P6. Consider the golf clubs manufacturer problem from the previous chapter.

The goal of the

operations manager is to determine how many iron sets to produce each month so the company

can maximize the revenue. The amount of machine hours is still 20,000 and the company still

pays its workers in the iron set assembly line an average of $40 per hour. Operational data for

this exercise can be found in the ch4_P6lironsetsproduction which can be downloaded from the

companion website. The minimum production quota of 500 units and the maximum quota of

1000 units are still required however the manager is allowed to offer a 20% discount to those

iron sets which sell over 600 units per month.

1. Explain why the new requirement will transform the model form LP to NLP.

2. Recalculate the new contribution coefficients using an IF function

3. Calculates the values of the average net profit for each iron set, average time usage per

each iron set, the total profit for a given production set, the actual usage of machine and

labor hours for a given production mix. Assume an initial production level of one unit

for each set

4. Use solver to set up the objective function and constraints and generate an optimal

solution

5. Analyze results using the Sensitivity Report and the Limits Report
 P6. A shoe manufacturer would like to determine the best way to maximize profits on three

new shoe models. The new models belong in the following categories: running, hiking, and

casual, The model in the running category will result in a profit of $30 per item, the model in

the hiking category will result in $40 profit per item, and the model in the casual category will

result in $20 per item. The manufacturer has limitations in terms of production hours to

consider: 1000 hours of production time available per month in the cutting/sewing department,

600 hours per month in the finishing department, and only 500 hours per month available in

the packaging/shipping department. The following table illustrates the production time

requirements for each shoe model.

Production Time (Hours)

Model Cutting/Sewing | Finishing | Packaging/Shipping | Profit/Shoe

Running Shoe Model (x) 2.00 0.50 1.5 $30.00

Hiking Shoe Model (x2) 3.00 1.50 0.125 $40.00

Casual Show Model (x3) 1.00 0.50 1.5 $20.00

The production manager is seeking to optimize production according to several company goals.

* (Pl = 500) Priority 1: The manufacturer should produce at least 100 pair of shoes for each

model.

* (P2 = 400) Priority 2: The manufacturer should meet monthly demand of 300 pair per month

for running shoes and casual shoes.

* (P3 = 100) Priority 3: The manufacturer should utilize the available machine hours.

1, Formulate the problem as a simple LP

2. Define deviational variables for goal programming model

3. Identify GP and system constraints

4. Formulate GP model

5. Solve the problem with Solver and analyze the results

PS. Consider the toy manufacturing case from Chapter 4 (problem P4). As a reminder, the

following requirements are stated in the problem description for this nonlinear programming

model.

The manufacturing requirements

for each toy production lot remain the same and are

shown in the following table:

Raw Materials Truck Toy Car Toy Available

Plastic 6 Lb. & lb. 72 tb.
Labor Hours 10 hrs. 8 hrs. 80 hrs.
Machine Time 10 hrs. 4 hrs. 60 hrs.

The cost of producing a lot of toy trucks is 700T+ 4 OT’ + 1,000 and the cost of producing

a lot of toy cars is 200C +20C? + 1500. There is a total budget of $5,000 per week. The

profit for either toy is $500 per lot. The template and additional data can be found in the

Excel file named ch5_PStoys and can be downloaded from the companion website.

Formulate the problem as a goal nonlinear programming model to include the following goals

and with their respective priorities:

Goal 1: The company should use the available plastic completely (P=1000)

Goal 2: The company should not underutilize labor and machine hours available (P=200)

* Goal 3: The company should minimize production cost (P=500)

Solve the GP problems and indicate which of the goals is achieved. Try different priority values

and investigate how the solution changes. Offer managerial recommendations based on your

findings.
P5. An appliance warehouse stocks the following items: microwaves, ranges, washers, dryers,

and dishwashers. Operational data in the ch4_PSappliances file located in the companion

website indicate the demand for each appliance during the last 12 months. The following table

stores additional operational data for each appliance:

Microwave | Range Washer | Dryer Dishwasher

Monthly Demand (units) 700 500 600 600 500
Selling Price per Unit $300 $2,000 $2,000 | $2,000 $800
Holding Cost (per unit, $15 $100 $100 $100 $40
period)
Ordering Cost (per order) $70 $175 $200 $200 $185
Storage Space Required 3 18 20 22 18
(cubic feet per unit)

You are the logistics manager and would like to calculate the monthly order quantity for

each item category to minimize overall inventory cost. The Economic Order Quantity model can

be used to optimally calculate the amount of inventory for each item group with the goal of

minimizing the storage (holding) cost and ordering cost. However, there are some constraints

such as storage capacity (5,000 cubic feet) and purchasing budget $2.0 million) which may make

the optimal solution of EOQ model not feasible.

1. Formulate and solve above problem as a linear programming model.

a. What is the optimal order inventory level for each appliance? Are these quantities

different form the values calculated via the EOQ formula? Why?

b. What is the value of the objective function (holding plus ordering cost) for the above

solution?

2. The company will implement a quantity discount policy when pricing each appliance. The

following table represents the price for each appliance when the warehouse orders a specified

quantity range. For example, if the warehouse orders up to 40 microwaves, then the price is

$160, when the ware house orders from 41-60 microwaves the price drops to $150, and so

on.

1. Adjust the Excel template to reflect the price discount using vlookup functions.

Quantity ordered | 0-40 41-60 61-80 80 or over

Microwave $160 $150 $140 $135
Range $1,100 $1,000 $900 $950
Washer $1,100 $1,000 $900 $950
Dryer $1,100 $1,000 $900 $950
Dishwasher $450 $400 $350 $300

2. Formulate and solve the problem with an NLP model to determine the optimal order
 Quantity ordered | 0-40 41-60 61-80 80 or over
Microwave $160 $150 $140 $135
Range $1,100 $1,000 $900 $950
Washer $1,100 | $1,000 | $900 $950
Dryer $1,100 $1,000 $900 $950
Dishwasher $450 $400 $350 $300

2. Formulate and solve the problem with an NLP model to determine the optimal order

quantity which maximizes the total profit. Note that the profit for each appliance can be

calculated as: ((selling price — discounted purchasing price)*(monthly demand)) — total

cost per month

3. Analyze the Answer Report to identify the final values for the decision variables, binding

and not binding constraints, and the impact of changing the right hand side values of the

constraints in the final value of the objective function.

P7. The management team of a resort hotel and convention center has several goals related to the

new project of expanding the convention center. You are hired as an analyst and your task is to

help determine how many rooms are needed to expand. The following table indicates a summary

of operational data which can serve as input parameters to the optimization model.

Room Type Required Area per Expected Cost

Room (square feet) per Room
Small Rooms 1400 $20,000

Medium Rooms 1800 $30,000

Large Rooms 2200 $40,000

There is a $2,000,000 budget for expansion and the following priorities must be considered:

* Goal 1, The expansion should include at least 5 small conference rooms (P1=5)

* Goal 2. The expansion should include at least 10 medium conference rooms (P2=3)

* Goal 3. The expansion should include at least 15 large conference rooms (P3=3)

* Goal 4. The expansion should include at least 90000 square feet (P4=1)

* Goal 5. The expansion should cost no more than $2,000,000 (P5=1)

1. Formulate the above problem as a simple LP model. The goal is to minimize the overall

construction cost and the constraints can be similar to the five stated goals with equal

priority values.

2. Define deviational variables, goal and systems constraints and reformulate the problem as

a goal programming model

3. Solve the problem with Solver and analyze the results

PS, You are the logistics manager of a distributor of frozen foods. The product line is comprised

of 40 distinct products and they have different production and shipping costs due to the varying

sizes of boxes and locations in the warehouse. The company has employed 50 workers who

manufacture the food products. They work 40 hour work per week, regardless of demand. The

company has set budgets for production, packing, and shipping at $4,000, $6,000, and $13,000

respectively. Four weeks of operational data are recorded and a summary is presented in the

ch3_P5frozenfood file from the companion website. The file contains data about product price

per unit, raw materials cost per unit, packing costs per unit, shipping costs per unit, production

costs per hour, production time per unit, and maximum possible quantity to be shipped as

constraint by prior contractual agreements. The manager wants to determine how many units of

each product should be produced, packed, and shipped in order to maximize the total net profit

contributions.

1. Prepare an Excel template which calculates the input parameters for the LP model.

Specifically, contribution coefficients (cc) for each product as the net profit based on the

following formula:

cc= price per unit — (shipping cost per unit + packing cost per unit + production cost per

hour*production time per unit)

2. Use Solver to set up the objective function and constraints and generate an optimal solution.

Analyze the results using the Answer Report, the Sensitivity Report and the Limits Report

and answer the following managerial questions:

a. What is the maximum possible profit that the company can reach?

b. How many units of each product must be produced, packed, and shipped for the

optimal solution?

c. Ifadditional funding is made available, where should the company invest among its

four resources: labor hours, production budget, packing budget, or shipping budget.

Explain why?
P7. Colored Cosmetics is a mineral cosmetics company that ships their custom-blended products

all over the world, The company produces various colors of lipsticks, eyeliners, eye shadows,

blushes, and foundations. You are the operations manager for the company and your goal is to

determine how many units of each product to produce each month in order to maximize revenue.

Operational data from the last three months is recorded and can be found in the ch3_P7cosmetics

file which can be downloaded from the companion website. These data consists of average

processing time, cost of raw materials, and monthly demand for the last three months. There are

currently 46 different color product combinations. Costs of producing each product vary

depending on the different types of pigments used in the particular colors. There is a different

cost for each product since certain pigments are more costly than others. A total of $3,000 is

available every month to purchase raw materials, Also, a staff member put in 10 hours per week

(40 hours per month) at a labor cost of $12 per hour, The cosmetic facility wants to limit its

production capacity to no more than the maximum demand for each line during the last three

months.

1. Using a Pivot Table, process the Excel file data to calculate the average processing time,

cost of raw materials, and maximum monthly demand for each cosmetic product

2. Prepare an Excel template which calculates the values of the average net profit for each

cosmetic product, average time usage per each cosmetic, the total profit for a given

product, and the actual usage of labor hours for a given production mix. Assume an

initial production level of one unit for each product

3. Use Solver to set up the objective function and constraints and generate an optimal

solution

4. Analyze results using the Sensitivity Report and the Limits Report