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Master of Business Administration: Quantitative Analysis For Management Decisions

This document discusses a quantitative analysis course for an MBA program. It covers the topics of linear programming (LP), including formulation of LP problems, graphical and simplex methods for solving LP problems, and providing two examples of LP problems involving production decisions to maximize profit. The document provides mathematical formulations of LP problems and step-by-step solutions to the examples.

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Dawit Tesfaye
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© © All Rights Reserved
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Download as PPTX, PDF, TXT or read online on Scribd
0% found this document useful (0 votes)
592 views

Master of Business Administration: Quantitative Analysis For Management Decisions

This document discusses a quantitative analysis course for an MBA program. It covers the topics of linear programming (LP), including formulation of LP problems, graphical and simplex methods for solving LP problems, and providing two examples of LP problems involving production decisions to maximize profit. The document provides mathematical formulations of LP problems and step-by-step solutions to the examples.

Uploaded by

Dawit Tesfaye
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 75

DEPARTMENT OF BUSINESS MANAGEMENT

Master of Business Administration

QUANTITATIVE ANALYSIS FOR


MANAGEMENT DECISIONS
Asamenew E. (Assit. Prof.)
Unit-One: Linear Programming/LPP

Topics To Be Covered
 Formulation of LPP
 Graphical method for two variables
 Solution- BFS. Optimal , degenerate, non degenerate
solutions
 Simplex method
 Big ‘m’ method

2
1.1. Formulation of LPP
 Linear Programming is a mathematical process that as bee
developed to help management in decision making involving
the efficient allocation of scares resources to achieve a
certain objectives.
 LP is a class of mathematical programming model which
deals with the program of allocation limited resource among
competing activities in an optimum manner.

 LP is a mathematical program where both the objective and


constraint are linear function of the input variables.
3
Con’t…
 LP involves the optimization (maximization or
minimization of a linear function) while satisfying a set of
linear equality and or inequality constraints.

 The objective function may be profit, cost, production


capacity or any other measure of effectiveness, which is to
be obtained in the best possible or optimal manner.

 The constraints may be imposed by different resources such


as market demand, production process and equipment,
storage capacity, raw material availability, etc.
4
Con’t…

5
Mathematical Form of Linear Programming

  

Let the decision (input) variables be X1, X2, …….Xn and m
as the set of constraint. Both decision variables and
constraints are linear function of the variable.
 The standard form of a general linear programming may be
written in the following form.

(max or min) Obj. Fun.

 Where z is the objective function to maximize or minimize.


Ci’s are the coefficient and xi’s are the variables.

6
Con’t…
  
Subject to constraints
𝑎11 𝑥1 + 𝑎12 𝑥2 + ⋯ … … … … . . +𝑎1𝑛 𝑥𝑛 ≤, =, ≥ 𝑏1
𝑎21 𝑥1 + 𝑎22 𝑥2 + ⋯ … … … … . . +𝑎2𝑛 𝑥𝑛 ≤, =, ≥ 𝑏2
.
.
𝑎𝑚1 𝑥1 + 𝑎𝑚2 𝑥2 + ⋯ … … … … . . +𝑎𝑚𝑛 𝑥𝑛 ≤, =, ≥ 𝑏𝑚

where x1, x2,…..xn are decision (input) variables, c1, c2,…cn are called
constant are representing cost or profit coefficients i.e. per unit contribution
to the objective function, aij (i=1,2,….m and j=1,2,…..n) are called
structural coefficients, b1, b2,……,bm represents an availability of m
constraints and xj 0 simply implies that the Zi’s must be non-negative.
7
Assumptions in linear programming models

1. Proportionality: a basic assumption of linear


programming is that proportionality exists in the objective
function and the constraints.
 This assumption implies that if a product yields a profit of
Rs. 10, the profit earned from the sale of 12 such products
will be Rs. (10*12) = Rs. 120.
 This may not be always true because of quantity discounts.
Further even if the sale price is constant, the manufacturing
cost may vary with the number of units produced and so
may vary the profit per unit.
8
Con’t…

2. Additivity: It means if we use t1 hours on machine A to make


product 1 and t2 hours to make product 2, the total time required
to make products 1 and 2 on machine A is t1 + t2 hours.

3. Continuity: The decision variables are continuous i.e., they are


permitted to take any non- negative values that satisfy the
constraints. However, there are problems where in variables are
restricted to have integral values only. Though such problems,
strictly speaking, are not linear programming problems, they are
frequently solved by linear programming techniques and the
values are then rounded of to nearest integers to satisfy the
constraints.
9
Con’t…

4. Certainty: this assumption states that the various


parameters, namely, the objective function coefficients,
Right hand side (R.H.S.) coefficients of the constraints
and resource values in the constraints are certainly and
precisely known and that their values do not change with
time.

5. Finite choice: a linear programming model also assumes


that a finite (limited) number of choices (alternatives) are
available to the decision maker and that the decision
variables are interrelated and non-negative.
10
Method of solving LP problems

There are two method of solving LPP

The graphical method

The simplex method

11
The Graphical Methods

 For LP problems that have only two variables, it is possible


that the entire set of feasible solutions can be displayed
graphically by plotting linear constraints on a graph paper
to locate the best (optimal) solution.

 A feasible solution is a value of the decision variables x1, x2,


…..xn for which all constraints are satisfied.

 Conversely an infeasible solution is a solution for which at


least one constraint is violated.

12
Con’t…

 An optimal solution is a feasible solution that has the most


favorable value of the objective function.
 The most favorable function is the largest value if the
objective function is to be maximized, whereas it is the
smallest value if the objective function is to be minimized.
 The steps of graphic methods can be summarized as
follows:
1. Formulate the linear programming problem.
2. Each inequality in the constraints may be written as
equality.
3. Plot the constraint lines considering them as equations.
13
Con’t…

4. Identify feasible solution region.

5. Locate the corner points of the feasible region.

6. Calculate the value of the objective function on the

corner points.

7. Choose the point where the objective function has

optimal value.

14
Example 1

A firm is engaged in producing two products P1 and P2. Each unit of


product P1 requires 2 kg of raw material and 4 labor hours for
processing, whereas each unit of product P2 requires 5 kg of raw
material and 3 labor hours of the same type. Every week the firm
has the availability of 50 kg of raw materials and 60 labor hours.
One unit of product P1 sold earn profit birr 20 and one unit of
product P2 sold give birr 30 as profit. Formulate this problem as
linear programming problem to determine as to how many units of
each of the product should be produced per week so that the firm
can earn maximum profit, assume all unit produced can be sold in
the market.
15
Con’t…

Solution:

Maximize 𝑍 = 20𝑥1 +30𝑥2 profit function


Subject to 2𝑥1 +5𝑥2 ≤ 50 material constraint
4𝑥1 +3𝑥2 ≤ 60 Labour constraint
where 𝑥1,𝑥2 ≥ 0 non negativity

16
Con’t…

Thus the value of Z corresponding to the various points in


respect of the given problem are shown here
17
Con’t…

Point X1 X2

O 0 0 0

A 0 10 300

E 7.9 6.84 363.2

D 12 0 240

Since Z is highest at point E, the optimal solution to produce


17.9 units of P1 and 6.84 units of P2 every week to get profit
of birr 363.2. No other product mix under the given condition
yield more profit.

18
Example 2:

Consider two models of color TV sets; Model A and B, are


produced by a company to maximize profit. The profit realized is
$300 from A and $250 from set B. The limitations are

a. availability of only 40hrs of labor each day in the production


department.

b. a daily availability of only 45 hrs on machine time

c. ability to sale 12 set of model A.

How many sets of each model will be produced each day so


that the total profit will be as large as possible?

19
Con’t…

Resources used per unit


Constraint Model A ( Model B ( Maximum available hrs.
Labor hr. 2 1 40
Labor hr. 2 1 40
Machine hr. 1 3 45
Machine hr. 1 3 45
Marketing hr. 1 0
Marketing hr. 1 0 12
12
Profit $300 $250
Profit $300 $250

Solution
1. Formulation of mathematical modeling of LPP
Max Z=300X1 +250X2
St:
2X1 +X2< 40
X1 +3X2< 45
LPP Model
X1 < 12
X1, X2 >0

20
Con’t…
2. Convert constraints inequalities into equalities
2X1 +X2 = 40
X1 +3X2= 45
X1 = 12
3. Draw the graph by intercepts
2X1 +X2 = 40 ==> (0, 0) and (20, 0)
X1 +3X2= 45==> (0, 15) and (45, 0)
X1 = 12==> (12, 0)
X1, X2 >0

21
Con’t…

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


constrains.
5. Identify the corner points in the feasible region
 A (0, 0), B (0, 15), C (12, 11) and D (12, 0)

6. Identify the optimal point

22
Con’t…
7. Interpret the result
Corner Points Coordinates Max Z=300 X1 +250X2
A (0,0) $0
B (0,15) $3750
C (12,11) $6350
D (12,0) $3600

Interpretation:
 12 units of product A and 11 units of product B should be
produced so that the total profit will be $6350.

23
Example 3:

 Suppose that a machine shop has two different types of


machines; machine 1 and machine 2, which can be used to
make a single product .These machine vary in the amount
of product produced per hr., in the amount of labor used and
in the cost of operation.
 Assume that at least a certain amount of product must be
produced and that we would like to utilize at least the
regular labor force. How much should we utilize each
machine in order to utilize total costs and still meets the
requirement?
24
Con’t…
________________________________________________________________
Solution Resource used
Machine 1 (X1) Machine (X2) Minimum required hours

_____________________________________________________________________

Product produced/hr 20 15 100


Labor/hr 2 3 15________
Operation Cost $25 $30_____________________________

Min.Z  25 X 130 X 2
St :
20 X 115 X 2 100 LPP Model

2 X 13 X 2 15
X1, X 2  0

25
Con’t…
 Constraint
equation:
20X1 +15X2=100 ==> (0, 20/3) and (5, 0)
2X1+3X2=15 ==> (0, 5) and (7.5, 0)
X1, X2 >0

26
Con’t…

Corner Points Coordinates Min Z=25 X1 +30X2


A (0,20/3) 200
B (2.5, 3.33) 162.5
C (7.5, 0) 187.5

X1 =2.5

X2=3.33 and

Min Z= 162.5

27
SPECIAL CASES IN GRAPHICS METHODS
1. Redundant Constraint
 If a constraint when plotted on a graph doesn’t form part of
the boundary making the feasible region of the problem that
constraint is said to be redundant.
 If the removal of constraints of a LPP does not alter the
optimal solution to the problem, the constraint is said to be
redundant constraint. In other words, constraint appears
redundant when it may be more binding/restrictive/ than
other.

28
Con’t…
Consider the following maximization function
Max.Z  40 X 135 X 2
St :
2 X 13 X 2 60
4 X 13 X 2 96
4 X 1  3.5 X 2  105
X1, X 2  0
The feasible and optimal solutions were found to be

Corners Coordinates MinZ=40 X1 + 35X2


A (0, 0) 0
B (0, 20) 700
C (18, 8) 1000
D (24, 0) 960
X1 =18
X2=8 and
MinZ= 1000
29
Con’t…
Interpretation: The company should produce and sale 18 units of
product A and 8 units of product B per week so as to get a maximum
profit of 1000.
By this production plan the entire raw material will be consumed.

2X1 +3X2 <60


2(18) +3(8) =60 So, 60=60==> N o idle or unused raw material
4X1 +3X2 <96
4(18) +3(8) <96 96=96 ==>the entire labor hour will be consumed
4X1 +3.5X2 <105
100<105==>There is to be idle or unused capacity of 5hrs in the
packaging department.
 Note: The packaging hour’s constraint does not form part of the
boundary making the feasible region. Thus, this constraint is of no
consequence and is therefore, redundant. The inclusion or exclusion of
a redundant constraint does not affect the optimal solution of the
problem.
30
2. Multiple (Alternative) optimal Solutions

 This is a situation where by a LPP has more than one


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

 We have unlimited number of optimal solution with out


increasing or decreasing the objective function.

31
Con’t…
Example:
 The information given below is for the products A and B.
_____________________________________________________________________
Machine hours per week Maximum available
Department Product A Product B per week
_____________________________________________________________________

Cutting 3 6 900
Assembly 1 1 200
Profit per unit $8 $16
_____________________________________________________________________

Assume that the company has a marketing constraint on


selling products B and therefore it can sale a maximum of
125units of this product.
32
Con’t…
Required:
a. Formulate the LPP of this problem
b. Find the optimal solution
 Solution:
 Let X1 =The No of units f product A produced per week

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


The LPP Model of the problem is:

33
Con’t…

Corners Coordinates MaxZ=8 X1 + 16X2


A (0, 0) 0
B (0, 125) 2000
C (50, 125) 2400
D (100, 100) 2400
E (200, 100) 1600

Interpretation:
 Both C and D are optimal solutions. Any point on the line
segment CD will also lead to the same optimal solution.
 ==>Multiple optimal solutions provide more choices for
management to reach their objectives.

34
3. Infeasible Solution

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

Subject to the constraint

Solution: the constraints are plotted as follow:


35
Con’t…

Note:

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


area.

-All constraints cannot be satisfied simultaneously and there is


no feasible solution to the problem.
36
4. Unbounded Solution

 A max LP is unbounded if it is possible to make the value of


the solution as large as desired without violating any of the
constraint.
 A min LP is unbounded if the value of the optimal solution
can be decreased as small as desired without violating any
of the constraints.
 unbounded solution to a maximization problem is the case
where the feasible region extends to infinity in the direction
where the objective function increases

37
Con’t…

38
SIMPLEX METHOD

 The graphical method to solving LPPs provides fundamental


concepts for fully understanding the LP process.
 However, the graphical method can handle problems
involving only two decision variables (say X1 and X2).
 In 19940’s George B.Dantzig developed an algebraic
approach called the Simplex Method which is an efficient
approach to solve applied problems containing numerous
constraints and involving many variables that cannot be
solved by the graphical method.

39
Con’t…

 The simplex method is an ITERATIVE or “step by step”


method or repetitive algebraic approach that moves
automatically from one basic feasible solution to another
basic feasible solution improving the solution each time
until the optimal solution is reached at.
 The simplex method starts with a corner that is in the
solution space or feasible region and moves to another
corner of the solution space improving the value of the
objective function each time until optimal solution is
reached at the optimal corner.
40
Standard and canonical form of LPP

  LP is said be in its standard form if all the right hand side


A

values are non-negative and all constraints are


equations/equalities.
 A maximization problem is said to be in canonical form if all
variables are non-negative and all constraints are of the type
of the type.
 A minimization problem is said to be in canonical form if all
variables are non-negative and all constraints are of the type
of the type. To employ the simplex method, it is essential
that the program be in standard form.
41
Con’t…

 We begin the simplex method by converting the constraints


that are in inequality to equations that is by obtaining the
standard form of the LPP.
 All the constraints should be expressed as equations by
adding slack or surplus and/or artificial variables.
 And the right hand side of each constraint should be made
non-negative; if it is not, this should be done by multiply
both sides of the resulting constraint by -1.

42
Con’t…

 A slack variable represents unused resources, either in the form


of time on a machine, labor hours, money or any number of
such resources in various business problems.
 Since this variables yield no profit, therefore such variables are
added to the original objective function with zero coefficients.
 A surplus variable represents amount by which solution values
exceed a resource.
 These variables are also called negative slack variables.
Surplus variables, like slack variables carry a zero coefficient
in the objective function.
43
The Simplex Algorithm
Consider the LPP with m constraints and the standard form
 
of such a LP may contain n variables including the slack
variables symbolized for continence as x1, x2,…….,xn given
by the optimization
 The standard form of the LPP is expressed as:

Subject to the linear constraint

.
.
.
44
Con’t…
In matrix form the standard form is expressed as:
 
 and where is the row vector, are column vectors

is the mxn matrix of coefficient of variables in the


constraints.

45
Con’t…
To employ the simplex algorithm, we use the following
tableau as a device.
𝑐𝑗 𝑐1 𝑐2 … 𝑐𝑛 0 0… 0
Coefficients of Basic Basic 𝑥1 𝑥2 … 𝑥𝑛 𝑠1 𝑠2 … 𝑠𝑚 b 𝑏ൗ
𝑎𝑖𝑗
Variables in the Variable
solution of 𝑐𝑗
0 𝑠1 𝑎11 𝑎12 … 𝑎1𝑛 1 0… 0
0 𝑠2 𝑎21 𝑎22 … 𝑎2𝑛 0 1… 0
. . . . . . . .
. . . . . . . .
. . . . . . . .
. . . . . . . .
. . . . . . . .
0 𝑠𝑚 𝑎𝑚 1 𝑎𝑚 2 … 𝑎𝑚𝑛 0 … 1
𝑍𝑗 0 0 … 0 0 … 0
𝑐𝑗 − 𝑍𝑗

46
Summary of steps in solving a maximizing LP

 Step 1: Set the objective function


 Step 2: Write necessarily constraints
 Step 3: Express the problem in standard form
 The given problem is said to expressed in standard forms if the given
(decision) variables are non-negative, right hand side of the constraints
are non-negative and the constraints are expressed as equations.
 Step 4: Find the initial basic feasible solution
 In the simplex method a start is made with a feasible solution, which
we shall get by assuming that the maximization objective function
value is zero. This will be so when decision variables x1, x2, … , xn are
each equal to zero. These variables are called non-basic variables.
47
Con’t…
Step
  5: Perform optimality test
 The next step is to ascertain whether the initial basic feasible
solution found in step 4 can be improved or not.
 This solution involves zero values of the objective function; an
improved solution should result in a value of higher than zero.
-row coefficients under any column are obtained by adding the
products of elements under that column with the corresponding
CB values.
 i.e. = , where are the matrix element in the row and column.
Values in the -row represents the contribution lost per unit of the
variable.
48
Con’t…
The
   last row (base row) in the simplex table is row, also called the
index row or net evaluation row (N. E. R.). This row determines
whether or not the current solution is optimal.
 A positive coefficient in the row indicates the amount by which
the value of the objective function will be increased if a unit of the
corresponding variable is introduced in to the solution; a negative
coefficient in the row indicates the amount by which the value of
the objective function will be decreased if a unit of the
corresponding variable is introduced in to the solution.
 The elements in the row are, therefore, examined; in case they
are negative or zero, the current solution is optimal.
49
Con’t…
Step
  6: Iterate towards an optimal solution
 At each iteration, the simplex method moves the current
basic feasible solution to an improved basic feasible
solution. This is done by replacing one current basic
variable by anew non-basic variable as explained bellow.

I. Selection of the entering variable: for this we observe for


different columns and mark the column for maximum
positive value.

50
Con’t…

 The variable heading that column is which should enter the solution. This

variable is called entering variable or incoming variable and the column

in which it occurs is called the key column or pivot column.

 if more than one variable appears with the same maximum value, any one

of these variables may be selected arbitrarily as the incoming variable.

II. Selection of the leaving variable: to determine which of the basic


variables be replace (removed or made zero or made non-basic),
elements under b-column (quantity column) are divided by the
corresponding elements of the key column and the row containing the
minimum non-negative ratio is marked..

51
Con’t…
 
 The current basic variable, then, to be replaced and is called leaving
(outgoing or departing) variable and is to be made zero. The row so marked
is called the key (pivot) row. Zero is considered as non-negative and
negative ratios are discarded. The element lying at the intersection of key
column and key row is called key (or pivot) element.
III. Evaluating (updating) the new solution: the new simplex table will be
updated by using Gauss-Jordan computations procedures to find new raw
values by performing some mathematical operations
 Pivot Row
a) Replace the leaving variable in the basic column with the entering
variable.
b) New pivot row = Current pivot Pivot element
 All other rows, including z
a) New row = (Current row value) (its pivot column coefficient) New
pivot row
52
Con’t…
Step
  7: Perform optimality test for the new Simplex table
 Compute = and also the row, the algorithm terminates if
all the row values are either zero or negative, otherwise the
algorithm continues in the same fashion.

53
Example 1:

a farmer has 100 acres of land which he wishes to plant with a


mixture of potatoes, corn and cabbage. It costs him birr 100 to
produce an acre on potato, birr 40 to produce an acre of corn
and birr 70 to produce an acre of cabbage. He has a maximum
of 5000 birr to spend. He make a profit of birr 30 per an acre
on potato, birr 10 to per acre of corn and birr 15 to per acre of
cabbage. How many acres of corn should he plant to
maximize his profit?

54
Soution:
 Available capital=5000 birr
 Available land =100 acres
Crops cost/acres profit
Potatoes 100 30
Corns 40 10
Cabbage 70 15

 Let: X1 be the number of acres of land allocate to potato


X2 be the number of acres of land allocate to corns
X3 be the number of acres of land allocate to cabbage

55
Soution:

 
Subject to:

 In order to change the above Lp in to standard form we


have to introduce the slack variables.

Subject to:

56
Con’t…
The initial simplex tableau is:
 
Cj 30 10 15 0 0
Var. in Var. in Cj 𝑥1 𝑥2 𝑥3 𝑠1 𝑠2 b b/aij
soln.
𝑠1 0 100 40 70 1 0 5000 50
𝑠2 0 1 1 1 0 1 100 100
𝑍𝑗 0 0 0 0 0
𝑐𝑗 − 𝑍𝑗 30 10 15 0 0

 Since values are positive, the objective function can be improved.


The largest, values is 30 thus is entering variable. The smallest
non negative quotient is 50 thus is departing variable.

57
Con’t…
 The second simplex tableau is:
 R1 (new) R1(old)/100 1, 0.4, 0.7, 0.01, 0, 50
 R2 (new) R2(old)-1*( R1 (new))0, 0.6, 0.3, -0.01,1, 50

Cj 30 10 15 0 0
Var. in Var. in 𝑥1 𝑥2 𝑥3 𝑠1 𝑠2 b b/aij
soln. Cj
𝑥1 30 1 0.4 0.7 0.01 0 50
𝑠2 0 0 0.6 0.3 -0.01 1 50
𝑍𝑗 30 12 21 0.3 0 1500
𝑐𝑗 − 𝑍𝑗 0 -2 -6 -0.3 0

58
Con’t…

  

All values are less than or equal to zero, thus we cannot
improve the objective function. Value of the variable X1=50
and S2=50 in maximize the objective function. X1 represents
the unused capital portion of land. Therefore the solutions
are X1=50, S2=50, X2, X3, S1=0. The farmer should plant 50
acres of land of potato in order to maximize profit and he
has to leave the other 50 acres of land unplanted and the
maximum profit is 1500 birr.

59
Example 2:

Electronics firms are decided to produce as to the most


profitable mix for its products. The products now
manufactured are transistor, resistor and carbon tube with a
profit (per 100 unit) of birr 10, 6, 4 respectively. To produce a
shipment of transistor containing 100 units require 1 hour of
engineering, 10 hours of direct labor and 2 hours of
administration service. To produce 100 resistors are required
1, 4 and 2 hours of engineering, direct labor and
administration time respectively. To produce one shipment of
carbon tube (100 units) requires 1 hour of engineering, 5
hours of direct labor, and 6 hours of administration. There are
100 hours of engineering service available, 600 hours of labor
and 300 hours of administration. What is the most profitable
mix?

60
Solution:
 The information in the problem may be organized using table:

  The time require to produce 100  


Service units of Available type
Transistor Resistor Carbon

Engineering 1 1 1 100
Labor 10 4 5 600
Administration 2 2 6 300
Profit/100 units 10 6 4  

 Let: X1 be the number of 100 units of transistor


X2 be the number of 100 units of resistor
X3 be the number of 100 units of carbon
Z be profit
61
Con’t…

 
Subject to

 Introduce the slack variable to change the above model into


standard form:

Subject to

62
Con’t…

 
The initial simplex tableau is:
Cj 10 6 4 0 0 0
Var. in Var. in 𝑥1 𝑥2 𝑥3 𝑠1 𝑠2 𝑠3 b b/aij
soln. Cj
𝑠1 0 1 1 1 1 0 0 100 100
𝑠2 0 10 4 5 0 1 0 600 60
𝑠3 0 2 2 6 0 0 1 300 150
𝑍𝑗 0 0 0 0 0 0
Cj-Zj 10 6 4 0 0 0

Entering Variable departing Variable

10 is the largest Cj-Zj , thus is the entering variable. The


smallest non negative quotient is 60, is departing variable.
63
Con’t…
 The second simplex tableau:
R2 (new) R2(old)/10 1, 0.4, 0.5, 0, 0.1, 0, 60
R1 (new) R1(old)-1*( R2 (new))0, 0.6, 0.5, 1, -0.1, 0, 40
R3 (new) R3(old)-2*( R1 (new)) 0, 1.2, 5, 0, -0.2, 1, 180

Cj 10 6 4 0 0 0
Var. in Var. in 𝑥1 𝑥2 𝑥3 𝑠1 𝑠2 𝑠3 b b/aij
soln. Cj
𝑠1 0 0 0.6 0.5 1 -0.1 0 40 400/6
𝑥1 10 1 0.4 0.5 0 0.1 0 60 600/4
𝑠3 0 0 1.2 5 0 -0.2 1 180 150
𝑍𝑗 10 4 5 0 1 0 600
Cj-Zj 0 2 -1 0 -1 0

64
Con’t…

The

  third simplex tableau is:
R1 (new) R1(old)/0.6 0, 1, 5/6, 10/6, -1/6, 0, 400/6
R2 (new) R1(old)-0.4* R1 (new) 1, 0, 1/6, -2/3, 1/6, 0, 100/3
R3 (new) R3(old)-1.2* R1 (new) 0, 0, 4, -2, 0, 1, 100
Cj 10 6 4 0 0 0
Var. in Var. in 𝑥1 𝑥2 𝑥3 𝑠1 𝑠2 𝑠3 b b/aij
soln. Cj
𝑥2 6 0 1 5/6 10/6 -1/6 0 400/6
𝑥1 10 1 0 1/6 -2/3 1/6 0 100/3
𝑠3 0 0 0 4 -2 0 1 100
𝑍𝑗 10 6 40/6 10/3 4/6 0 2200/3
Cj-Zj 0 0 -16/6 -10/3 -4/6 0

Since all Cj-Zj values are not positive, the objective function
cannot be improved. The optimal solution is to obtain the
maximum profit 2200/3 birr.
65
Solving Minimization Problem

 There are two approaches for solving a minimization


problem using the simplex method.
 One is to convert the minimization LP in to an equivalent
maximization Lpp.
 This can be done by multiplying the objective function by
“-1”. The solution for the maximization problem will
provide a solution to the original minimization problem.

66
Con’t…

 

The minimum value of the objective function is the value
read by the final simplex tableau of the equivalent
maximization problem multiplied by -1.
 The second approach requires a change of the rule of
determining the entering variable for a minimization
problem, the variable corresponding to the most negative
will be the next entering variable improved and the
objective function cannot be improved further if all the .
 Direct method/Big M-method/Using artificial variables

67
Con’t…

 Artificial variable (A) is a variable that has no meaning in a


physical sense but acts as a tool to create an initial feasible
LP solution.
Note:
Type of constraintTo put into standard form
< ------------------------------------Add a slack variable
= ------------------------------------Add an artificial variable
> ----- Subtract a surplus variable and add a slack variable
 The Big-M Method is a method which is used in removing
artificial variables from the basis .

68
Con’t…

 In this method; we assign coefficients to artificial variables,


undesirable from the objective function point of view.
 If objective function Z is to be minimized, then a very large
positive price (called penalty) is assigned to each artificial
variable.
 Following are the characteristics of Big-M Method:

a. High penalty cost (or profit) is assumed as M

b. M is assigned as a coefficient to artificial variable A in the


objective function Z.
69
Con’t…

c. Big-M method can be applied to minimization


as well as maximization problems with the
following distinctions:
◦ Minimization problems
- Assign +M as coefficient of artificial variable A in the
objective function Z

◦ Maximization problems:
- Assign–M as coefficient of artificial variable A in the
objective function Z
70
Con’t…

d. Coefficient of S (slack/surplus) takes zero values in the


objective function Z

e. For minimization problem, the incoming variable


corresponds to the highest negative value of Cj-Zj.

f. Solution is optimal when there is no negative value of Cj-


Zj.( For minimization case)

71
Example:

Minimize Z=25x1 +30x2


Subject to:
20x1+15x2 > 100 2x1+ 3x2 > 15
x1, x2 >0
Solution
Step 1
 Standardize the problem

Minimize Z=25x1 +30x2 +0s1+0s2 +MA1+MA2


Subject to:
20x1+15x2- s1+A1 = 100 2x1+ 3x2 –s2+A2 =
15
x1, x2 , s1, s2 ,A1 ,A2 > 0

72
Con’t…

Step 2: Initial simplex tableau


 The initial basic feasible solution is obtained by setting x1=
x2= s1= s2=0
 No production, x1= x2= s1=0==>20(0) +15(0) - 0+A1 = 100
==> A1 = 100
 x1= x2= s2=0==>0(0)+3(0) - 0+A2 =15==> A2 = 15
Cj 25 30 0 0 M M
RR
SV X1 X2 S1 S2 A1 A2 Q

M A1 20 15 -1 0 1 0 100 100/20=5

M A2 2 3 0 -1 0 1 15 15/2=7.5
Zj 22M 18M -M -M M M 115 M
Cj - Zj 25 -22M 30- 18M M M 0 0
73
Con’t…

 Note: Once an artificial variable has left the basis, it has


served its purpose and can therefore be removed from the
simplex tableau. An artificial variable is never considered
for re-entry into the basis.
2nd Simplex Tableau
Cj 25 30 0 0 M

SV X1 X2 S1 S2 A2 Q

25 X1 1 3/4 -1/20 0 0 5 R’1=R1/20

M A2 0 3/2 1/10 -1 1 5 R’2=R2-2 R’


Zj 25 75/4+3/2M -5/4+1/10M -M M 125+5 M
Cj - Zj 0 45/4-3/2M 5/4-1/10 M M 0

74
Con’t…

The Third Simplex Tableau

Cj 25 30 0 0

SV X1 X2 S1 S2 Q

25 X1 1 0 -1/10 1/2 5/2 R’’1=R’1-3/4 R’’2

30 X2 0 1 1/15 -2/3 10/3


R’’2=R’2/3/2
Zj 25 30 -1/2 -15/2 162.5
Cj - Zj 0 0 1/2 15/2

 Cj - Zj > 0==>Optimal solution is reached


 X1=5/2
 X2=10/3 and MinZ=162.5

75

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