CA5102: MANAGEMENT SCIENCE

3rd Departmental Examination

LECTURE Sensitivity Analysis of Objective Function

Coefficient (OFC)

MODULE 4.1: SENSITIVITY ANALYSIS ON CHANGES Let the objective Function be 𝑀𝑎𝑥 𝑍 = 𝑐1𝑥1 + 𝑐2𝑥2:
IN THE OBJECTIVE FUNCTION COEFFICIENT (OFC) The sensitivity analysis will allow us to answer the
following questions:
Sensitivity or Post Optimality Analysis
1. Will a change in the OFC (𝑐1and 𝑐2) cause a
➔ The analysis of the effect of change in one or
more parameters (i.e. change in the objective change in the optimal solution?
function coefficient or right-hand side) defining a 2. Will the optimum solution remain optimal upon
linear programming model and its effect on the changes in the OFC?
current optimal solution 3. What range of changes (range of optimality) can
➔ Conducted after determining the optimal solution be made in the OFC (𝑐1and 𝑐2) to make the
➔ Important to decision makers because real-world optimum solution remain optimal?
problems exists in a changing environment 4. What range of changes (range of optimality) can
➔ Recognizes the fact that management operates be made in the OFC (𝑐1and 𝑐2) that will cause
in a dynamic environment
➔ Changes like costs or prices of raw materials, change in the optimum solution?
product demand changes, companies purchase Sensitivity Analysis of the Right Hand Side (RHS)
new machinery, stock prices fluctuate, employee
turnover occurs, availability of resources, and so The sensitivity analysis will allow us to answer the
on are possible as well as technological following questions:
advances affecting production processes.
5. What will happen to the Objective Function (OF)
What if there is uncertainty about one or more value 𝑍, if the available resources (RHS) are
values in the LP model? increased or decreased?
6. How much is the increase in the OF value 𝑍 for
➔ Sensitivity analysis allows the decision maker each additional resource (RHS) to the
to ask certain “what-if:” questions about the constraint?
problem. 7. How much decrease in the OF value 𝑍 for each
◆ What effect will additional resources lost in the resource to the constraint?
have on the total profit? 8. Will the price per unit of the resource (shadow
◆ What particular resources are price) remain the same regardless of the
diminished? available resources?
◆ What if per-unit profit contributions are 9. What is the range of the available resources
increased or decreased? (RHS) is allowed to keep the price per unit of the
● Profit Contribution - refers to resource (shadow price) unchanged?
the objective function coefficient
𝑐1and 𝑐2 Graphical Sensitivity Analysis
● Total profit contribution - We can use the graph of an LP model to see what
refers to the objective function happens when:
value 𝑍
➔ An Objective Function Coefficient (OFC)
If 𝑀𝑎𝑥 𝑍 = 𝑐1𝑥1 + 𝑐2𝑥2 changes
➔ A Right Hand Side (RHS) changes
◆ What if more efficient production
processes become readily available?

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Sensitivity Analysis on the Change in the Objective LP Model and its Graphical Solution
Function Coefficient (OFC) Procedure

1. Graph of the LP Model.

2. Graph of linear equations (OF line) using
slope-intercept form 𝑦 = 𝑚𝑥 + 𝑏
3. Understand the concepts of slopes.
4. Solution and properties of linear inequalities or
complex linear inequalities.

In performing the sensitivity analysis for changes in

the OFC, the following question arises:

➔ How do changes made to the coefficients of the

objective function 𝑍 = 𝑐1𝑥1 + 𝑐2𝑥2, affect the
optimal solution?
◆ Changes in the OFC (𝑐1and 𝑐2) have no
effect on the feasible region
◆ Changes in the OFC (𝑐1and 𝑐2) change
the slope of the objective function line Max: 5𝑥1 + 7𝑥2
The graph above gives the
(OF line) optimum solution to the LP
S.t.: 𝑥1 ≤ 6 model including the OF line.
◆ There is a range for each OFC (𝑐1and 𝑐2
2𝑥1 + 3𝑥2 ≤ 19 Remember in analytic
) where the current optimal corner point geometry that linear
(or optimum solution) remains optimal. 𝑥1 + 𝑥2 ≤ 8 equations can be graphed
Thus, changes in the OFC (𝑐1and 𝑐2) using any method of
NNC: 𝑥1, 𝑥2 ≥ 0 graphing linear equations
has limitations to keep the optimum (i.e., slope-intercept form).
solution optimal called Range of
To graph the OF line:
Optimality
◆ If the slope changes beyond the Range Using the slope-intercept form, the OF 5𝑥1 + 7𝑥2 can be
of Optimality, a different corner point will
graphed by the following procedure:
become optimal
◆ If the OFC (𝑐1and 𝑐2) changes beyond
Equate the OF by the
that range, a new corner point becomes 5𝑥1 + 7𝑥2 LCM of 5 and 7, which is
optimal. 7𝑥2 =− 5𝑥1 + 35 35, then express the
equation in
5
The slope of the objective function line usually is 𝑥2 =− 7
𝑥1 + 5 slope-intercept form,
negative. Hence, rotating the objective function line 𝑥2 = 𝑚𝑥1 + 𝑏
clockwise makes the line steeper while the slope is
getting smaller (more negative).
5
Thus, 𝑚 =− 7
𝑖𝑛𝑡𝑒𝑟𝑐𝑒𝑝𝑡 = 5

Therefore, the OF line is passing through (0,5), using the

𝑟𝑖𝑠𝑒
definition of the slope 𝑚 = 𝑟𝑢𝑛
, we get the second point
(7,0). Move the OF line towards the area of the feasible
region until the OF line intersects the optimum solution
(5,3).

Range of Optimality

➔ The range of optimality for each objective

function coefficient (𝑐1 or 𝑐2), provides the set of

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 values over which the current solution will optimal solutions between extreme points 3 and
remain optimal. 4.
➔ The range of optimality can be expressed as: ➔ Any further counterclockwise rotation of the
objective function line will cause extreme point 3
[𝑐1𝑎 , 𝑐1𝑏] or 𝑐1𝑎 ≤ 𝑐1 ≤ 𝑐1𝑏 for 𝑐
1
to be non-optimal. Hence, the slope of line A
provides an upper limit for the slope of the
[𝑐2𝑎 , 𝑐2𝑏] or 𝑐2𝑎 ≤ 𝑐2 ≤ 𝑐2𝑏 for 𝑐
2 objective function line.
𝑐1𝑎 and 𝑐2𝑎 are the lower limits of the range ➔ Rotating the objective function line clockwise
𝑐1𝑏 and 𝑐2𝑏 are the upper limits of the range causes the slope to become more negative, and
the slope decreases. When the objective
➔ Thus, one should bear in mind that the solution function line rotates clockwise (slope decreases)
is kept optimal as long as the slope of the enough to coincide with line B, we obtain
objective function line is between the slope of alternative optimal solutions between extreme
the two binding constraints. points 3 and 2.
➔ The optimal solution (𝑥1 , 𝑥2) remains optimal as ➔ Any further clockwise rotation of the objective
long as the graph of the OF is within the graph function line will cause extreme point 3 to be
of the two binding constraints while changing the non-optimal. Hence, the slope of line B provides
OFC (𝑐1 or 𝑐2) within the range of optimality. a lower limit for the slope of the objective
function line.
➔ Graphically, the limits of a range of optimality are
found by changing the slope of the objective
function line (or changing the OFC, 𝑐1 and 𝑐2,
Procedure in finding the Range of Optimality
one at a time) within the limits of the slopes of
the binding constraint lines. 1. Draw the graph of the OF line at the optimum
solution which should lie within the slopes of the
In finding the range of optimality, we take note of the two binding constraints.
following: 2. Find the slope of the two binding constraints and
express them as inequality together with the OF
𝑐1
line slope − 𝑐2
:

𝑐1
smaller slope of the two constraints ≤ − 𝑐2
≤ larger slope of the two constraints
3. Solve for 𝑐1 and 𝑐2 range of optimality using the
properties and algebraic manipulations of
inequalities.
4. Express the range of optimality as inequality and
interval notation

Range of Optimality Range of Optimality

for 𝑐1 for 𝑐2

[𝑐1𝑎 , 𝑐1𝑏] [𝑐2𝑎 , 𝑐2𝑏]

𝑐1𝑎 ≤ 𝑐1 ≤ 𝑐1𝑏 𝑐2𝑎 ≤ 𝑐2 ≤ 𝑐2𝑏
➔ Rotating the objective function line 𝑐1𝑎 = lower limit 𝑐2𝑎 = lower limit
counterclockwise causes the slope to become
𝑐1𝑏 = upper limit 𝑐2𝑏 = upper limit
less negative, and the slope increases. When
the objective function line rotates 𝑐1 = original 𝑐2 = original
counterclockwise (slope increased) enough to coefficient of 𝑥1 coefficient of 𝑥2
coincide with line A, we obtain alternative

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Binding Constraints
Slope of Constraint 2 Slope of Constraint 3
➔ A binding constraint is where an optimum
solution is on the line for the constraint. Thus, if 2𝑥1 + 3𝑥2 = 19 𝑥1 + 𝑥2 = 8
this constraint (RHS) were to be changed 3𝑥2 =− 2𝑥1 + 19 𝑥2 =− 𝑥1 + 8
slightly (increased or decreased), this optimal
3𝑥2 −2𝑥1+19 𝑠𝑙𝑜𝑝𝑒1 =− 1
solution would no longer be feasible. =
3 3
➔ A constraint whose rhs is exhausted (all the 𝑐1 𝑃
resource is consumed) at the optimum solution. 𝑥2 =− 𝑐2
𝑥+ 𝑐2
➔ A non-binding constraint is one where no
2
optimal solution is on the line for the constraint. 𝑠𝑙𝑜𝑝𝑒1 =− 3
➔ To determine if a constraint is binding, substitute
the optimum solution (𝑥1, 𝑥2) with the constraint.
It is binding if the left-hand side is equal to the
The general form 𝑀𝑎𝑥 𝑍 = 𝑐1𝑥1 + 𝑐2𝑥2 is used in finding
right–hand side, otherwise, non-binding.
the slope of Objective Function Line since the Objective
Example: If the optimum solution to an LP model is (5, 3) Function Coefficients 𝑐1 & 𝑐2 changes within on the

Constraint 1 Constraint 2 Constraint 3 range of optimality [𝑐1𝑎, 𝑐1𝑏] and [𝑐2𝑎, 𝑐2𝑏]
Where: 𝑐1𝑎 = Lower limit for 𝑐1
𝑥1 ≤ 6 2𝑥1 + 3𝑥2 ≤ 19 𝑥1 + 𝑥2 ≤ 8
𝑐1𝑏 = Upper limit for 𝑐1
(5) ≤ 6 2(5) + 3(3) ≤ 1 (5) + (3) ≤ 8
𝑐2𝑎 = Lower limit for 𝑐2
5≠6 19 = 19 8=8
𝑐2𝑏 = Upper limit for 𝑐2

➔ Therefore, constraints 2 and 3 are binding

constraints. Range of Optimality for 𝑐1:
Find the slope of the OF and the binding constraints: Find the range of possible values for 𝑐1 (𝑀𝑎𝑥 5𝑥1 + 7𝑥2,

➔ The slope of the OF line 𝑀𝑎𝑥 𝑐1𝑥1 + 𝑐2𝑥2, is with 𝑐2 staying 7) such that:
𝑐1 The objective function line slope lies between
− 𝑐2 the slopes of the two binding constraints.
◆ The slope of the first binding constraint,
𝑐1 2
2
2𝑥1 + 3𝑥2 ≤ 19 is − 3
− 1 ≤− 7
≤− 3
𝑐1
◆ The slope of the second binding − 7⎡⎢− 1 ≤− ≤−
2 ⎤ − 7 Multiply both sides by -7
⎥
7 3
1 ⎣ ⎦
constraint, 𝑥1 + 𝑥2 ≤ 8 is − or -1 14
1 7 ≥ 𝑐1 ≥ 3 Reversing inequalities
14
≤ 𝑐1 ≤ 7 Range for 𝑐1
Objective Function 3
4. 7 ≤ 𝑐1 ≤ 7 Range for 𝑐1 in decimal
𝑀𝑎𝑥 𝑍 = 𝑐1𝑥1 + 𝑐2𝑥2 [4. 7 , 7] Interval Notation
𝑐1𝑥1 + 𝑐2𝑥2 = 𝑍
𝑐2𝑥2 =− 𝑐1𝑥1 + 𝑃
Range of Optimality for 𝑐2:
𝑐2𝑥2 −𝑐1𝑥1+𝑃
=
𝑐2 𝑐2 Find the range of possible values for 𝑐2 (with 𝑐1 staying 5
𝑐1
𝑥2 =− 𝑥+
𝑃 ) such that the objective function slope lies between that
𝑐2 𝑐2
of the two binding constraints:

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 5 2
− 1 ≤− 𝑐2
≤− 3

− 1⎡⎢− 1 ≤− ⎤ − 1 Multiply both sides by -1

5 2
𝑐2
≤− 3 ⎥
⎣ ⎦
5 2
1≥ 𝑐 ≥ 3 Reversing inequalities
2
𝑐2 3
1≤ 5
≤ 2
Invert the inequality

5⎡⎢1 ≤ 𝑐 ≤ ⎤5
5 2
3 ⎥ Multiply both sides by 5
⎣ 2 ⎦
15
5 ≤ 𝑐2 ≤ 2 Range for 𝑐2
5 ≤ 𝑐2 ≤ 7. 5 Range for 𝑐2 in decimal
Excel Solver
[5 , 7. 5] Interval Notation

Therefore, the range of optimality for the given LP model

is:
14
3
≤ 𝑐1 ≤ 7 or [4. 7 , 7] range of optimality for 𝑐1
15
5 ≤ 𝑐2 ≤ 2
or [5 , 7. 5] range of optimality for 𝑐2
This indicates that:

➔ The value of 𝑐1 = 5 can be decreased to as low

as 4.7 and could be increased to as high as 7,
keeping the OF line within the graphs of the two
binding constraints.
➔ The value of 𝑐2 = 7 can be decreased to as low
as 5 and could be increased to as high as 7.5,
keeping the OF line within the graphs of the two
binding constraints.

Solving simple Linear Programming using excel

➔ In solving simple linear programming, Excel

Solver generates the following:
◆ Optimum Solution
◆ Sensitivity Analysis

Spreadsheet Model using Excel Solver

➔ The figure below is the Excel spreadsheet of the

information provided by the LP problem.
➔ These are groups by the following categories:
◆ Production Plan
◆ Decision Variables
◆ Available Materials and the Used
Materials

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Sensitivity Report ◆ Select the checkbox for Make
Unconstrained Variables Nonnegative .
6. In the Selecting a Solving Method dropdown
menu, select Simplex LP.
7. Click Solve
8. When the Solver Results dialog box appears:
◆ Select Keep Solver Solution then click
OK.

Linear Programming Problem Spreadsheet Model

To find the total profit (OF) and the used resources:

➔ Objective Function:

◆ E8 = sumproduct(B8:C8, B9:C9)

◆ [= sumproduct(production plan cell,OF

Setting Up and Running the Spreadsheet Model
coefficient)]
➔ Activate the Solver Add-in in Excel ( File >
➔ Constraint:
Options > Add-ins > Click Add-ins > Go ).
◆ D12 = sumproduct(B8:C8, B12:C12)
1. On the spreadsheet, enter the problem
◆ [= sumproduct(production plan
data in the top part of the spreadsheet.
cell,constraint coefficient)]
2. Specify cell locations for the decision
variables. Setting up and running the Spreadsheet Model
3. Select a cell and enter a formula for
computing the value of the objective 1. Activate the Solver Add-in in Excel.
function. [File/options/Add-ins/click Add-ins/Go].
4. Select a cell and enter a formula for 2. On the spreadsheet, enter the ‘variables’ row as
computing the LHS of each constraint. ‘changing cells’ named as Production Plan
5. Select a cell and enter a formula for (number of 𝑥1, 𝑥2, ... , 𝑥𝑛 produced).
computing the RHS of each constraint. 3. Enter the ‘Objective Function’ cell as ‘Target
Cell’ using the =sumproduct formula to maximize
Basic Steps in Using Excel Solver
or minimize along the Production Plan row.
1. Select the DATA tab on the ribbon. 4. Enter the OF array along the Unit Profit/Cost per
2. Select Solver from the Analysis Group variable.
3. When the Solver Parameters dialog box 5. Enter the constraints array on the succeeding
appears: rows per variable, the used resources column
◆ Enter the cell reference of the Objective using the formula =sumproduct, and the
Function into the Set Objective box. available resources array(constants/RHS).
◆ Select the to: Max/Min option.
Input:
◆ Enter the cell reference of the decision
variables into By Changing Variable
Cells box.
4. Select Add
◆ When the Add Constraint dialog box
appears:
● Enter cell references are for the
left hand side coefficients.
● Select the corresponding
symbol (<=, >=, =).
● Enter the cell references of the
RHS then click OK.
5. When the solver dialog box reappears:

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Output after encoding the =sumproduct formula: ● hold ctrl + shift and then enter.
4. Identify the corner points of the feasible region,
enter them (x1, x2, … xn) in separate column
cells. Compute the OF value that corresponds to
each corner point in column next to each pair of
the corner points using the formula:
=mmult(corner points array,transpose(OF
coefficients array))
Basic Steps in Using Excel Solver ◆ Example:
● Highlight the column next to the
1. After entering the =sumproduct formula on the
corner points;
spreadsheet, click on Solver on the DATA Tab.
● Enter the formula =mmult(E71:
2. Enter the target cell on the Set Objective to find
F73,transpose(B50:C50)
the total profit/cost.
● hold ctrl + shift and then enter.
3. Select Max/Min.
5. Identify the point/s that give/s the optimum
4. Enter the cell reference of the variables
solution.
(production plan) on By Changing Variable Cells
6. Make the decision
to find the number of 𝑥1, 𝑥2, ... , 𝑥𝑛 that give the
optimum solution. Illustration 1: Range of Optimality for 𝑐1 and 𝑐2 using
5. Enter the cell reference of the used resources Excel Solver
for each constraint, select the corresponding
symbol (≥, ≤, =), and the cell reference of the
corresponding available reference by clicking
the add button.
6. Select ‘Simplex LP’ for a Linear Programming
model.
7. Click Solve.
8. Click keep solver solution.
9. Click Sensitivity if sensitivity analysis is required.
10. Click OK.
11. Optimum solution, the Total Profit/Cost and the
used resources will be reflected on the
spreadsheet model.

Basic steps in Finding the Optimum Solution and

Graph of LP Problems using Excel

1. On the spreadsheet, find the intercepts of each

constraint to show a graph of the LP model.
2. Identify the feasible region using the ‘test value
point’.
◆ Label or Shade the region if desired.
3. Solve for the boundaries (intersection of each ➔ Therefore, the range of optimality for the given
pair of lines) of the feasible region using the LP model is:
formula: =mmult(minverse(constraint
array),constant array)
◆ Example:
● Highlight the cell next to the
variables corresponding to each
ordered pair (x1, x2);
● Enter the formula ➔ This indicates that, from the original OF
=mmult(minverse(B71: coefficients, 𝑐1 = 5 and 𝑐2 = 7
C72),E71:E72);

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 ◆ The value of 𝑐1 = 5 can be decreased to
as low as 4.7 and could be increased to
as high as 7, keeping the OF line within
the graphs of the two binding constraints
◆ The value of 𝑐2 = 7 can be decreased to
as low as 5 and could be increased to
as high as 7.5, keeping the OF line
within the graphs of the two binding
constraints

The two broken lines correspond to the graphs of the

two binding constraints.

The figure above presents the spreadsheet output of the

LP model with an optimum solution of (5, 3) and OF
value = 46 whose result is consistent with the graphical
solution

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The figure above presents the sensitivity report ◆ The constraint line shifts, which could
generated by the excel solver change the feasible region
◆ Slope of constraint line does not change
➔ The column D “Final value” provides the
◆ Corner point locations can change
optimum solution to the problem (5, 3)
◆ Optimal solution can change
➔ The column E shows the reduced cost (see p.
107 from Anderson et.al. for the explanation) Right Hand Side Changes
➔ The column F provides the original OFC.
➔ The set of right hand side values which same
➔ The columns G and H - row 9 provide the
set of constraints, determines the optimal point.
allowable increase and allowable decrease,
It is the range of values over which the shadow
respectively for the 𝑐1 .
prices (dual value/dual price) is applicable.
◆ 2 allowable increase indicates that the ➔ The shadow price is the amount of increase (or
value of 𝑐1 = 5 could be increased up to decrease) in the OF value (profit) when we
7, thus the upper limit for this profit make one additional unit (or a resource is
contribution is 7. diminished) in the RHS or the available
◆ 0.3 allowable decrease indicates that resources.
the value of 𝑐1 = 5 could be decreased ➔ Within the range of feasibility, shadow prices
remain constant; however, the optimal solution
to as low as 4.7, thus the lower limit for
will change.
this profit contribution is 4.7.
➔ The sensitivity range for a RHS value or range
➔ The columns G and H - row 10 provide the
of feasibility is the range of values over which
allowable increase and allowable decrease,
the quantity (RHS) values can change without
respectively for the 𝑐2 .
changing the solution variable mix, including
◆ 0.5 allowable increase indicates that the slack variables.
value of 𝑐2 = 7 could be increased up to
The range analysis for the objective function coefficients
7.5, thus the upper limit for this profit
and the constraint RHS is only applicable for changes in
contribution is 7.5.
a single coefficient.
◆ 2 allowable decrease indicates that the
value of 𝑐2 = 7 could be decreased to as Sensitivity Analysis on the change in the Objective
low as 5, thus the lower limit for this Function Coefficients
profit contribution is 5 ➔ Causes a change in the slope of the OF and the
OF value, but keeping the optimum solution (x,
y) optimal so long as the change is within the
range of optimality.

Sensitivity Analysis on the change in the Right Hand

Side (RHS)

➔ Causes a change in the feasible region, but

MODULE 4.2: SENSITIVITY ANALYSIS ON CHANGES keeping the shadow price unchanged so long as
IN THE RIGHT HAND SIDE (RHS) OF A CONSTRAINT change is within the range of feasibility

In performing the sensitivity analysis with changes on Illustration of Sensitivity Analysis on the Change of
the RHS, the following questions arise: the Right Hand Side (RHS) of the Constraint

1. How do changes made to the constants (RHS) An upholsterer has the following materials available: 18
of the constraint affect the optimal solution? square meter microfiber, 20 square meter leather, and 5
◆ Constraints will shift parallel square meter vinyl. A sofa requires the following: 3
◆ If it is a binding constraint, the axis will square meter microfiber, 2 square meter leather, and 1
change and OF value will change square meter vinyl. A couch requires the following: 2
◆ If it is a non-binding constraint, the axis square meter microfiber, and 4 square meter leather. If a
might change if it becomes a binding sofa sells for P1,200 and a couch sells P1,600, how
constraint

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many of each upholstery seats should the upholsterer The increase in resources could allow us to
make to obtain the maximum amount of money? increase production and profit.

Let x = number of sofa

3𝑥 + 2𝑦 ≤ 18, at (4 , 3), 𝑃 = ₱9, 600 Original
y = number of couch Profit
5
3𝑥 + 2𝑦 ≤ 20, at (5 , 2 ), 𝑃 = ₱10, 000 New Profit

5
The new corner point (5 , 2
) is obtained by elimination
method using the modified microfiber constraint and the
Objective Function 𝑀𝑎𝑥 𝑍 = 1200𝑥 + 1600𝑦 vinyl constraint (the modified microfiber constraint and
the leather constraint—which could be seen on the
St. 3𝑥 + 2𝑦 ≤ 18 Microfiber constraint graph)
2𝑥 + 4𝑦 ≤ 20 Leather constraint
𝑥≤5 Vinyl Constraint

NNC: 𝑥, 𝑦 ≥ 0

➔ The constraint line shifts parallel, which could

change the feasible region
➔ Slope of constraint does not change
➔ Corner point locations can change
➔ The optimal solution can change
➔ The vinyl constraint (𝑥 ≤ 5) becomes binding at
5
1. At the optimum solution, which of the three (5 , 2
)
constraints are binding? ➔ The microfiber (3𝑥 + 2𝑦 ≤ 20) and leather (
2. Find the range of optimality for the sofa and for 2𝑥 + 4𝑦 ≤ 20) constraints are still binding at
the couch. (5 ,
5
)
2
3. Interpret the result.

2. What if the leather material is lowered from 20 to

16 square meters?
Objective Function 𝑀𝑎𝑥 𝑍 = 1200𝑥 + 1600𝑦
Answer:
St. 3𝑥 + 2𝑦 ≤ 18 Microfiber constraint
The decrease in resources may cause a
2𝑥 + 4𝑦 ≤ 20 Leather constraint
decrease in production and profit.
𝑥≤5 Vinyl Constraint

NNC: 𝑥, 𝑦 ≥ 0
2𝑥 + 4𝑦 ≤ 20, at (4 , 3), 𝑃 = ₱9, 600 Original
1. What if the available microfiber resource is Profit
changed from 18 to 20? What will happen to the 3
2𝑥 + 4𝑦 ≤ 16, at (5 , 2 ), 𝑃 = ₱8, 400 New Profit
OF value?

Answer:

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 2𝑥 + 4𝑦 ≤ 20, at (4 , 3), 𝑃 = ₱9, 600 Original
Profit
₱8, 400 − ₱9, 600 =− ₱1, 200 Profit
decrease
There will be 1, 200 ÷ 4 = ₱300 decrease in profit per
square meter of diminished leather material. Thus,

➔ For each diminished square meter of leather, the

profit will decrease by ₱300
➔ Conversely, for each increased square meter of
leather, the profit will increase by ₱300
➔ The vinyl constraint (𝑥 ≤ 5) becomes binding at
(5 ,
3
) Shadow Price (Dual Value/Price)
2
➔ The microfiber (3𝑥 + 2𝑦 ≤ 18) and leather ( ➔ The change in the optimal value (OF value) of
2𝑥 + 4𝑦 ≤ 20) constraints are still binding at the solution per unit increase in the right hand
(5 ,
3
) side of the constraint
2
➔ The change is the objective function value per
one-unit increase in the RHS of the constraint
3. What is the effect of the RHS adjustment
➔ The amount that tells how much you should be
(increase from 18 to 20 square meters) of
willing to pay for additional units of a resource
microfiber constraint in the OF value?

Answer:
𝑆𝑃1 = 200
There will be an increase of profit for every
additional square meter of microfiber in the constraint. The manufacturer should not pay more than 200 for an
additional unit of microfiber. Likewise, this means that
the profit decreases by 200 for every unit removed from
4. How much increase in the profit will there be for the current availability of microfiber
each additional square meter of microfiber
made?
𝑆𝑃2 = 300
Answer:
The manufacturer should not pay more than 300 for an
5
3𝑥 + 2𝑦 ≤ 20, at (5 , 2
), 𝑃 = ₱10, 000 New Profit additional unit of leather. Likewise, this means that the
3𝑥 + 2𝑦 ≤ 18, at (4 , 3), 𝑃 = ₱9, 600 Original profit decreases by 300 for every unit removed from the
Profit current availability of leather.
₱10, 000 − ₱9, 600 = ₱400 Profit
Increase
𝑆𝑃3 = 0
There will be 400 ÷ 2 = 200 increase in profit per
square meter of additional microfiber. Thus, Total profit is not affected by an increase in the amount
➔ For each additional square meter of microfiber, of vinyl (RHS). The dual value/shadow price for any
the profit will increase by ₱200 nonbinding constraint will be zero because an increase
➔ Conversely, for each diminished square meter of in the rhs of the constraint will affect only the value of the
microfiber, the profit will decrease by ₱200 slack or surplus variable for that constraint.

5. How much decrease in the profit will there be for 6. If we can increase the available resources (rhs)
each diminished square meter of leather made, of the microfiber and leather constraints, which
if any? material should receive priority?
Answer: 𝑆𝑃𝑀𝑖𝑐𝑟𝑜𝑓𝑖𝑏𝑒𝑟: 200/𝑠𝑞𝑚
𝑆𝑃𝑙𝑒𝑎𝑡ℎ𝑒𝑟: 300/𝑠𝑞𝑚
3
2𝑥 + 4𝑦 ≤ 16, at (5 , 2
), 𝑃 = ₱8, 400 New Profit

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Answer: 6. With the enlarged or expanded FR, determine
the change in the value of the optimal
Leather, because the increase of profit in
solution/function.
increasing leather is much higher than the increase to be
7. Determine the dual value or shadow price by
made with microfiber. If we increase the leather material
subtracting the original final value of the optimal
by one unit the profit will increase by P300, whereas, if
solution/objective function & the new final value
we increase microfiber by one unit, profit will be
of the optimal solution.
increased by P200 only.
8. The change in the value of the optimal solution
7. Should we increase the availability of microfiber per unit increase in the right hand side of the
at an additional cost of P220? What about the constraint is called the dual value/shadow price.
leather at P220?
Graphical Solution of the LP Problem
𝑆𝑃𝑀𝑖𝑐𝑟𝑜𝑓𝑖𝑏𝑒𝑟: 200/𝑠𝑞𝑚
The Redy Miks Company owns a small paint factory that
𝑆𝑃𝑙𝑒𝑎𝑡ℎ𝑒𝑟: 300/𝑠𝑞𝑚 produces both interior and exterior house paints for
wholesale distribution. Two basic materials, A and B, are
Answer: used to manufacture the paints. The maximum
availability of A is 6 tons a day; that of B is 8 tons a day.
No. Because increasing the availability of
The daily requirements of the raw materials per ton of
microfiber at a cost of P220 is not worth it because the
interior and exterior paints are summarized in the
cost of microfiber material is much higher than the
following table.
increase it will make with the profit which is P200.

Yes. Because increasing the availability of

leather at a cost of P220

would still make profit since one sq. meter increase of

leather material would make a profit of P80 (P300-P220)

Steps needed when changing the RHS (Graphical

Method)

1. Determine the feasible region of the LP problem

2. Identify the optimal solution based on the
feasible region graphically together with the
maximum profit/minimum cost.
3. The improvement in the value of the optimal
solution per unit increase (or decrease) in the A market survey has established that the daily demand
right-hand side is called the shadow price or the for interior paint cannot exceed that of exterior paint by
dual value. more than 1 ton. The survey also shows that the
Graphically, a shadow price is determined by maximum demand for interior paint is limited to 2 tons
adding +1 (or -1) to the right hand side value of daily. The profit contribution per ton is 3 thousand for
the requirement or resource being evaluated. exterior and 2 thousand for interior paint. How much
exterior and interior paints should the company produce
Right-hand side ranging to maximize profit?
it involves how many additional units of the resource can
be added or subtracted before the shadow price
changes. It is the process of finding the range of
applicability or range of feasibility of shadow prices.

4. After adding (or subtracting) to the RHS, resolve

for the optimal solution in terms of the same two
binding constraints.
5. . Draw the expanded part of the feasible region
then identify the extreme points

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Maximize 𝑍 = 3000𝑥 + 2000𝑦

𝑍 = 3000(3. 33) + 2000(1. 33)

𝑍 = 12650

Steps for the Solution for the expanded or enlarged

FR:

1. Find the intercepts to plot a new line in the FR

2. Resolve for the value of x & y or the decision

variables graphically or using elimination method
or other methods
3. Resolve the maximum profit/minimum cost
4. Solve the shadow price/dual value as a basis for
sensitivity analysis.
Use the formula: 𝑃𝑟𝑜𝑓𝑖𝑡𝑛𝑒𝑤 − 𝑃𝑟𝑜𝑓𝑖𝑡𝑜𝑙𝑑

PREPARED BY: ACCOUNTANCY STUDENT COUNCIL | 13

Effects of changing the RHS binding constraints) that determined the original
optimal solution continue to determine the
optimal solution for the problem and resolving
the values for the decision variables.
➔ As the RHS increases, other constraints will
become binding and limit the change in the
value of the objective function.

Implication of the Binding & Non-binding

Constraints

➔ A constraint is considered a binding constraint if

changing it also changes the optimal solution.
Constraints that do not affect the optimal
solution are non-binding solutions.
➔ Tightening the binding constraints can worsen
the objective function value & loosening it can
improve the objective function value. Hence,
once the optimal solution is found, managers
can seek to improve the solution by finding ways
to relax the constraints.

Constraints and Shadow Prices

➔ An increase of 1 ton for Raw Material A will ➔ A binding constraint has a non-zero value while
cause a change in the value of the optimal a non-binding constraint has a value of zero.
solution or objective function. Hence, there will ➔ a binding constraint has a non-zero value while
be an increase of profit of ₱13,000 - ₱12,650 = a non-binding constraint has a value of zero.
₱350. ➔ A more detailed discussion of these two
➔ This indicates the change in the optimal constraints will be illustrated using the computer
objective value per unit change in the availability solution/solution using excel solver
of the resource (Raw material A). It provides a Minimization (Graphical)
direct link between the model input (resources)
and its output (total profit).
➔ The change in the value of the optimal solution
per unit increase in the right-hand side of the
constraint is called the dual value or shadow
price.
➔ It also represents the unit worth of a resource
(₱350/ton). This means that a unit increase (or
decrease) in Raw Material A capacity will
increase (or decrease) profit by ₱350.
➔ The manufacturer should not pay more than
₱350/ton for an additional unit of Raw material
A.

What is the extent or range of increasing or

decreasing the RHS

➔ The range of feasibility is the range over which

the shadow price/dual value is applicable. (or
allowable increase or decrease in the constraint)
➔ Graphically, the range of feasibility is determined
by finding the values of a right hand side
coefficient such that the same two lines (two

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What happens when we decrease material 2 by 1
unit?

➔ A decrease of 1 unit for Material 2 will cause a

change in the value of the optimal solution or
objective function. Hence, there will be a
decrease of cost of ₱3.00.
➔ It also represents the unit worth of a resource
(₱3/unit).
➔ This means that a unit increase (or decrease) in
Material 2 capacity will increase (or decrease)
cost by ₱3.00.
Generating the Sensitivity Report
Computer Solution of the LP Problem using Solver

Sensitivity Analysis (RHS)

Generating the Answer Report

➔ In sensitivity analysis, using a computer solution

using excel solver just like in the graphical
method, the shadow price/dual value plays a

PREPARED BY: ACCOUNTANCY STUDENT COUNCIL | 15

 significant role in the change of the optimal
value of the solution.
➔ The dual value/shadow price associated with a
constraint is the change in the optimal value of
the solution per unit increase in the right-hand
side of the constraint.
➔ Thus, the shadow price/dual values of ₱333.33
for raw material A and ₱1333.33 for raw material
B tell us that an additional unit of RM A
increases the value of the optimal solution by
₱333.33, and an additional unit of RM B
increases the value of the optimal solution by
₱1333.33.
➔ As in graphical method, they also represent the
The binding constraints (RM A & RM B) have a slack of
unit worth of a resource (₱333.33/ton of RM A &
zero, indicating that all resources have been used.
₱1333.33/ton of RM B). This means that a unit
Meanwhile a non-zero slack implies unused resources or
increase (or decrease) in Raw Material A &
capacity.
capacity will increase (or decrease) profit by
₱333.33 & ₱1333.33 respectively.

What is the extent or range of increasing or

decreasing the RHS?

What will happen to the optimal solution if the RHS

of RM A will be changed to 4 units?

➔ Since 2 is within the allowable decrease then the

shadow price will apply. Hence, the change in
profit = 2 x P333.33 = P666.67 and this implies
in the change of optimal profit:
◆ ₱12,666.67 – ₱666.67 = P12,000 the
It must be noted from this slide that the shadow price of
profit has been reduced to P12,000
binding constraints are non-zero & the shadow price of
since there was a reduction of 2 units in
the non-binding constraints are both 0. The dual values
the RHS of RM A.
of zero show that additional units of these two resources
It must be noted that as long as the change in the RHS will not improve the value of the objective function.
of the evaluated resource is within the range of
feasibility, the corresponding shadow price will apply. If
the proposed change exceeds the range, the shadow
price will no longer be valid.

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Minimization (Computer Solution Sensitivity ◆ ₱48 + ₱4 = ₱52 the cost has been
Analysis) increased to ₱52 since there was also
an increase of 2 units in the RHS of
Material 1.

It must be noted that as long as the change in the RHS

of the evaluated resource is within the range of
feasibility, the corresponding shadow price will apply. If
the proposed change exceeds the range, the shadow
price will no longer be valid.

Limitations of Classical Sensitivity Analysis

➔ Simultaneous changes in input data

➔ Changes in constraint coefficients, and
➔ Non-intuitive dual values

MODULE 5.1: DISTRIBUTION AND NETWORK

MODELS

Supply Chain

➔ It describes the set of all interconnected

The binding constraints (Mat. 1 & Mat 2) have a slack of resources involved in producing and distributing
zero, indicating that all resources have been used. a product; it is designed to satisfy customer
Meanwhile Mat. 3 has a slack of 4 which implies unused demand for a product at minimum cost (
resources or capacity for Mat. 3 Anderson, et al., 2018 ).
➔ It refers to the sequence of organizations, their
facilities, functions, and activities, that are
involved in producing and delivering a product or
service ( Benton, 2010 ).

Types of Problems in Supply Chain Models/Network

Flow Problems (Anderson, et al., 2018)

1. Transportation Problems
2. Transshipment Problems
3. Assignment Problems

Illustration of the Supply Chain (Stevenson, 2018)

What will happen to the optimal solution if the RHS

of Material 1 will be increased by 2 units?

➔ Since 2 is within the allowable increase for

Material 1 then the shadow price will apply.
Hence, the change in cost = 2 x ₱2.00 = ₱4 and
this implies in the change of optimal cost:

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Logistics 𝑥𝑖𝑗 = number of units shipped from the origin/source 𝑖 to

➔ It is part of a supply chain involved with the destination 𝑗

forward and reverse flow of goods, services, 𝑐𝑖𝑗 = cost per unit shipped from the origin/source 𝑖 to
cash, and information (Bowersox et al., 2010) destination 𝑗
𝑠𝑖 = supply or capacity in units at origin 𝑖
Those who manage supply chain must make
decisions in terms of (Anderson et al., 2018): 𝑑𝑗 = demand in units at destination 𝑗

➔ Where to produce the product? LP Formulation Special Cases

➔ How much should be produced?
➔ Where should it be sent? ➔ Total supply exceeds total demand
➔ How to design a supply chain to satisfy ◆ No modification of LP formulation is
customer demand for a product at minimum necessary
cost? ➔ Total demand exceeds total supply
◆ Add a dummy origin with supply equal to
Transportation Problem the shortage amount
➔ Seeks to minimize the total costs of transporting ◆ Assign a zero-shipping cost per unit
goods from 𝑚 origins (each with a supply 𝑠𝑖) to 𝑛 ◆ The amount “shipped” from the dummy
origin will not be shipped
destinations (each with demand 𝑑𝑗) when the
Sample Problem 1: Transportation Problem
unit shipping cost from an origin, 𝑖, to a
destination, 𝑗, is 𝑐𝑖𝑗 Acme Block Company has orders for 80 tons of concrete
blocks at three suburban locations:
Network representation for a transportation Northwood -- 25 tons, Westwood -- 45 tons, and
problem with two sources and three destinations
Eastwood -- 10 tons. Acme has two plants, each of
which can produce 40 tons per week. Delivery cost (in
dollars) per ton from each plant to each suburban
location is shown below.
How should end-of-week shipments be made to fill the
above orders?

Delivery Cost

Northwood Westwood Eastwood

Plant 1 24 30 40
➔ C’s are transportation costs
➔ Circles and squares are nodes Plant 2 30 40 42
➔ Arrows distribution routes from source (𝑖) to
destination (𝑗)
Network Representation

Linear Programming Formulation

𝑚 𝑛
𝑀𝑖𝑛 ∑ ∑ 𝑐𝑖𝑗𝑥𝑖𝑗
𝑖=1 𝑗=1
𝑛
∑ 𝑥𝑖𝑗 ≤ 𝑠𝑖 for 𝑖 = 1, 2, ... , 𝑚 Supply
𝑗=1
𝑚
∑ 𝑥𝑖𝑗 ≤ 𝑑𝑗 for 𝑖 = 1, 2, ... , 𝑚 Demand
𝑖=1

Using the notation:

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 The Navy has 9,000 pounds of material in Albany,
Georgia that it wishes to ship to three installations: San
Diego, Norfolk, and Pensacola. They require 4,000,
2,500, and 2,500 pounds, respectively. Government
regulations require equal distribution of shipping among
the three carriers.
Formulate and solve a linear program to determine the
shipping arrangements (mode, destination, and quantity)
that will minimize the total shipping cost.

Destination

Mode San Diego Norfolk Pensacola

Define the Objective Function Truck $12 $6 $5

➔ Minimize the total delivery cost Railroad $20 $11 $9

Airplane $30 $26 $28

Min: (delivery cost per ton from each plant to each
suburban location) × (number of tons from each plant
to each suburban location)
Define the Decision Variables

𝑀𝑖𝑛 𝑍: 24𝑥11 + 30𝑥12 + 40𝑥13 + 30𝑥21 + 40𝑥22 + 42𝑥23 We want to determine the pounds of material, 𝑥𝑖𝑗, to be
shipped by mode 𝑖 to destination 𝑗. The following table
Define the Constraints: summarizes the decision variables:
➔ Supply Constraints
◆ 𝑥11 + 𝑥12 + 𝑥13 ≤ 40
◆ 𝑥21 + 𝑥22 + 𝑥23 ≤ 40 San Diego Norfolk Pensacola
➔ Demand Constraints Truck 𝑥11 𝑥12 𝑥13
◆ 𝑥11 + 𝑥21 = 25
◆ 𝑥12 + 𝑥22 = 45 Railroad 𝑥21 𝑥22 𝑥23
◆ 𝑥13 + 𝑥23 = 10
Airplane 𝑥31 𝑥32 𝑥33
➔ Non-Negativity of Variables
◆ 𝑥𝑖𝑗 ≥ 0
◆ 𝑖 = 1, 2 Define the Objective Function
◆ 𝑗 = 1, 2, 3
➔ Minimize the total shipping cost

Min: (shipping cost per pound from each mode per

destination pairing) × (number of pounds shipped by
mode per destination pairing)

𝑀𝑖𝑛: 12𝑥11 + 6𝑥12 + 5𝑥13 + 20𝑥21 + 11𝑥22 + 9𝑥23 + 30𝑥31

+ 30𝑥31 + 26𝑥32 + 28𝑥33

Balanced Table: Total Supply = Total Demand Define the Constraints:

Sample Problem 2: Transportation Problem ➔ Equal use of Transportation Modes

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 ◆ 𝑥11 + 𝑥12 + 𝑥13 = 3000
◆ 𝑥21 + 𝑥22 + 𝑥23 = 3000
◆ 𝑥31 + 𝑥32 + 𝑥33 = 3000
➔ Destination Material Requirements
◆ 𝑥11 + 𝑥21 + 𝑥31 = 4000
◆ 𝑥12 + 𝑥22 + 𝑥32 = 2500
◆ 𝑥13 + 𝑥23 + 𝑥33 = 2500
➔ Non-Negativity of Variables
◆ 𝑥𝑖𝑗 ≥ 0
◆ 𝑖 = 1, 2, 3 Define the Objective Function
◆ 𝑗 = 1, 2, 3
➔ Minimize the total transportation cost
Sample Problem 3: Transportation Problem
(Unbalanced) Min: (transportation cost per unit from each mode per
destination pairing) × (number of units transported by
The table below shows an unbalanced transportation mode per destination pairing)
problem wherein total plant capacity exceeds the total
demand requirement
𝑀𝑖𝑛: 8𝑥11 + 5𝑥12 + 4𝑥13 + 0𝑥14 + 9𝑥21 + 6𝑥22 + 3𝑥23 + 0𝑥24
Store 1 Store 2 Store 3 Plant
Capacity Define the Constraints:

Plant 1 ₱8 ₱5 ₱4 250 ➔ Equal use of Transportation Modes

◆ 𝑥11 + 𝑥12 + 𝑥13 + 𝑥14 = 250
Plant 2 ₱9 ₱6 ₱3 200
◆ 𝑥21 + 𝑥22 + 𝑥23 + 𝑥24 = 200
Store 80 140 200 420/450 ➔ Destination Material Requirements
Demand
◆ 𝑥11 + 𝑥21 = 80
◆ 𝑥12 + 𝑥22 = 140
The next table shows the unbalanced transportation ◆ 𝑥13 + 𝑥23 = 200
problem wherein a dummy variable has been inputted
◆ 𝑥14 + 𝑥24 = 30
➔ Non-Negativity of Variables
◆ 𝑥𝑖𝑗 ≥ 0
Store Store Store Dummy Plant
1 2 3 Store Capaci ◆ 𝑖 = 1, 2
ty ◆ 𝑗 = 1, 2, 3

Plant ₱8 ₱5 ₱4 ₱0 250 Summary of Steps in Solving Transportation

1 Problems (Minimization)

Plant ₱9 ₱6 ₱3 ₱0 200 1. Read and understand the problem and its given
2 conditions.
2. Set up a balanced transportation table. (If
Store 80 140 200 30 450/450
unbalanced "total supplies not equal to total
Dema
nd demand" create a dummy variable with a
transportation cost equal to "0").
3. Represent the Transportation Problem with a
network model
Network Representation (with dummy store) 4. Formulate the General Linear Programming
Model
5. Solve the problem

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Transshipment Problem The Northside and Southside facilities of Zeron
Industries supply three firms (Zrox, Hewes, Rockrite)
➔ These are transportation problems in which a
with customized shelving for its offices. They both order
shipment may move through intermediate nodes
shelving from the same two manufacturers, Arnold
(transshipment nodes) before reaching a
Manufacturers and Supershelf, Inc.
particular destination node.
Currently weekly demands by the users are 50 for Zrox,
➔ Transshipment problems can be converted to
60 for Hewes, and 40 for Rockrite.
larger transportation problems and solved by a
Both Arnold and Supershelf can supply at most 75 units
special transportation program.
to its customers.

Network Representation of a transshipment Because of long standing contracts based on past

problem with two sources, three intermediate orders, unit costs from the manufacturers to the
nodes, and two destinations suppliers are:

Zeron N Zeron S

Arnold 5 8

Supershelf 7 4

The costs to install the shelving at the various locations

are:

Zrox Hewes Rockrite

Corrections: Segments should be arrows and there
should be an arrow from node 5 to node 6. Zeron N 1 5 8

Zeron S 3 4 4

Linear Programming Formulation

➔ With all the information above and recalling the
previous steps, solve the transshipment problem
𝑀𝑖𝑛 ∑ 𝑐𝑖𝑗𝑥𝑖𝑗
𝑎𝑙𝑙 𝑎𝑟𝑐𝑠
➔ Conduct the linear programming formulation and
define the decision variables of the given
s.t. ∑ 𝑥𝑖𝑗 − ∑ 𝑥𝑖𝑗 ≤ 𝑠𝑖 Origin Nodes 𝑖 problem
𝑎𝑟𝑐𝑠 𝑜𝑢𝑡 𝑎𝑟𝑐𝑠 𝑖𝑛 ➔ Identify the objective fruition, constraints, and
construct a network representation of the said
∑ 𝑥𝑖𝑗 − ∑ 𝑥𝑖𝑗 = 0 Transshipment Nodes
𝑎𝑟𝑐𝑠 𝑜𝑢𝑡 𝑎𝑟𝑐𝑠 𝑖𝑛 transshipment problem

∑ 𝑥𝑖𝑗 − ∑ 𝑥𝑖𝑗 = 𝑑𝑗 Destination Nodes

𝑎𝑟𝑐𝑠 𝑜𝑢𝑡 𝑎𝑟𝑐𝑠 𝑖𝑛
𝑥𝑖𝑗 ≥ 0 For all 𝑖 and 𝑗 Network Representation

Using the notation:

𝑥𝑖𝑗 = number of units shipped from the node 𝑖 to node 𝑗

𝑐𝑖𝑗 = cost per unit shipped from the node 𝑖 to node 𝑗
𝑠𝑖 = supply at node 𝑖
𝑑𝑗 = demand at destination 𝑗

Sample Problem 4: Transshipment Problem

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Define the Decision Variables ➔ An assignment problem is a special case of a
transportation problem in which all supplies and
➔ 𝑥𝑖𝑗 = amount shipped from manufacturer 𝑖 to
all demands are equal to 1; hence assignment
supplier 𝑗 problems may be solved as linear programs
➔ 𝑥𝑗𝑘 = amount shipped from supplier 𝑗 to ➔ 𝑥𝑖𝑗 variables should either be 0 or 1. No decimals
customer 𝑘

Where: 𝑖 = 1 (Arnold), 2 (Supershelf)

Network Representation
𝑗 = 3 (Zeron N), 4 (Zeron S)

𝑘 = 5 (Zrox), 6 (Hewes), 7 (Rockrite)

Define the Objective Function

➔ Minimize overall shipping cost

𝑀𝑖𝑛 𝑍: 5𝑥13 + 8𝑥14 + 7𝑥23 + 4𝑥24 + 1𝑥35 + 5𝑥36 + 8𝑥37

+ 3𝑥45 + 4𝑥46 + 4𝑥47

Define the Constraints:

➔ Amount Out of Arnold

◆ 𝑥13 + 𝑥14 ≤ 75
➔ Amount Out of Supershelf
◆ 𝑥23 + 𝑥24 ≤ 75
➔ Amount through Zeron N Linear Programming Formulation
◆ 𝑥13 + 𝑥23 − 𝑥35 − 𝑥36 − 𝑥37 = 0
𝑚 𝑛
➔ Amount through Zeron S
𝑀𝑖𝑛 ∑ ∑ 𝑐𝑖𝑗𝑥𝑖𝑗
◆ 𝑥14 + 𝑥24 − 𝑥45 − 𝑥46 − 𝑥47 = 0 𝑖=1 𝑗=1

Note: When all the goods are shipped out, 𝑛

deducting that from the goods shipped in, the remaining ∑ 𝑥𝑖𝑗 = 1 For all 𝑗 = 1, 2, ..., 𝑛 Tasks
𝑗=1
goods in the node is 0. No goods should remain in the 𝑛
intermediate node. ∑≤ 1 For 𝑖 = 1, 2, ..., 𝑚 Agents
𝑗=1
➔ Amount into Zrox 𝑥𝑖𝑗 ≥ 0 For all 𝑖 and 𝑗
◆ 𝑥35 + 𝑥45 = 50
➔ Amount into Hewes
◆ 𝑥36 + 𝑥46 = 60 Using the notation:
➔ Amount into Rockrite
◆ 𝑥37 + 𝑥47 = 40
➔ Non-Negativity of Variables
◆ 𝑥𝑖𝑗 ≥ 0, for all 𝑖 and 𝑗

Assignment Problem
Assignment Problem (LP Formulation Special Cases
➔ Seeks to minimize the total cost assignment of
𝑚 workers to 𝑚 jobs, given that the cost of ➔ Number of agents exceeds the number of tasks
worker 𝑖 performing job 𝑗 is 𝑐𝑖𝑗 ◆ Extra agents simply remain unassigned
➔ It assumes all workers are assigned and each ➔ Number of tasks exceeds the number of agents
job is performed

PREPARED BY: ACCOUNTANCY STUDENT COUNCIL | 22

 ◆ Add enough dummy agents to equalize
the number of agents and the number of
tasks.
◆ The objective function coefficients for
these new variable would be zero
➔ The assignment alternatives are evaluated in
terms of revenue or profit
◆ Solve as a maximization problem
➔ An assignment is unacceptable
◆ Remove the corresponding decision
variable
➔ An agent is permitted to work 𝑡 tasks
𝑛
◆ ∑ 𝑥𝑖𝑗 ≤ 𝑡
𝑗=1
◆ For 𝑖 = 1, 2, ..., 𝑚 Agents

Sample Problem 5: Assignment Problem Linear Programming Formulation

An electrical contractor pays his subcontractors a fixed

fee plus mileage for work performed. On a given day the
contractor is faced with three electrical jobs associated
with various projects. Given below are the distances
between the subcontractors and the projects

Projects

Subcontra A B C
ctor

Westside 50 36 16

Federated 28 30 18
MODULE 5.2: ANALYTICAL AND COMPUTER
Goliath 35 32 20 SOLUTIONS OF TRANSPORTATION PROBLEMS

Universal 25 25 14 Determination of a Starting Feasible Solution (Uy, et

al., 2013)
How should the contractors be assigned so that total ➔ The general definition of the transportation
mileage is minimized?
model requires that:

Network Representation

Rim Requirement

➔ A starting basic feasible solution must include

𝑚+𝑛−1
◆ 𝑚 = number of rows
◆ 𝑛 = number of columns

Analytical Solution of Transportation Problem

PREPARED BY: ACCOUNTANCY STUDENT COUNCIL | 23

 1. Northwest Corner Method (NWC)
◆ It provides a straightforward technique
for obtaining the initial solution
(systematic, easily understandable
method)
◆ The costs are not relevant in
determining the initial solution

Steps in using the Northwest Corner Method (Uy et

al., 2013)

1. Starting with the northwest most (upper left Step 2 and 3:

hand) corner, allocate the smaller amount of
either the row supply or the column demand Subtract 25 from the row supply in Plant 1 (40) and
thereby exhausting the supply and demand allocate the said amount of resources (15) of Plant 1 to
requirements. Westwood.
2. Subtract from the row supply and from the The resources in row 1 are fully allocated (exhausted).
column demand the amount allocated. If the
column demand is now zero, move to the cell
next on the right; if the row supply is zero, move
down the cell in the next row. If both are zero,
move first to the next cell on the right, place 0,
then down one cell.
3. Once a cell is identified as per step 2, it
becomes the new northwest cell. Allocate an
amount as in step 1.
4. Repeat the above steps 1 to 3 until all remaining
supply and demand is gone
Step 4:
Sample Problem 6: Analytical Solution using
Repeat steps 1 to 3 until all resources are exhausted
Northwest Corner Method
and all requirements are satisfied.
➔ Find the initial basic feasible solution using the
Northwest corner method

Step 1: Note that a solution becomes basic if the number of

occupied cells, i.e. cells with allocations is m+n-1, where
Begin in the upper left hand corner of the table by
m represents the number of rows and n, the number of
allocating the 25 units of resources (smaller amount of
columns (if 𝑚 = 2 and 𝑛 = 3 then 𝑚 + 𝑛 − 1 = 4, thus
either row supply or column demand) to exhaust the
the basic feasible solution must include 4 basic
requirements.
variables).

PREPARED BY: ACCOUNTANCY STUDENT COUNCIL | 24

 one that is close to optimal in small
transportation problems.
◆ This method is “heuristic” in nature
● If there is a tie for a
lowest-cost cell during any
allocation, we may choose any
of these cells for allocation.
● If a single allocation exhausts
the capacity of a row and
satisfies the requirement of a
➔ The total cost in this solution is obtained by column, we place a zero in one
multiplying the cells allocation to the shipping of the bordering cells (Uy et al.,
cost per unit 2013).
➔ 𝑍 = 24(25) + 30(15) + 40(30) + 42(10) = 2670 Steps in Using the Least Cost Method (Uy et al.,
Sample Problem 7: Analytical Solution using 2013)
Northwest Corner Method 1. Select the cell with the lowest available cost.
➔ Find the initial basic feasible solution using the Allocate as much as possible in view of the
Northwest corner method. capacity of its row and the destination
requirement of its column.
2. Choose the next lowest-cost cell and make an
allocation in view of the remaining capacity and
requirement of its row and column.
3. Repeat the process until all remaining supply
and demand is exhausted.

Sample Problem 8: Analytical Solution using Least

Cost Method

Result:

Step 1:

Select the cell with the least cost and allocate the
𝑍 = 12 (3000) + 20 (1000) + 11 (2000) + 26 (500)
shipment to exhaust either the supply of plants or meet
+ 28 (2500) = 161, 000
the demand requirements. Note that the lowest cost is
24 (in cell Plant 1 to Northwood).

2. Least Cost Method (Minimum Cell)

◆ Involves sequentially allocating the

resources to the cells with the minimum
cost to obtain the initial solution
◆ The Least Cost Method (LCM) yields not
only an initial feasible solution but also

PREPARED BY: ACCOUNTANCY STUDENT COUNCIL | 25

Step 2:

Choose the next lowest cost cell (with cost of 30) then
make allocation of15 units of resources meeting all the
supplies in Plant 1.

𝑍 = 5 (2500) + 6 (500) + 11 (2000) + 20 (1000)

+ 30 (3000) = 147, 500

Step 3: 3. Modified Distribution Method (MODI)

Repeat the process until all remaining supply and ◆ An evaluation procedure used to
demand is exhausted. examine if it is more desirable to move a
shipment into one of the unused cells
◆ Aims to determine whether a better
schedule of shipments from plants to
warehouses can be developed
◆ Used to compute improvement indices
for each unused cell without drawing all
of the closed paths

Steps in using the Modified Distribution Method (Uy

et al., 2013)

Total Transportation Cost: 1. For each solution, compute the R and K values
𝑍 = 24 (25) + 30 (15) + 40 (30) + 42 (10) = 2670 for the occupied or used cells in the table using
the formula:

𝑅𝑖 + 𝐾𝑗 = 𝐶𝑖𝑗 where 𝑅𝑖 is always set to 0

Sample Problem 9: Analytical Solution using Least
Cost Method
2. Calculate the improved indices for all empty or
unused cells using:

Improvement index:
𝐼𝑖𝑗 = 𝐶𝑖𝑗 − (𝑅𝑖 + 𝐾𝑗)

3. Select the unused cell with the largest negative

index.

If all indices are equal to or greater than

zero, the solution is optimal.

Results: 4. Trace the close path for the unused cell having
the largest negative index.
5. Develop an improved solution.
6. Repeat steps 1 to 5 until an optimal solution has
been found.

PREPARED BY: ACCOUNTANCY STUDENT COUNCIL | 26

Sample Problem 10: Analytical Solution using the Step 4 and 5:
Modified Distribution Method
Develop a new improved solution by tracing a close path
for the cell having the largest negative index (𝐼21 =− 4).
This is done by placing plus and minus signs at alternate
corners of the path, beginning with a plus sign at the
unused cell (row 2 to column 1). The smallest number in
a negative position in the close path indicates the
quantity that can be assigned to the unused cell being
entered in the solution. This quantity is added to all cells
in the close path with plus sign and subtracted from
those cells with minus signs.

Step 1:

Begin with the same initial solution obtained using NWC.

To compute R and K values, consider the occupied or
used cells. Note that there are four occupied cells (Plant
1 to Northwood, Plant 1 to Westwood, Plant 2 to
Westwood and Plant 2 to Eastwood).

With four occupied cells (using 𝐶𝑖𝑗 = 𝑅𝑖 + 𝐾𝑗), the

following are obtained: Note that the table shows the results of adding and
subtracting the smallest number (25) in a negative
24 = 𝑅1 + 𝐾1 position in the close path to quantities with plus and
30 = 𝑅1 + 𝐾2 negative signs, respectively.

40 = 𝑅2 + 𝐾2 Step 6:
42 = 𝑅2 + 𝐾2 Evaluate now the unused cells in this new solution and
repeat the process until all indices are equal to or
Since 𝑅1 is assumed equal to zero, then greater than zero. The evaluation of each used and
unused cells of the second solution is shown below:
𝑅2 = 10
With four occupied cells (using 𝐶𝑖𝑗 = 𝑅𝑖 + 𝐾𝑗), the
𝐾1 = 24
following are obtained:
𝐾2 = 30
𝐾3 = 32 30 = 𝑅1 + 𝐾2
30 = 𝑅2 + 𝐾1
Step 2:
40 = 𝑅2 + 𝐾2
After the row and column values are computed, the next 42 = 𝑅2 + 𝐾3
step is to evaluate each unused/ unoccupied cells by
computing their improvement indices using Since 𝑅1 is assumed equal to zero, then
𝐼𝑖𝑗 = 𝐶𝑖𝑗 − (𝑅𝑖 + 𝐾𝑗). Thus, 𝐼13 = 𝐶13 − (𝑅1 + 𝐾3) and
𝐼21 = 𝐶21 − (𝑅2 + 𝐾1) are computed. 𝑅2 = 10
𝐾1 = 20
Note that there are two unused cells in the problem and
𝐾2 = 30
their improvement indices are: 𝐼13 = 8 and 𝐼21 =− 4
𝐾3 = 32
Step 3:
Now, evaluating the two unused cells in the problem by
Since the improvement index in the unused cell (row 2 to computing their improvement indices using
column 1) is negative (𝐼24 =− 4), the solution is not yet 𝐼𝑖𝑗 = 𝐶𝑖𝑗 − (𝑅𝑖 + 𝐾𝑗) leads to 𝐼11 = 4 and 𝐼13 = 8 Since
optimal.

PREPARED BY: ACCOUNTANCY STUDENT COUNCIL | 27

all improvement index values are either zero or positive, ➔ It is a problem wherein one agent is being
the solution is optimal. assigned to one and only one task (Anderson et
al., 2019).
➔ It has an objective of minimizing the overall cost
of completing the job, or, alternately, of
maximizing the overall profit (Anderson et al.,
2019)

Sample Problem 11: Analytical Solution of an

Assignment Problem

The Fowle Marketing Research faces the task of

assigning a project leader (agent) to each client (task).
Currently, three individuals have no other commitments
𝑍 = 30 (40) + 30 (25) + 40 (5) + 42 (10) = 2570 and are available for the project leader assignments.
The three projects have approximately the same priority,
and management wants to assign project leaders to
Sample Problem 11: Analytical Solution using the minimize the total number of days required to complete
Modified Distribution Method all three projects. If a project leader is to be assigned to
one client only, which assignments should be made?
(Anderson et al., 2019, p.274)

ESTIMATED PROJECT COMPLETION TIMES

(DAYS) FOR THE FOWLE MARKETING RESEARCH
ASSIGNMENT PROBLEM

Project Client
Leader
Results: 1 2 3

Terry 10 15 9

Carle 9 18 5

McClymon 6 14 3
ds

Here, the supply is always one project leader, and the

demand is for only one client.

𝑍 = 12 (1000) + 6 (2000) + 11 (500) + 9 (2500) The first table is already in the proper form for the
+ 30 (3000) = 142, 000 Assignment Tableau.

It is also called Cost Matrix , and it is where we perform

our solutions.
MODULE 5.3: ANALYTICAL AND COMPUTER
SOLUTIONS OF TRANSPORTATION PROBLEMS Since supply and demand are always one, it is not
necessary to include supply and demand rows in the
Assignment Problem tableau.
➔ It is a special form of transportation problem
where the supply at each source and the
demand at each destination are each limited to
one unit (Uy et al., 2013)

PREPARED BY: ACCOUNTANCY STUDENT COUNCIL | 28

The cost of assigning project leader to a client is the time optimal when the number of lines equals the number of
it takes that project leader to complete the client’s task. rows or columns.

Step 1:

Develop an opportunity cost table by subtracting the

least cost in each row from every element of the row.
This is the first reduced cost matrix. These computations
are referred to as row reductions. This shows the best Step 5:
course of action for each row, and the penalty or “lost
opportunity” is developed for all other row values Subtract the smallest number not covered by a line from
all the elements not covered and add this number to all
elements lying at the intersection of two lines.

The minimum value not covered by a line in Table 2b is

2. The second iteration for this model with the
appropriate changes is shown in Table 3.

Step 2:

Subtract the minimum value in each column of the first

reduced matrix from all entries in that column. This is the
second reduced cost matrix. These computations are
called column reductions.

Step 3:

Test for optimality by determining if an assignment with a

total reduced cost of zero is possible from the second
reduced cost matrix. If so, the solution is optimal. Note that in Table 3, no matter how you draw the lines,
at least three are needed to cover all the zeros. This
An assignment can be made in the table wherever a indicates that three unique assignments can be made
zero is present. An optimal solution results when each of and that an optimal solution has been reached.
the three project leaders can be uniquely assigned to a
different client. Notice from the table above that the In making the assignments, project leader Terry is
assignment of project leader Terry to Client 1 means that assigned to Client 2, project leader Carle is assigned to
no other project leader can be assigned to that Client 1. client 3 and project leader McClymonds is assigned to
Also, the assignment of project leader Carle to Client 3 Client 1. Here, each of the project leaders can be
means that no other project leader can be assigned to uniquely assigned to the different client.
that Client 3.
Once this assignment is made, the zero row in
McClymonds is infeasible, which indicates that there is
no unique optimal assignment for Client 3.
Therefore, Table 2a does not contain an optimal solution.

Step 4:

Draw horizontal and vertical lines to cover all zeros. Use

a small number of lines as possible (zeros must be
covered with as few lines as possible). The table is

PREPARED BY: ACCOUNTANCY STUDENT COUNCIL | 29

 FLASHCARDS
Management Science Module 4

Management Science Module 5

Step 6:

Repeat steps 4 and 5 if solution is not optimal

Like a transportation problem, an assignment model can

be unbalanced when supply exceeds demand or
demand exceeds supply. In either case, a dummy
column or a dummy row will be added to the table to
balance the model.

Sample Problem 12: Analytical Solution of an

Assignment Problem

Supposed a company has four jobs that must be

assigned to four machines. The cost it takes each
machine to complete each job is given by the table
below

Results:

The assignment will be as follows:

Machine 1 to Job 4
Machine 2 to Job 1
Machine 3 to Job 3
Machine 4 to Job 2

The cost matrix in this assignment:

𝑍 = 23 + 15 + 17 + 21 = 76

PREPARED BY: ACCOUNTANCY STUDENT COUNCIL | 30

 d. its dual price
PRACTICE EXERCISE: THEORETICAL
Instructions: True or False 13. The amount by which an objective function
1. The reduced cost for a positive decision variable coefficient can change before a different set
is 0. of values for the decision variables becomes
optimal is the
2. For any constraint, either its slack/surplus value
must be zero or its dual price must be zero. a. optimal solution
b. dual solution
3. Decreasing the objective function coefficient of a c. range of optimality
variable to its lower limit will create a revised d. range of feasibility
problem that is unbounded.
14. The amount that the objective function
4. For a minimization problem, a positive dual price
indicates the value of the objective function will coefficient of a decision variable would have
increase. to improve before that variable would have a
positive value in the solution is the
5. There is a dual price for every decision variable a. dual price
in a model. b. surplus variable
c. reduced cost
6. Whenever total supply is less than total demand
d. upper limit
in a transportation problem, the LP model does
not determine how the unsatisfied demand is
handled. 15. The dual price measures, per unit increase in
the right hand side,
7. A transportation problem with 3 sources and 4 a. the increase in the value of the optimal
destinations will have 7 decision variables. solution
b. the decrease in the value of the optimal
8. A transshipment constraint must contain a
solution
variable for every arc entering or leaving the
node. c. the improvement in the value of the
optimal solution
9. A dummy origin in a transportation problem is d. the change in the value of the optimal
used when supply exceeds demand. solution

10. Converting a transportation problem LP from

16. The problem which deals with the
cost minimization to profit maximization requires
only changing the objective function; the distribution of goods from several sources to
conversion does not affect the constraints. several destinations is the
a. maximal flow problem
Instructions: Multiple Choice b. transportation problem
11. A negative dual price for a constraint in a c. assignment problem
minimization problem means d. shortest-route problem
a. as the right-hand side increases, the
objective function value will increase 17. The number of units shipped from origin i to
b. as the right-hand side decreases, the destination j is represented by
objective function value will increase a. 𝑥𝑖𝑗
c. as the right-hand side increases, the b. 𝑥𝑗𝑖
objective function value will decrease
d. as the right-hand side decreases, the c. 𝑐𝑖𝑗
objective function value will decrease d. 𝑐𝑗𝑖

12. A constraint with a positive slack value value 18. The difference between the transportation
a. will have a positive dual price and assignment problems is that
b. will have a negative dual price a. total supply must equal total demand in
c. zero the transportation problem

PREPARED BY: ACCOUNTANCY STUDENT COUNCIL | 31

 b. the number of origins must equal the A pecan pie takes two cups of pecans, a cup
number of destinations in the of brown sugar, a cup of cane syrup, a cup of
transportation problem granulated sugar, a teaspoon of vanilla, and
c. each supply and demand value is 1 in a tablespoon of rum. A recipe for Bananas
the assignment problem Foster requires a cup of pecans, a cup of
d. there are many differences between the brown sugar, a cup of granulated sugar, a
transportation and assignment problems banana, and a tablespoon of rum and makes
two servings. Bananas Foster is considered
19. The assignment problem is a special case of a dessert for two and is priced accordingly at
the $15. Your pantry has on hand 24 cups of
a. transportation problem pecans, 40 cups of brown sugar, 12 cups of
b. transshipment problem cane syrup, 20 cups of granulated sugar, 40
c. maximal flow problem teaspoons of vanilla, twelve bananas, and 64
d. shortest-route problem tablespoons of rum. Pralines sell for $22.68
per dozen and a pecan pie costs $22.40. The
20. In a transshipment problem, shipments Sensitivity Report from an Excel formulation
a. cannot occur between two origin nodes of this problem is show below.
b. cannot occur between an origin node
and a destination node
c. cannot occur between a transshipment
node and a destination node
d. can occur between any two nodes

PRACTICE EXERCISE: PROBLEM SOLVING

1. The optimal solution to this linear program is

a. $0
b. $0.28
c. $0.12
d. $0.40
3. Consider the following objective function:
𝑀𝑎𝑥: 𝑃 = 3𝑥 + 5𝑦
a. 𝑥1 = 34 , 𝑥2 = 40 s.t. 2𝑥 + 3𝑦 ≤ 30
b. 𝑥1 = 6 , 𝑥2 = 11 4𝑥 + 𝑦 ≤ 20
c. 𝑥1 = 7. 33 , 𝑥2 = 6 Find the rage of optimality for the coefficient
y.
d. 𝑥1 = 3 , 𝑥2 = 6 a. [0.75 , 4.5]
2. Classic New Orleans desserts include b. [4, 7]
pralines, pecan pie and Bananas Foster — all c. [2, 12]
three are absolutely essential to eat on any d. [1.5, 4]
trip to the city. Chefs may quibble about this
ingredient list as there are dozens of 4. Consider the following
variations on each recipe, but these objective function:
ingredients are common to most 𝑀𝑎𝑥: 𝑍 = 1200𝑥 + 1600𝑦
formulations. A recipe for a dozen pralines s.t. 3𝑥 + 2𝑦 ≤ 18
takes a cup of pecans, two cups of brown 2𝑥 + 4𝑦 ≤ 20
sugar, a cup of granulated sugar, a half 𝑥≤5
teaspoon of vanilla and a tablespoon of rum. NNC: 𝑥 , 𝑦 ≥ 0

PREPARED BY: ACCOUNTANCY STUDENT COUNCIL | 32

 Find the slope of the second constraint. c. Project 3 = Alice
a. -2 d. Project 4 = Wally
2
b. − 3
1
8. The Pointy-haired boss has five projects to
c. − 2 assign and decides to go against all
d. −
3 conventions and assign them to individuals
2
rather than project teams. He has the
5. Consider the following
Elbonians estimate the labor cost in dollars
objective function:
of each possible assignment and that
𝑀𝑎𝑥: 𝑍 = 1200𝑥 + 1600𝑦
information is summarized in the table. Use
s.t. 3𝑥 + 2𝑦 ≤ 18
Solver to determine which worker is
2𝑥 + 4𝑦 ≤ 20
assigned Project 1.
𝑥≤5
NNC: 𝑥 , 𝑦 ≥ 0
Find the slope of the first constraint.
a. -2
2
b. − 3
1
c. − 2

d. −
3 a. Alice
2
b. Asok
c. Dilbert
6. The final table for an assignment problem,
d. Wally
who should be assigned to job 2?
9. The Pointy-haired boss has five projects to
assign and decides to go against all
convention and assign them to individuals
rather than project teams. He has the
Elbonians estimate the labor cost in dollars
of each possible assignment and that
a. worker A
information is summarized in the table.
b. worker B
c. worker C
d. worker D

7. The Pointy-haired boss has five projects to

assign and decides to go against all
convention and assign them to individuals How many decision variables are in an LP
rather than project teams. He has the formulation of this problem?
Elbonians estimate the labor cost in dollars a. 25
of each possible assignment and that b. 10
information is summarized in the table. Use c. 9
Solver to determine which of these d. 5
assignments is correct.
10. The Pointy-haired boss has five projects to
assign and decides to go against all
convention and assign them to individuals
rather than project teams. He has the
Elbonians estimate the labor cost in dollars
of each possible assignment and that
information is summarized in the table.
a. Project 3 = Dogbert
b. Project 2 = Alice

PREPARED BY: ACCOUNTANCY STUDENT COUNCIL | 33

How many constraints are in an LP
formulation of this problem?
a. 25
b. 11
c. 10
d. 5

PREPARED BY: ACCOUNTANCY STUDENT COUNCIL | 34

 sources × 4 destinations
ANSWER KEY = 12).

THEORETICAL A transshipment
constraint requires
The reduced cost for a 8. True variables for all arcs
positive decision variable (inflows and outflows)
is 0, meaning that for connected to the node
1. True
variables in the solution,
their contribution is A dummy origin is used
optimal. when demand exceeds
9. False
supply, not when supply
This is the exceeds demand.
complementary slackness
condition: either a
2. True
constraint is binding Converting from cost
(slack/surplus = 0), or its minimization to profit
dual price is zero. maximization only
10. True requires changing the
Decreasing the objective objective function, while
function coefficient to its the constraints stay the
lower limit won't same.
3. False necessarily make the
problem unbounded; it
may just change the In a minimization
optimal solution. problem, a negative dual
price means that
In a minimization 11. A increasing the right-hand
problem, a positive dual side worsens (increases)
price indicates that the objective function
increasing the right-hand value.
4. False
side of a constraint
decreases the value of A constraint with a
the objective function, not positive slack value is not
12. C.
increases it binding, meaning its dual
price is zero.
There is no dual price for
decision variables, but The range of optimality
5. False indicates how much an
there is one for each
constraint. objective function
13. C. coefficient can change
If supply is less than before the current
demand in a solution is no longer
transportation problem, optimal.
6. True the LP model does not
handle how the The reduced cost shows
unsatisfied demand is how much an objective
met function coefficient would
14. C need to improve for a
A transportation problem decision variable to enter
with 3 sources and 4 the solution with a
7. False
destinations will have 12 positive value.
decision variables (3

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 The dual price measures
3.
the improvement in the
optimal solution for each
15. C. 2𝑥 + 3𝑦 ≤ 30 4𝑥 + 𝑦 ≤ 20
unit increase in the
right-hand side of the 3𝑦 =− 2𝑥 + 30 𝑦 =− 4𝑥 + 20
2 𝑠𝑙𝑜𝑝𝑒 =− 4
constraint. 𝑦 =− 3
+ 10
2
𝑠𝑙𝑜𝑝𝑒 =−
The transportation 3

problem deals with

distributing goods from
16. B. Inequality
several sources to 𝑐1 2
several destinations at − 4 ≤− 𝑐2
≤− 3
minimal cost. 3 2
− 4 ≤− 𝑐2
≤− 3
The number of units
− 1⎡⎢− 4 ≤− ⎤− 1
3 2
shipped from origin i to 𝑐2
≤− 3 ⎥
17. A. ⎣ ⎦
destination j is 2 3
≤ ≤4
represented by 𝑥𝑖𝑗 3 𝑐 2

𝑐2
In the assignment 4≤ ≤
3
3 2
problem, each task is 𝑐
3⎡⎢ 4 ≤ 32 ≤ 2 ⎤⎥3
1 3
18. C. assigned to one resource,
⎣ ⎦
with supply and demand
0. 75 ≤ 𝑐2 ≤ 4. 5
values equal to 1.
[0.75 , 4.5]
The assignment problem
is a specific case of the
19. A. transportation problem, 4.
where supply and
demand are equal to 1. 2𝑥 + 4𝑦 ≤ 20
4𝑦 =− 2𝑥 + 20
In a transshipment 2
𝑦 =− +5
problem, shipments can 4
2 1
occur between any 𝑠𝑙𝑜𝑝𝑒 =− 𝑜𝑟 −
20. D. 4 2
nodes, including origins,
transshipment nodes, and
destinations. 5.

PROBLEM-SOLVING
3𝑥 + 2𝑦 ≤ 18
1. D. 6. C. 2𝑦 =− 3𝑥 + 18
3
𝑦 =− 2 + 18
2. B. 7. A. 𝑠𝑙𝑜𝑝𝑒 =−
3
2

3. A. 8. D.
6.
4. C. 9. A.
If worker C is assigned to Job 2, the overall time for all
5. D. 10. C. assignments is minimized to 0 minutes.

SOLUTIONS 7.

PREPARED BY: ACCOUNTANCY STUDENT COUNCIL | 36

 ➔ Cengage Learning Asia Philippines (2016).
Analyze each choice:
a. Project 3 = Dogbert Chapter 6A: Distribution and Network Models
The labor cost to complete project 3 is [PowerPoint slides].
$20, which is the lowest cost for that ➔ Uy, C., et al, (2013). Quantitative Techniques in
project. Business. S.M.A.R.T. Innovations.

b. Project 2 = Alice Prepared by:

The labor cost to complete Project 2
ONG, Jonel Tomi T.
is $22. However, Wally’s cost is lower,
so this is not the best assignment.

c. Project 3 = Alice
The labor cost to complete Project 3
is $22. However, Dogbert’s cost is
lower, so this is not the best
assignment.

d. Project 4 = Wally
The labor cost to complete Project 4
is $23. However, Dilbert’s cost is
lower, so this is not the best
assignment.

8.

Wally has the lowest labor cost of $21 for Project 1

9.

Total decision variables:

5 (projects) x 5 (individuals) = 25

10.

Total number of constraints:

5 (one constraint per project) + 5 (one constraint per
individual) = 10

REFERENCES

➔ Anderson, D. R., Sweeney, DJ., Williams, T.A.,

Camm, J.D., Cochran, J.J., & Ohlmann, J.W.
(2019). An Introduction to Management Science:
Quantitative Approaches to Decision Making.
Singapore: Cengage Learning Asia Pte Ltd.
➔ Benton Jr, W. C. (2020). Purchasing and supply
chain management. SAGE Publications,
Incorporated.
➔ Bowersox, D. J., Closs, D. J., & Cooper, M. B.
(2010). Supply Chain Logistic Management (3
rd. Ed Boston McGravel.

PREPARED BY: ACCOUNTANCY STUDENT COUNCIL | 37