory to each
warehouse differs, and these unit shipping costs are as in the table below.
FROM/TO New York Chicago Los Angeles
New Orleans $2 $3 $5
Omaha $3 $1 $4

Formulate this as an LP model that will help the company minimize the transportation costs.

Decision Variables:

xij = number of bicycles shipped from origin i to destination j.

FROM/TO New York (n) Chicago (c) Los Angeles (l) Supply
New Orleans (n) $2 $3 $5 20000
Omaha (o) $3 $1 $4 15000
Demand 10000 8000 15000

Final LP Model

Min z = 2xnn + 3xnc + 5xnl +3xon + 1xoc + 4xol

s.t. xnn + xon = 10000 (New York demand)
xnc + xoc = 8000 (Chicago demand)
xnl +xol = 15000 (Los Angeles demand)
xnn + xnc + xnl ¿ 20000 (New Orleans Factory supply)
xon + xoc + xol ¿ 15000 (Omaha factory supply)
xij ¿ 0; i =n,o; j = n,c,l

2.6 Marketing Problem

Kobil Uganda Ltd promotes use of K-gas in Uganda. The company has budgeted up to $8,000 per
week for local advertising. The money is to be allocated among four promotional media: TV spots,
newspaper ads, and two types of radio advertisements. The company is to reach the largest possible
high potential audience through the various media. The following table represents the number of
potential users reached by making use of an advertisement in each of the four media. It also provides
the cost per ad placed and maximum number of ads that can be purchased per week.
Medium Audience Cost per Maximum ads
Reached per ad ($) per week
ad
TV spot (1 minute) 5000 800 12
Daily newspaper (full page ad) 8500 925 5

5
 Radio spot (30 sec, prime time) 2400 290 25
Radio spot (1 minute, afternoon) 2800 380 20

Kobil Uganda Ltd contractual arrangement require that at least five radio spots be placed each week.
To ensure a broad-scoped promotional campaign, management also insists that no more than $1,800
be spent on radio ads every week. Formulate the problem as an LP model to help Kobil Uganda Ltd to
maximize audience coverage.

Decision Variables:

x1 = number of 1 minute TV spots taken each week

x2 = number of full-page daily newspaper ads taken each week.
x3 = number of 30 second prime time radio spots taken each week.
x4 = number of 1 - minute afternoon radio spots taken each week.

Final LP Model

Max z = 5000x1 + 8500x2 + 2400x3 + 2800x4 Objective function

s.t. 800x1 + 925 x2 + 290x3 + 380x4 ¿ 8000 All ads budget
290 x3 + 380x4 ¿ 1800 Radio ads budget
x3 + x4 ¿ 5 Min radio spots contracted
x1 ¿ 12 Max TV spots/wk
x2 ¿ 5 Max newspaper ads/wk
x3 ¿ 25 Max 30 sec radio spots/wk
x4 ¿ 20 Max1-min radio spot/wk
xi ¿ 0; i = 1,2,3,4

Problems

1. U.S. Labs manufactures heart valves from the heart valves of pigs. Different heart operations
require valves of different sizes. U. S. Labs purchases pig valves from three different suppliers. The
cost and size mix of the valves purchased from each supplier are given in the table. Each month,
U.S. Labs places one order with each supplier. At least 500 large, 300 medium, and 300 small
valves must be purchased each month. Because of limited availability of pig valves, at most 500
valves per month can be purchased from each supplier. Formulate an LP that can be used to
minimize the cost of acquiring the needed valves.
Cost per Percent Percent Percent
valve ($) Large Medium Small
Supplier 1 5 40 40 20
Supplier 2 4 30 35 35
Supplier 3 3 20 20 60

2. During each 4-hour period, the Smalltown police force requires the following number of on duty
police officers: 12 midnight to 4 AM – 8; 4 to 8 AM – 7; 8 AM to 12 noon – 6; 12 noon to 4 PM – 6;
4 to 8 PM – 5; 8 PM to 12 midnight – 4. Each police officer works two consecutive 4-hour shifts.
Formulate an LP that can be used to minimize the number of police officers needed to meet
Smalltown’s daily requirement.

6
3. Bullco blends silicon and nitrogen to produce two types of fertilizers. Fertilizer 1 must be at least
40% nitrogen and sells for $70 per Kg. fertilizer 2 must be at least 70% silicon and sells for $40 per
kg. Bullco can purchase up to 80 Kgs of nitrogen at $15 per Kg and up to 100 Kgs of silicon at $10
per kg. Assuming that all fertilizer produced can be sold, formulate an LP to help Bullco maximize
profits.

4. Coalco produces coal at three mines and ships it to four customers. The cost per ton of producing
coal, the ash and sulphur content (per ton) of the coal, and the production capacity (in tons) for
each mine are given in the table. The numbers of tons of coal demanded by each customer are
given in the table. The cost (in dollars) of shipping a ton of coal from a mine to each customer is
given in the table. It is required that the total amount of coal shipped contains at most 5% ash and
at most 4% sulphur. Formulate an LP that minimizes the cost of meeting customer demands.
Production Capacity Ash Sulphur
cost ($) content Content
Mine 1 50 120 0.08 0.05
Mine 2 55 100 0.06 0.04
Mine 3 62 140 0.04 0.03

Customer 1 Customer 2 Customer 3 Customer 4

Demand 80 70 60 90

Transport Costs
Customer 1 Customer 2 Customer 3 Customer 4
Mine 1 4 6 8 12
Mine 2 9 6 7 11
Mine 3 8 12 3 5