Or Problems For LINGO Exercise

National Institute of Technology Calicut Department of Mechanical Engineering
Problems for Mathematical Formulation and Solution

Using LINGO
1. Media Selection
A company has budgeted up to $8,000 per week for local advertising. The money is to
be allocated among four promotional media: TV spots, newspaper ads, and two types of
radio advertisements. The company’s goal is to reach the largest possible high-potential
audience through the various media. The following table presents the number of
potential customers reached by making use of an advertisement in each of the four media.
It also provides the cost per advertisement placed and the maximum number of ads that
can be purchased per week.
Table: Advertisement – Audience reached and cost
MEDIUM AUDIENCE COST PER MAXIMUM
REACHED PER AD AD ($) ADS PER
WEEK
TV spot (one minute) 5,000 800 12
Daily newspaper (full-page ad) 8,500 925 5
Radio spot (30 seconds, prime time) 2,400 290 25
Radio spot (one minute, afternoon) 2,800 380 20
The company’s contractual arrangements require that at least 5 radio spots be placed each
week. To ensure a broad-scoped promotional campaign, management also insists that no
more than $1,800 be spent on radio advertising every week.
Formulate the above problem and solve using LINGO mathematical modelling language.
Do the sensitivity analysis and interpret the results.
Various media has informed that there is a revision in cost in near future and the estimate
of the revised costs are as follows:
MEDIUM COST PER
AD ($)
TV spot (one minute) 1000
Daily newspaper (full-page ad) 1125
Radio spot (30 seconds, prime time) 430
Radio spot (one minute, afternoon) 400
Determine the new media mix and show the sensitivity of the result.
12
Industrial Engineering Lab September 2007
2. Production Mix
Fifth Avenue Industries, a manufacturer of menswear, produces four varieties of ties.
One is an expensive, all-silk tie, one is an all-polyester tie, and two are blends of
polyester and cotton. The following table illustrates the cost and availability (per
monthly production planning period) of the three materials used in the production
process.
MATERIAL COST PER MATERIAL AVAILABLE
YARD ($) PER MONTH (YARDS)
Silk 21 800
Polyester 6 3,000
Cotton 9 1,600
The firm has fixed contracts with several major department store chains to supply ties.
The contracts require that Fifth Avenue Industries supply a minimum quantity of each tie,
but allow for a larger demand if Fifth Avenue chooses to meet that demand. (Most of the
ties are not shipped with the name Fifth Avenue on their label, incidentally, but with
“Private Stock” labels supplied by the stores). Table below summarizes the contract
demand for each of the four styles of ties, the selling price per tie, and the fabric
requirements of each variety.
Table: DATA FOR FIFTH AVENUE INDUSTRIES
VARIETY OF TIE SELLING MONTHLY MONTHLY MATERIAL MATERIAL
PRICE PER CONTRACT DEMAND REQUIRED PER REQUIREMENTS
TIE ($) MINIMUM TIE (YARDS)
All Silk 6.70 6,000 7,000 0.125 100% silk
All polyester 3.55 10,000 14,000 0.08 100% polyester
Poly-cotton Blend #1 4.31 13,000 16,000 0.10 50% polyester
50% cotton
Poly-cotton blend # 2 4.81 6,000 8,500 0.10 30% polyester
70% cotton
There is a revision in monthly contract and monthly demand, and the revised estimates
are as follows.
VARIETY OF TIE MONTHLY MONTHLY
CONTRACT DEMAND
MINIMUM
All Silk 4,000 5,000
All polyester 12,000 15,000
Poly-cotton Blend #1 11,000 15,000
Poly-cotton blend # 2 8,000 10,500
Show the effect of these changes in the solution and also show the sensitivity of new
solution.
13
3. Production Scheduling
Greenberg Motors, Inc., manufactures two different electrical motors for sale under
contract to Drexel Corp., a well-known producer of small kitchen appliances. Its model
GM3A is found in many Drexel food processors and its model GM3B is used in the
assembly of blenders.
Three times each year, the procurement office at Drexel contacts Irwin Greenberg, the
founder of Greenberg Motors, to place a monthly order for each of the coming four
months. Drexel’s demand for motors varies each month based on its own sales forecasts,
production capacity, and financial position. Greenberg has just received the January-
April order and must begin his own four-month production plan. The demand for motors
is shown in table below.
Table: Four-Month Order Schedule for Electrical Motors
MODEL JANUARY FEBRUARY MARCH APRIL
GM3A 800 700 1,000 1,100
GM3B 1,000 1,200 1,400 1,400
The production costs are currently $10 per GM3A motor produced and $6 per GM3B
unit. A labour agreement going into effect on March 1 will raise each figure by 10%,
however. Each GM3A motor held in stock costs $0.18 per month, while each Gm3B has
a carrying cost of $0.13 per month. Greenberg’s accountants allow monthly ending
inventories as an acceptable approximation to the average inventory levels during the
month. The inventory at the end of the planning period for GM3A and GM3B are 450
and 300 respectively. The storage area for Greenberg motors can hold a maximum of
3300 motors of either type at any one time. Greenberg has a base employment level of
2240 labor hours per month. In a busy period, the company can bring two skilled former
employees on board to increase capacity to 2,560 hours per month. Each GM3A motor
produced requires 1.3 hours of labor, while each GM3B takes a worker 0.9 hours to
assemble
Show the effect of labour agreement on decision.
14
4. Labour Planning
XYZ Bank of Commerce and Industry is a busy bank that has requirements for between
10 and 18 tellers depending on the time of day. The lunch time, from noon to 2 P.M., is
usually heaviest. Table below indicates the workers needed at various hours that the
bank is open.
TABLE: XYZ Bank of Commerce and Industry
TIME PERIOD NUMBER OF TELLERS REQUIRED
9 A.M. – 10 A. M. 10
10 A. M. - 11 A. M. 12
11 A.M. – Noon 14
Noon – 1 P.M. 16
1 P.M. – 2 P.M. 18
2 P.M. – 3 P.M. 17
3 P.M. – 4 P.M. 15
4 P.M. – 5 P.M. 10
The bank now employs 12 full-time tellers, but many people are on its roster of available
part-time employees. A part-time employee must put in exactly four hours per day, but
can start anytime between 9 A.M. and 1 P.M. Part-timers are a fairly inexpensive labor
pool, since no retirement or lunch benefits are provided for them. Full-timers, on the
other hand, work from 9 A.M. – 5. P.M., but are allowed one hour for lunch. (Half of the
full-timers eat at 11 A.M., the other half at noon) Full-timers thus provide 35 hours per
week of productive labor time.
By corporate policy, the bank limits part-time hours to a maximum of 50% of the day’s
total requirement.
Part-timers earn $4 per hour (or $ 16 per day) on the average, while full-timers earn $50
per day in salary and benefits, on the average. The bank would like to set a schedule that
would minimize its total personnel costs. It will release one or more of its full-time
tellers if it is profitable to do so.
15
5. Portfolio Selection
ABC Trust invests in short-term trade credits, corporate bonds, gold stocks, and
construction loans. The board of directors has placed limits on the amount that can be
committed to any one type of investment in order to encourage a diversified portfolio.
ABC Trust has $5 million available for immediate investment and wishes to do two
things: (1) maximize the interest earned on the investments made over the next six
months, and (2) satisfy the diversification requirements as set by the board of directors.
The specifics of the investment possibilities are:
INVESTMENT INTEREST EARNED (%) MAXIMUM INVESTMENT ($ MILLION)
Trade Credit 7 1.0
Corporate bonds 11 2.5
Gold stocks 19 1.5
Construction loans 15 1.8
In addition, the board specifies that at least 55% of the funds invested must be in gold
stocks and construction loans, and that no less than 15% be invested in trade credit.
The board also want to know that how the interest earned changes when the investment
restrictions are at least 40 % of the funds invested must be in gold stocks and construction
loans, and that no less than 20% be invested in trade credit.
16
6. Shipping Problem
A Bicycle Company manufactures and markets a line of ten-speed bicycles nationwide.
The firm has final assembly plants in two cities (A and B) in which labor costs are low.
Its three major warehouses are located near the large market areas namely X, Y, and Z.
The sales requirements for the next year at the warehouse of the city X are 10,000
bicycles, at the warehouse of the city Y are 8,000 bicycles, and at the warehouse of the
city Z are 15,000 bicycles. The factory capacity at each location is limited. The plant at
city A can assemble and ship 20,000 bicycles, while the plant at city B can produce
15,000 bicycles per year.
The cost of shipping one bicycle from each factory to each warehouse differs, and these
unit-shipping costs are:
X Y Z
FROM TO
A $2 $3 $5
B $3 $1 $4
The company wishes to develop a shipping schedule that will minimize its total annual
transportation costs.
A revision of shipping cost is expected soon and the revised cost is as follows:
X Y Z
FROM TO
A $2.5 $4 $5.5
B $4 $2 $4.5
Determine the effect of revision of cost.
17
7. Diet Problem
The Whole Food Nutrition Centre uses three bulk grains to blend a natural cereal that it
sells by the pound. The store advertises that each two-ounce serving of the cereal, when
taken with ½ cup of whole milk, meets an average adult’s minimum daily requirement for
protein, riboflavin, phosphorus, and magnesium. The cost of each bulk grain and the
protein, riboflavin, phosphorus, and magnesium units per pound of each are shown in
Table below.
TABLE: Whole Food s Natural Cereal Requirements
GRAIN COST PER PROTEIN FIBOFLAVIN PHOSPHORUS MAGNESIUM
POUND (Rs) (UNITS/LB) (UNITS/LB) (UNITS/LB) (UNITS/LB)
A 33 22 16 8 5
B 47 28 14 7 0
C 38 21 25 9 6
The minimum adult daily requirement (called the Recommended Daily Allowance, or
RDA) for protein is 3 units; for riboflavin, 2 units; for phosphorus, 1 unit; and for
magnesium, 0.425 units. Whole Food wants to select the blend of grains that will meet
the RDA at a minimum cost.
Whole Food is considering another grain D about which the following is known.
GRAIN COST PER PROTEIN FIBOFLAVIN PHOSPHORUS MAGNESIUM
POUND (Rs) (UNITS/LB) (UNITS/LB) (UNITS/LB) (UNITS/LB)
D 30 18 24 12 3
What may be the effect of considering this grain?
18
8. Ingredient Mix and Blending Problem

The Low Knock Oil Company produces two grades of cut-rate gasoline for industrial
distribution. The grades, regular and economy, are produced by refining a blend of two
types of crude oil, Type X100 and Type X220. Each crude oil differs not only in cost per
barrel, but in composition as well. The accompanying table indicates the percentage of
crucial ingredients found in each of the crude oils and the cost per barrel for each.
CRUDE OIL TYPE INGREDIENT A (%) INGREDIENT B (%) COST/BARREL ($)
X100 35 55 30.00
X220 60 25 34.80
Weekly demand for the regular grade of Low Knock gasoline is at least 25,000 barrels,
while demand for the economy is at least 32,000 barrels per week. At least 45% of each
barrel of regular must be ingredient A. At most 50% of each barrel of economy should
contain ingredient B.
The Low Knock management must decide how many barrels of each type of
crude oil to buy each week for blending in order to satisfy demand at minimum cost.
If the proportion is changed as follows, what is the effect on the solution?
At least 40% of each barrel of regular must be ingredient A. At most 55% of each barrel
of economy should contain ingredient B.
19
9. Product Mix Problem
The flair Furniture Company produces inexpensive tables and chairs. The production
process for each is similar in that both require a certain number of hours of carpentry
work and a certain number of labour hours in the painting and varnishing department.
Each table takes 4 hours of carpentry and 2 hours in the painting and varnishing shop.
Each chair requires 3 hours in carpentry and 1 hour in painting and varnishing. During
the current production period, 240 hours of carpentry time are available and 100 hours in
painting and varnishing time are available. Each table and chair must be inspected and
may need rework. The amount of inspection and rework required for each table and chair
are 0.5 hours and 0.6 hours respectively. Number of labour hours available for this
purpose is 36. The flair faces a resource constraint relating to the lumber needed for each
table or chair and the amount available each day is 1248 linear feet of lumber. The
required quantity for table and chair is 32 and 10 linear feet of lumbers respectively. The
demand for tables is found to be a maximum of 40 daily and there are no similar
constraints regarding chairs. Each table sold yields a profit of Rs 350; each chair
produced is sold for Rs 250 profit.
How many tables and chairs should flair furniture produced daily? What is the profit
generated by this solution?
Will Flair use all of its resources to their limits each day?
Should flair purchase more lumber if it is available at Rs 4 per linear foot? Should it hire
more carpenters at Rs. 30 per hour?
What is the range within which the carpentry hours, painting hours, and
inspection/rework hours can fluctuate before the optimal solution changes?
Fair’s owner has been approached by a friend whose company would like to use several
hours in the painting facility every day. Should flair sell time to the other firm? If so, how
much? Explain.
Within what range for the current solution can the profit contribution of tables and chairs
change?
As a result of improvement in production process, the inspection/rework time required
for tables and chairs is reduced to 0.2 and 0.4 hours. Flair want to earmark 24 hours daily
for this purpose instead of 36 hours. What is the effect of this improvement, in solution?
There is a saving of 12 hours of inspection/rework due to the improvement and where it
can be used? Assume that the workers are skilled for all kind work in the production shop
of the company.
20
10. Product Mix Problem

A Chicago manufacturer of office equipment is desperately attempting to control its
profit and loss statement. The company currently manufactures 15 different products,
each coded with a one-letter and three-digit designation.
PRODUCT STEEL PLASTIC WOOD ALUMINUM FORMICA LABOR MINIMUM CONTRI-
ALLOY REQUIRED REQUIRED REQUIRED REQUIRED REQUIRED MONTHLY BUTION
REQUIRED (SQ. FT.) (BD. FT.) (LBS.) (BD. FT.) (HOURS) DEMAND TO
(LBS.) (UNITS) PROFIT
A158 ------ 0.4 0.7 5.8 10.9 3.1 ---- $ 18.79
B179 4 0.5 1.8 10.3 2.0 1.0 20 6.31
C023 6 ---- 1.5 1.1 2.3 1.2 10 8.19
D045 10 0.4 2.0 ----- ---- 4.8 10 45.88
E388 12 1.2 1.2 8.1 4.9 5.5 ------ 63.00
F422 --- 1.4 1.5 7.1 10.0 0.8 20 4.10
G366 10 1.4 7.0 6.2 11.1 9.1 10 81.15
H600 5 1.0 5.0 7.3 12.4 4.8 20 50.06
I701 1 0.4 ----- 10.0 5.2 1.9 50 12.79
J802 1 0.3 ----- 11.0 6.1 1.4 20 15.88
K900 ---- 0.2 ----- 12.5 7.7 1.0 20 17.91
L901 2 1.8 1.5 13.1 5.0 5.1 10 49.99
M050 ---- 2.7 5.0 ---- 2.1 3.1 20 24.00
N150 10 1.1 5.8 ---- ----- 7.7 10 88.88
P259 10 --- 6.2 15.0 1.0 6.6 10 77.01
Availability 980 400 600 2,500 1,800 1,000
Per
Month
a. How many of each of the 15 products should be produced each month?
b. Clearly, explain the meaning of each shadow price.
c. A number of workers interested in saving money for the holidays have offered to
work overtime next month at a rate of $12.50 per hour. What should the response of
management be?
d. Two tons of steel alloy are available from an overstocked supplier at a total cost of
$8,000. Should the steel be purchased? All or part of the supply?
e. The accountants have just discovered that an error was made in the contribution to
profit for product N150. The correct value is actually $8.88. What are the
implications of this error?
f. Management is considering the abandonment of five product lines (those beginning
with the letters A through E). If no minimum monthly demand is established, what
are the implications? Note that there already is no minimum for two of these
products. Use the corrected value for N150.
21

Or Problems For LINGO Exercise

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National Institute of Technology Calicut Department of Mechanical Engineering

Problems for Mathematical Formulation and Solution

8. Ingredient Mix and Blending Problem

9. Product Mix Problem

10. Product Mix Problem

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