AIMS 3770 Dr.

Leon
Problem Set 3: Linear Programming
1. The Electrocomp Corporation manufactures two electrical products: air conditioners
and large fans. The assembly process for each is similar in that both require a certain
amount of wiring and drilling. Each air conditioner takes 3 hours of wiring and 2
hours of drilling. Each fan must go through 2 hours of wiring and 1 hour of drilling.
During the next production period, 240 hours of wiring time are available and up to
140 hours of drilling time may be used. Each air conditioner sold yields a profit of
$25. Each fan assembled may be sold for a $15 profit.
A spreadsheet model has been created for this problem on the Electrocomp worksheet
of the Lpmodels.xls workbook. Use Solver to optimize the model and identify the
production mix of air conditioners and fans that will yield the highest profit.

2. The Fun-to-BBQ Company has contracted to supply its customers next month with a
total of 20,000 charcoal grills and 10,000 gas grills. This company's production
however is limited by the availability of processing time in three departments:
production, assembly and packaging. The following table provides the hours of
processing time available per month and the processing time required in hours in each
department by each type of grill:
Charcoal Grill Gas Grill

Total Hours Available

Production

0.10

0.20

2500

Assembly

0.15

0.25

4000

Packaging

0.05

0.05

2000

Based on the numbers above, Fun-to-BBQ cannot meet its demand with only inhouse production. Another manufacturer however has agreed to supply Fun-to-BBQ
with any combination of charcoal and gas grills at a unit cost of $50 per charcoal grill
and $100 per gas grill. These unit costs exceed Fun-to-BBQ's in-house unit
production costs by $10 per charcoal grill arid $15 per gas grill. Fun-to-BBQ's
objective is to meet its demand with the cheapest combination of in-house production
and outside purchases.
a. A spreadsheet model has been created for this problem on the FunToBBQ
worksheet of the Lpmodels.xls workbook. Use Solver to optimize the model
and identify the cheapest in-house production and outside purchase plan for
this company.
b. Which resources should Fun-to-BBQ try to get more of? Why?

3. Carlos Martinez has developed polished stainless steel parts for his Taco machine that
makes it more of a show piece for display in Mexican restaurants. He wants to
develop a 5 month aggregate plan that utilizes some combination of regular time
production, overtime, subcontracting and inventory stockpiling. He does not want to
see any backordering or stockouts of his product. He has built the spreadsheet model
shown on the AggPlan worksheet of the Lpmodels.xls workbook. This model
includes his estimates for the upcoming demand, capacities and costs per unit. The
subcontractor he is considering can supply Carlos any number of parts as long as the
total number requested does not exceed 100 units over the next 5 month period.
Carlos currently has no beginning inventory of these parts, but would like to have 20
in stock at the end of the five month horizon. Use Solver to optimize this model to
identify the cheapest aggregate plan.
4. Welte Mutual Funds, Inc. has $100,000 to invest in the oil industry, steel industry and
government bonds. The following five alternatives have been selected as possibilities:

Investment

Rate of Return

Atlantic Oil

7.3%

Pacific Oil

10.3%

Midwest Steel

6.4%

Huber Steel

7.5%

Government Bonds

4.5%

The President of Welte has stipulated the following investment guidelines:

Neither of the 2 industries should receive more than 50% of the total investment.
Government bonds should be at least 25% of steel investments.
Investment in Pacific Oil cannot be more than 60% of the oil investment.

A spreadsheet model for this problem has been set up on the Welte worksheet of the
Lpmodels.xls workbook. Use Solver to determine the optimal investment solution:
what portfolio recommendations should be made for the $100,000? How much should
be invested in each alternative so as to maximize the expected annual return?
5. Duffy Pharmaceuticals enjoys a dominant position in southeast U.S. with over 800
discount retail outlets. These stores are served twice a week with deliveries from
Duffys 8 warehouses, which are in turn supplied daily by the five factories that
manufacture their products. Using the data in the following table where each table

entry represents a cartons unit shipping price, how should Duffy ship their products
from the factories to the warehouses so as to minimize daily shipping costs? Create a
transportation LP model and use Solver to help you analyze this problem.

Daily
Capacit
y
(cartons
per day)

Atlant
a

New
Orlean
s

Jackso
n

Birmingha
m

Montgomer
y

Miam
i

Tampa

Mobil
e

Augusta

400

Stuart

200

Biloxi

13

400

Starkville

400

Durham

500

Requirements 250
(cartons per
day)

250

300

300

300

Factory

150

150

200