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LP Model
Let
Primal Model:
Maximize: P = 60x1 + 80x2
(Objective function)
Subject to: x1
70
(material R constraint)
2x1 + x2 160
(material S constraint)
2x1 + 3x2 240
(material T constraint)
2x2 120
(material U constraint)
x1 , x2 0
Formulation of Dual LP model for a given primal problem.
1. The objective is reversed. If the primal is a maximization, the dual is
minimization, and vice versa.
2. The right-hand side constants in constraints of the primal become the
objective coefficients in the dual.
3. The primals objective coefficients become the right-hand side
constants of the dual constraints.
4. The transpose of the primal constraint coefficients become the dual
constraint coefficients.
5. The inequality signs in the explicit constraints are reversed.
Dual Model:
Minimize: C = 70y1 + 160y2 + 240y3 + 120y4 (Objective function)
Subject to: y1 + 2y2 + 2y3 60
(product 1 constraint)
y2 + 3y3 + 2y4 80
(product 2 constraint)
y1, y2, y3,y4 0
where: y1 = opportunity cost of 1 unit of material R.
y2 = opportunity cost of 1 unit of material S.
y3 = opportunity cost of 1 unit of material T.
y4 = opportunity cost of 1 unit of material U.
Examination of the simplex solution of both the primal and dual
problems will reveal the following:
1.
2.
3.
4.
All the terms in the first dual constraint pertain to product 1 and all
the terms in the second dual constraint pertain to product 2.
The optimum value is the same for both the primal and the dual.
The optimum solution of the primal is reflected in the final simplex
tableau of the dual. The optimum value of x 1 is the negative of the
opportunity cost of of s1 , and optimum value of x2 is the negative
of the opportunity cost of s2. The values of the slack variables are
the net contributions of y1, y2, y3 and y4, respectively.
Similarly, the optimum values of the dual variables appear in the
final simplex tableau of the primal. The values of y 1, y2, y3 and y4
are found in the row for the opportunity costs, while the values of
the surplus variables are the negative of the net contributions of x 1
and x2, respectively.
Interpretation:
Opportunity cost of material S is 5. Total profit is
increased/decreased by 5 if material S is increased/decreased by 1
unit.
Opportunity cost of material T is 25. Total profit is
increased/decreased by 25 if material T is increased/decreased by
1 unit.
Increasing material R and material U will not affect profit.
Shadow prices: The manufacturer should not pay more than 5 for
an additional unit of material S or more than 25 for an additional
material T.
B. Right-Hand-Side Ranging
The process of finding the range of applicability of the shadow
price (opportunity cost or marginal contribution) of a resource is referred as
right-hand-side ranging.
Steps in right-hand-ranging.
Divide the numbers in the quantity column by the corresponding
numbers in the column of the slack variable associated with the
resource being evaluated.
2)
Obtain the lower limit of the range by subtracting the smallest
positive ratio from the current availability of the resource.
3)
Obtain the upper limit of the range by adding the absolute value of
the largest negative ratio to the given availability of the resource.
1)
-3/4 = -40/3
1 = 40
3/4 = 80
-1/2 = -80
Optimum solution remains unchanged for as long as the per unit profit
of product 1 is within the range of 53.33 to 160.
Range for the Nonbasic Variables.
When the variable associated with a particular product is not in the
optimal solution, we know that the variable is nonbasic and therefore, the
product is not profitable.
Evaluating New Production Processes
The dual problem is very useful in evaluating new production
processes.
Example: Introduce another product. Producing 1 unit of product 3
requires 1 unit of material R, 1 unit of material S, 2 units of material T, and 1
unit of material U. Profit contribution of product 3 is 75.
y1 + y2 + 2y3 + y4 75
This product will not be a valuable addition unless the associated dual
constraint is violated. It will not be profitable unless the opportunity cost
consumed is less than the per-unit profit.
Let us substitute the values obtained in the dual simplex method.
0 + 5 + 2(25) + 0 = 55 < 75
Product 3 constraint is violated, we say that it is profitable.
Exercise
The primal model for a product-mix problem and the corresponding optimal
tableau are given.
Maximize: P = 240x1 + 150x2+ 60x3
Subject to: 4x1 + 4x2 + 6x3 560
(labor time)
2x1 + x2 + 2x3 360
(material)
2x1 + x2 + 5x3 240
(machine time)
x1 , x2, x3 0
where
x1 = number of product 1 to be produced every period.
x2 = number of product 2 to be produced every period.
x3 = number of product 3 to be produced every period.
240
150
60
0
0
0
x1
x2
x3
s1
s2
s3
150
x2
0
1
-2
1/2
0
-1
0
s2
0
0
-3
0
1
-1
240
x1
1
0
7/2
-1/4
0
1
40
120
100
240
150
540
15
0
90
30000
0
0
-480
-15
0
-90
1. What is the optimum solution of the primal problem?
2. Interpret the values of the slack variables in the context of the
problem.
3. Write the dual model.
4. What are the shadow prices?
5. Show that the total profit contribution is equal to the total contribution
of the resources.
6. Find the range of applicability for the shadow price of labor time.
7. Find the range of applicability for the shadow price of material.
8. Find the range of applicability for the shadow price of machine time.
9. Find the range over which the profit contribution of product 1 may vary
without affecting the maximum solution.
10.
Suppose the profit contribution of product 2 is raised to 180. Will
this increase affect the maximum solution?
11.
By how much must the profit contribution of product 3 increase
to make it profitable?
12.
The manufacturer is considering producing a product 4. Suppose
a unit of this product requires 2 units of labor time, 3 units of material,
and 4 units of machine time. To make it profitable, what should its
profit contribution be?