MODELLING WITH LINEAR PROGRAMMING

The admissions office at Caltech wants to determine how many in-state and how many out-of-state
students to accept for next year’s entering freshman class. Tuition for an in-state student is $7,600 per
year, whereas out-of-state tuition is $22,500 per year. A total of 12,800 in-state and 8,100 out-of-state
freshmen have applied for next fall, and Caltech does not want to accept more than 3,500 students.
However, because Caltech is a state institution, the state mandates that it can accept no more than
40% out-of-state students. From past experience, the admissions office knows that 12% of in-state
students and 24% of out-of-state students will drop out during their first year. Caltech wants to
maximize total tuition while limiting the total attrition to 600 first-year students.
a. Formulate a linear programming model for this problem.
b. Solve this model by using graphical analysis.

SENSITIVITY ANALYSIS
The following linear programming model formulation is used for the production of four different
products, with two different manufacturing processes and two different material requirements:
maximize Z = +50x1 + 58x2 + 46x3 + 62x4
subject to
4x1 + 3.5x2 + 4.6x3 + 3.9x4 <= 600 hr. (process 1)
2.1x1 + 2.6x2 + 3.5x3 + 1.9x4 <= 500 hr. (process 2)
15x1 + 23x2 + 18x3 + 25x4 <= 3,600 lb. (material A)
8x1 + 12.6x2 + 9.7x3 + 10.5x4 <= 1,700 lb. (material B)

x1, x2, x3, x4 >= 0

Variable Cells
Final Reduced
Objective Allowable Allowable
Cell Name Value CostCoefficient Increase Decrease
$D$3 X1 36,71421025 0 50 11,53349475 15,31292517
$E$3 X2 58,63708399 0 58 13,23148148 14,91919192
-
$F$3 X3 0 19,46856841 46 19,46856841 1E+30
$G$3 X4 63,56752949 0 62 1E+30 6,379464286
Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$H$5 process 1 600 7,927452016 600 148 70,91836735
$H$6 process 2 350,3345659 0 500 1E+30 149,6654341
$H$7 Material A 3488,554323 0 3600 1E+30 111,4456771
$H$8 Material B 1700 2,600810002 1700 61,47644488 336,3636364
-
$H$9 Ratio 0 6,290720197 0 64,46428571 20,13200795
a. Identify the sensitivity ranges for the objective function coefficients and the constraint
quantity values.
b. Which is the most valuable resource to the firm?
c. One of the four products is not produced in the optimal solution. How much would the profit
for this product have to be for it to be produced?

MODELLING MULTICRITERIA PROBLEMS (GOAL PROGRAMMING)

SPA Lab is a research and development (R&D) company that develops computer systems and
software primarily for the medical industry. The lab has proposals from its own researchers for eight
new projects. Each of the proposed research projects requires limited resources, and it is not possible
to undertake all of them. The following table shows the developmental budget, the number of
researchers, and the expected annual sales from each project if successfully developed and
implemented:
Developmental Number of Expected Annual Sales
Project
Budgets ($1,000,000s) Research Personnel ($1,000,000s)
1 0.675 6 0.82
2 1.050 5 1.75
3 0.725 7 1.60
4 0.430 8 1.90
5 1.240 10 0.93
6 0.890 6 1.70
7 1.620 7 1.30
8 1.200 6 1.80

The lab has developed the following set of prioritized goals for selecting which projects to initiate:
1) The company would like to remain within a total developmental budget of $5,000,000.
2) The number of available research personnel is 27, and SPA would like to avoid obtaining
extra researchers.
 3) The company would like the expected future annual sales from the implemented projects to
be at least $6,500,000.
4) Projects 1, 3, 4, and 6 are considered offensive in that they represent new product initiatives,
while projects 2, 5, 7, and 8 are existing product upgrades and thus defensive in nature. The
lab would like to select at least two projects from each group.
5) Projects 2, 3, 5, 6, and 7 are considered the most risky of the projects, and the company would
prefer not to select any more than three of these projects.
6) The lab’s owner has indicated that she would like to see projects 5 and 6 initiated if doing so
would not interfere with the achievement of any of the more important goals determined by
the lab’s top management.
Formulate a goal programming model to determine which projects SPA Lab should select to best
achieve its goals.

NETWORK FLOW MODELS (SHORTEST ROUTE)

A steel mill in Gary supplies steel to manufacturers in eight other midwestern cities by truck, as
shown in the following network:

The travel time between cities, in hours, is shown along each branch. Determine the shortest route
from Gary to each of the other eight cities in the network.

NETWORK FLOW MODELS (MAXIMAL FLOW MODELS)

The National Express Parcel Service has established various truck and air routes around the country
over which it ships parcels. The holiday season is approaching, which means a dramatic increase in
the number of packages that will be sent. The service wants to know the maximum flow of packages it
can accommodate (in tons) from station 1 to station 7. The network of routes and the flow capacities
(in tons of packages per day) along each route are shown in the following network:
Determine the maximum tonnage of packages that can be transported per day from station 1 to station
7 and indicate the flow along each branch.

GAME THEORY
Two major soft drink companies are located in the Southeast – the Cooler Cola Company and
Smoothie Soft Drinks, Inc. Cooler Cola is the market leader, and Smoothie has developed several
marketing strategies to gain a larger percentage of the market now belonging to Cooler Cola. The
following payoff table shows the gains for Smoothie and the losses for Cooler given the strategies of
each company.
Cooler Cola Strategies
Smoothies Strategies
A B C
1 10 9 3
2 4 7 5
3 6 8 -4
a. Determine the initial strategy for Cooler Cola and for Smoothie.
b. Is this a pure or a mixed strategy game? Explain.