PCOA 009

Management Science
First Semester, SY 2020-2021

Joseph Matthew A. Sierra, CPA

Learning Objective:
• Understand the purpose of linear programming
• Explain basic concepts of optimization, modelling and linear programming
• Model the decision-making problems by using linear programming techniques
• Solve a problem modelled in linear programming

Linear Programming
Linear programming is a problem-solving approach developed to help managers make decisions. Numerous
applications of linear programming can be found in today’s competitive business environment. For instance, IBM
uses linear programming to perform capacity planning and to make capacity investment decisions for its semi-
conductor manufacturing operations. GE capital uses linear programming to help determine optimal lease
structuring. Marathon Oil Company uses linear programming for gasoline blending and to evaluate the economics
of a new terminal or pipeline.
To illustrate some of the properties that all linear programming problems have in common, consider the following
typical applications:
1. A manufacturer wants to develop a production schedule and an inventory policy that will satisfy sales
demand in future periods. Ideally, the schedule and policy will enable the company to satisfy demand and
at the same time minimize the total production and inventory cost.
2. A financial analyst must select an investment portfolio from a variety of stock and bond investment
alternatives. The analyst would like to establish the portfolio that maximizes the return on investment.
3. A marketing manager wants to determine how best to allocate a fixed advertising budget among alternative
advertising media such as radio, television, newspaper, and magazine. The manager would like to
determine the media mix that maximizes advertising effectiveness.
4. A company has warehouses in a number of locations throughout the United States. For a set of customer
demands, the company would like to determine how much each warehouse should ship to each customer
so that total transportation costs are minimized.
In all linear programming problems, the maximization and minimization of some quantity is the objective. All
linear programming problems also have a second property: restrictions, or constraints, that limit the degree to
which the objective can be pursued. In example 1, the manufacturer is restricted by constraints requiring product
demand to be satisfied and by the constraints limiting production capacity. Thus, constraints are another general
feature of every linear programming problem.
A SIMPLE MAXIMIZATION PROBLEM
Par, Inc., is a small manufacturer of golf equipment and supplies whose management has decided to move into
the market for medium- and high-priced golf bags. Par Inc.’s distributor is enthusiastic about the new product line
and has agreed to buy all the golf bags Par, Inc., produces over the next three months.
After a thorough investigation of the steps involved in manufacturing a golf bag, management determined that
each golf bag produced will require the following operations:
1. Cutting and dyeing the material
2. Sewing
3. Finishing
 4. Inspection and packaging
The director of manufacturing analyzed each of the operations and concluded that if the company produces a
medium-priced standard model, each bag will require 7/10 hour in cutting and dyeing department, 1/2 hour in the
sewing, 1 hour in the finishing, and 1/10 hour in the inspection and packaging department. The more expensive
deluxe model will require 1 hour for cutting and dyeing, 5/6 hour for sewing, 2/3 hour for finishing, and 1/4 hour
for inspection and packaging. This production information is summarized below.
Production time (hours)
Department Standard Bag Deluxe Bag
Cutting and Dyeing 7/10 1
Sewing 1/2 5/6
Finishing 1 2/3
Inspection and Packaging 1/10 1/4

Par inc.’s production is constrained by a limited number of hours available in each department after studying
departmental workload projections, the director of manufacturing estimates that 630 hours for cutting and dyeing,
600 hours for sewing, 708 hours for finishing, and 135 hours for inspection and packaging will be available for
the production of golf bags during the next three months.
The accounting department analyzed the production data, assigned all relevant variable costs, and arrived at prices
for both bags that will result in a profit contribution of $10 for every standard bag and $9 for every deluxe bag
produced.

PROBLEM FORMULATION
Problem formulation, or modeling, is the process of translating the verbal statement of a problem into a
mathematical statement.
Describe the objective. The objective is to maximize the total contribution to profit.
Describe each Constraints. Four constraints relate to the number of hours of manufacturing time available: they
restrict the number of standard bags and the number of deluxe bags that can be produced.
Constraint 1: Number of hours of cutting and dyeing time used must be less than or equal to the number
of hours of cutting and dyeing time available.
Constraint 2: Number of hours of sewing time used must be less than or equal to the number of hours of
sewing time available.
Constraint 3: Number of hours of finishing time used must be less than or equal to the number of hours
of finishing time available.
Constraint 4: Number of hours of inspection and packaging used must be less than or equal to the number
of hours of inspection and packaging time available.
Defining the decision variables. The controllable inputs for Par, Inc., the number of standard bags produced and
the number of deluxe bags produced. Let
S = number of standard bags
D = number of deluxe bags a
Mathematical statements. The mathematical statement or mathematical formulation of Par, Inc., problem is now
complete. We succeeded the objective and constraints of the problem into a set of mathematical relationships
referred to as a mathematical model. The complete mathematical model for Par, Inc., is as follows:

Max 10S + 9D
subject to:
7/10S + 1D ≤ 630 Cutting and Dyeing
1/2S + 5/6D ≤ 600 Sewing
1S + 2/3D ≤ 708 Finishing
1/10S + 1/4D ≤ 135 Inspection and Packaging

S, D ≥ 0

Our job now is to find the product mix that satisfies all the constraints and, at the same time, yields a value for
the objective functions that is greater than or equal to the value given by any other feasible solution. Once these
values are calculated, we will have found the optimal solution to the problem.
This mathematical model of the Par, Inc., problem is a linear programming model, or linear program. The
problem has the objective and constraints that, as we said earlier are common properties of all linear programs.
But what is special feature of this mathematical model that makes it a linear program? The special feature that
makes it a linear program is that objective function and all constraint functions are linear functions of the decision
variable.
GRAPHICAL SOLUTION PROCEDURE
A linear programming problem involving only two decision variables can be solved using a graphical solution
procedure. Let us begin the graphical solution procedure by developing a graph that displays the possible solutions
for the Par, Inc., problem. The graph will have values of S on the horizontal axis and value of D on vertical axis.
Any point on the graph can be identified by the S and D values, which indicate the position of the point along the
horizontal and vertical axes, respectively. Because every point (S, D) corresponds to a possible solution, every
point on the graph is called a solution point. The solution where S = 0 and D = 0 is referred to as the origin.
Because S and D must be nonnegative.
To show all the solution points that satisfy this relationship, we start by graphing the solution points satisfying
the constraint as an equality. That is the points where 7/10S +1D = 630. Because the graph of this equation is a
line, it can be obtained by identifying two points that satisfy the equation and then drawing a line through points.
Setting S = 0 and solving for D, we see that the point (S = 0, D = 630) satisfies the equation. To find a second
point satisfying this equation, we set D = 0 and solve for S. By doing so, we obtain 7/10S + 1(0) = 630, S = 900.
Thus, a second point satisfying the equation is (S = 900, D = 0). Given these two points, we can now graph the
line corresponding to the equation.
Can you identify all of the solution points that satisfy this constraint? Because all points on the line satisfy 7/10S
+ 1D = 630, we know any point on this line must satisfy the constraint. But where are the solution points satisfying
7/10S + 1D = 630? Consider two solution points: (S = 200, D = 200) and (S = 600, D = 500). You can see that the
first solution point is below the constraint line and the second is above the constraint line. Which of these solutions
will satisfy the cutting and dyeing constraint? For the point (S = 200, D = 200), we see that
7/10S + 1D = 7/10(200) + 1(200) = 340
Because the 340 hours is less than the 630 hours available, the (S = 200, D = 200) production combination, or
solution point, satisfies the constraint. For the point (S = 600, D = 500), we have
7/10S + 1D = 7/10(600) + 1(500) = 920
The 920 hours is greater than the 630 hours available, so the (S = 600, D = 500) solution point does not satisfy
the constraint and is thus not feasible.

700

600
600, 500
Number of dluxe bag

500

400

300

200 200, 200

100

0
0 100 200 300 400 500 600 700 800 900 1000
Number of Standard bag

Cutting and Dyeing FEASIBLE SOLUTION INFEASIBLE SOLUTION

If a solution point is not feasible for a particular constraint, then all other solution points on the same side of that
constraint line are not feasible. If a solution point is feasible for a particular constraint, then all other solutions on
the same side of the constraint line are feasible for that constraint. Thus, one has to evaluate the constraint function
for only one solution point to determine which side of a constraint line is feasible.
Four separate graphs now show the feasible solution point for each of the four constraints. In a linear programming
problem, we need to identify the solution points that satisfy all the constraints simultaneously. To find these
solution points, we can draw all four constraints on one graph and observe the region containing the points that
do in fact satisfy all the constraints simultaneously.

The shaded region in this figure includes every solution point that satisfies all the constraints simultaneously.
Solutions that satisfy all constraints are termed feasible solutions, and the shaded region is called the feasible
solution region, or simply the feasible region.
One approach to finding the optimal solution would be to evaluate the objective function for each feasible
solution; the optimal solution would then be the one yielding the largest value. The difficulty with this approach
is the infinite number of feasible solutions, this trial-and-error procedure cannot be used to identify the optimal
solution.
Rather than trying to compute the profit contribution for each feasible solution. We select an arbitrary value for
profit contribution and identify all the feasible solutions (S, D) that yield the selected value. For example, which
feasible solutions provide a profit contribution of $1,800? These solutions are given by the values of S and D in
the feasible region that will make the objective function.
10S + 9D = 1800
This expression is simply the equation of a line. Thus, all feasible solution points (S, D) yielding a profit
contribution of $1800 must be on the line. We learned earlier in this section how to graph a constraint line. The
procedure for graphing the profit or objective function line is the same. Letting S = 0, we see that D must be 200;
thus, the solution points (S = 0, D = 200) is on the line. Similarly, by letting D = 0, we see that the solution point
(S = 180, D = 0) is also on the line. Drawing the line through these two points identifies all the solutions that
have a profit contribution of $1800.
Because the objective is to find the feasible solution yielding the largest profit contribution, let us proceed by
selecting higher profit contributions and finding the solutions yielding the selected values. For instance, let us
find all solutions yielding the profit of $3600 and $5400. To do so, we must find the S and D values that are on
the following lines:
10S + 9D = 3600; and
10S + 9D = 5400
Using the previous procedure for graphing profits and constraint lines, we draw the line $3600 and $5400 profit
lines as shown on the graph below. Although not all solution points on the $5400 profit line are in the feasible
region, at lest some points on the line are, and it is therefore possible to obtain a feasible solution that provides a
$5400 profit contribution.

Note the following: (1) the profit lines are parallel to each other, and (2) higher profit lines are obtained as we
move farther from the origin.
The optimal solution point is at the intersection of the cutting and dyeing and the finishing constraint lines. That
is, the optimal solution point is on both the cutting and dyeing constraint line
7/10S + 1D = 630
And the finishing line
1S + 2/3D = 708
Thus, the optimal values of the decision variables S and D must satisfy both equations and simultaneously. Using
the equation and solving for S gives
7/10S + 1D = 630
OR
S = 900 – 10/7D
Substituting this expression for S into equation and solving for D provides the following:
1S + 2/3D = 708
1(900 –10/7D) + 2/3D = 708
900 – 10/7D + 2/3D = 708
900 – 30/21D + 14/21D = 708
–16/21 D = –192
192
D = 16⁄ = 252
21
Using D = 252 in equation and solving for S, we obtain
S = 900 – 10/7(252)
=900 – 360 = 540
The exact location of the optimal solution point is S = 540 and D = 252. Hence, the optimal production quantities
for Par, Inc., are 540 standard bags and 252 deluxe bags, with a resulting profit contribution of 10(540) + 9 (252)
= $7668.
For linear programming problem with two decision variables, the exact values of the decision variables an be
determined by first using the graphical solution procedure to identify the optimal solution point and the solving
the two simultaneous constraint equations with it.
Slack Variables
In addition to the optimal solution and its associated profit contribution, Par Inc.’s management will probably
want information about the production time requirements for each production operation. We can determine this
information by substituting the optimal solution values (S = 540, D = 252) into the constraints of the linear
program.

Hours required for S = 540 Unused

In linear programming terminology, any unused capacity for a ≤ is referred to as the slack associated with the
constraint. Often variables, called slack variables, are added to the formulation of a linear programming problem
to represent the slack, or idle capacity.
Note, in particular, that sewing constraint did not affect the feasible region. That is, the feasible region would be
the same whether the sewing capacity constraint were included or not, which tells us that enough sewing time is
available to accommodate any production level that can be achieved by the other three departments. The sewing
constraint does not affect the feasible region and thus cannot affect the optimal solution; it is called a redundant
constraint.
Also notice that the optimal solutions occur at one of the vertices, or “corners.” Of the feasible region. In linear
programming terminology, these vertices are referred to as the extreme points of the feasible region. The Par,
Inc., feasible region has five vertices or five extreme points. The optimal solution to a linear program can be found
at an extreme point of the feasible region. This property means that if you are looking for the optimal solution to
a linear program, you do not have to evaluate all feasible solution points. In fact, you have to consider only the
feasible solution s that occur at the extreme points of the feasible region.
Reference:

Anderson, D., Sweeney, D., Williams, T., Camm, J., Cochran, J., Fry, M., & Ohlmann, J. (2016). An

Introduction to Linear Programming. In An Introduction to Management Science: Quantitative

Approaches to Decision Making (14th ed., pp. 30–93). Cengage Learning.

Exercises:
Kelson sporting Equipment, Inc, makes two different types of baseball gloves: a regular model and a catcher’s
model. The firm has 900 hours of production time available in its cutting and sewing department, 300 hours
available in its finishing department, and 100 hours available in its packaging and shipping department. The
production time requirements and the profit contribution per globe are given as follows:
Production Time (hours)
Cutting and Packaging
Model Sewing Finishing and Shipping Profit /Glove
Regular model 1 1/2 1/8 $5
Catcher's model 3/2 1/3 1/4 $8

Requirement:
1. Find the optimal solution using the graphical solution procedure. How many gloves of each model should
Kelson manufacture?
2. What is the total profit contribution Kelson an earn with the given production quantities?
3. What is the slack time in each department?