Portfolio Selection Problem

Investment Trade credits Corp bonds Gold Platinum Mortgages Const. loans
T B G P M C

Interest earned 7% 10% 19% 12% 8% 14%

Risk score 1.7 1.2 3.7 2.4 2 2.9

Constraints:
1. Total budget is $5 million
2. No more than 25% of total investment in any single investment
3. At least 30% of total investment in precious metals (G, P)
4. At least 45% of total investment in trade credts and corportate bonds (T, B)
5. Average risk score of total investment is 2 or less.
Portfolio Selection Problem

T B G P M
Trade credits Corp bonds Gold Platinum Mortgages
Dollars Invested 1,250,000.00 1,250,000.00 250,000.00 1,250,000.00 500,000.00
(0) Interest 0.07 0.10 0.19 0.12 0.08
Constraints:
(1) Total funds 1 1 1 1 1
(2T) Max trade credits 1
(2B) Max corp bonds 1
(2G) Max gold 1
(2P) Max platinum 1
(2M) Max mortgages 1
(2C) Max const loans
(5) Risk score 1.7 1.2 3.7 2.4 2.0
(3) Precious metals 1 1
(4) Trade credits & bonds 1 1
 C
Const loans
500,000.00
0.14 520,000.0000

1 5,000,000.00 <= 5,000,000.00

1,250,000.00 <= 1,250,000.00
1,250,000.00 <= 1,250,000.00
250,000.00 <= 1,250,000.00
1,250,000.00 <= 1,250,000.00
500,000.00 <= 1,250,000.00
1 500,000.00 <= 1,250,000.00
2.9 10,000,000.00 <= 10,000,000.00
1,500,000.00 >= 1,500,000.00
2,500,000.00 >= 2,250,000.00
LHS Sign RHS Shadow price
Portfolio Selection Problem

T B G P M C
Trade credits Corp bonds Gold Platinum Mortgages Const loans
Portion Invested 0.25 0.25 0.05 0.25 0.10 0.10
Interest 0.07 0.10 0.19 0.12 0.08 0.14 0.104
Constraints:
Total funds 1 1 1 1 1 1 1.00
Max trade credits 1 0.25
Max corp bonds 1 0.25
Max gold 1 0.05
Max platinum 1 0.25
Max mortgages 1 0.10
Max const loans 1 0.10
Risk score 1.7 1.2 3.7 2.4 2.0 2.9 2.00
Precious metals 1 1 0.30
Trade credits & bonds 1 1 0.50
LHS
 <= 1.00
<= 0.25
<= 0.25
<= 0.25
<= 0.25
<= 0.25
<= 0.25
<= 2.00
>= 0.30
>= 0.45
Sign RHS Shadow price
Media Selection Problem

T N R30 R60
Media Television Newspaper Radio - 30 sec Radio - 60 sec

Audience per ad 5000 8500 2400 2800

Maximum ads per week 12 5 25 20

Cost per ad 800 925 290 380

Total budget 8000

Total radio budjet 1800
Media Selection Problem

Newspaper 30-second 60-second

TV ads ads radio ads radio ads
T N R30 R60
Number of ads 1.97 5.00 6.21 0.00
(0) Audience 5000 8500 2400 2800 67240.30
Constraints:
(1a) Max TV ads 1 1.97 <= 12
(1b) Max newspaper ads 1 5.00 <= 5
(1c) Max 30-sec radio ads 1 6.21 <= 25
(1d) Max 60-sec radio ads 1 0.00 <= 20
(2a) Total budget $800 $925 $290 $380 $8,000.00 <= $8,000
(2b) Radio budget $290 $380 $1,800.00 <= $1,800
(3) Min radio spots 1 1 6.21 >= 5
LHS Sign RHS
Shadow price
Marketing Research Problem

B1 B2 B3 N1 N2 N3
<= 30 and 31-50 and >= 51 and <= 30 and 31-50 and >= 51 and
border border border not border not border not border
Number of persons 0.00 600.00 140.00 1000.00 0.00 560.00
(0) Interview cost $7.50 $6.80 $5.50 $6.90 $7.25 $6.10
Constraints:
(1) Total persons 1 1 1 1 1 1
(2) <= 30 persons 1 1
(3) 31-50 persons 1 1
(4) border Mexico 1 1 1
(5) <= 30 and not border 1
(6) >= 51 and border 1
$15,166.00

2300.00 >= 2300

1000.00 >= 1000
600.00 >= 600
740.00 >= 345
1000.00 >= 500
140.00 <= 140
LHS Sign RHS Shadow price
Labour Planning Problem Labour Planning Problem

F P9 P10 P11
FT PT PT PT
nurses @9am @10am @11am
Time period Staff requirements Number of nurses 10.0 0.0 7.0 2.0
9am to 10am 10 (0) Cost $210.00 $80.00 $80.00 $80.00
10am to 11am 12 Constraints:
11am to noon 14 (1) 9am-10am needs 1 1
Noon to 1pm 16 (2) 10am-11am needs 1 1 1
1pm to 2pm 18 (3) 11am-Noon needs 0.5 1 1 1
2pm to 3pm 17 (4) Noon-1pm needs 0.5 1 1 1
3pm to 4pm 15 (5) 1pm-2pm needs 1 1 1
4pm to 5pm 10 (6) 2pm-3pm needs 1 1
Total staff-hours 112 (7) 3pm-4pm needs 1
(8) 4pm-5pm needs 1
(9) Max full time 1
(10) Part-time limit 4 4 4
 P12 P1
PT PT
@noon @1pm
5.0 0.0
$80.00 $80.00 $3,220.00
slack (<=) surplus (>=)
10.0 >= 10 binding surplus=0
17.0 >= 12 not binding surplus=5
14.0 >= 14 binding surplus=0
1 19.0 >= 16 not binding surplus=3
1 1 24.0 >= 18 not binding surplus=6
1 1 17.0 >= 17 binding surplus=0
1 1 15.0 >= 15 binding surplus=0
1 10.0 >= 10 binding surplus=0
10.0 <= 12 not binding slack=2
4 4 56.0 <= 56 binding slack=0
LHS Sign RHS Shadow price Is LHS = RHS ?
Transportation Problem

MB MT MA WB WT WA CB CT CA UB
No. of trucks 100.0 0.0 0.0 50.0 200.0 50.0 0.0 0.0 300.0 50
(0) Cost $5 $6 $9 $12 $8 $11 $9 $7 $5 $0
Constraints:
(1) Montreal supply (M) 1 1 1
(2) Winnipeg supply (W) 1 1 1
(3) Chicago supply (C) 1 1 1
(4) Dummy supply (U) 1
(5) Boston demand (D) 1 1 1 1
(6) Toronto demand (T) 1 1 1
(7) Atlanta demand (A) 1 1 1
UT UA
0 0
$0 $0 $4,750

100.0 = 100
300.0 = 300
300.0 = 300
1 1 50.0 = 50
200.0 = 200
1 200.0 = 200
1 350.0 = 350
LHS Sign RHS Shadow price
Product Mix Problem

Ch 1 - Business decision problem

Input variables

Products Silk tie Polyester tie Blend 1 tie Blend 2 tie

S P B1 B2
Demands
(ties per month)
Minimum 6,000 10,000 13,000 6,000
Maximum 7,000 14,000 16,000 8,500
Material usage Cost
(yards per tie) ($ per yard)
Silk 0.125 0 0 0 $20
Polyester 0 0.08 0.05 0.03 $6
Cotton 0 0 0.05 0.07 $9
Costs
($ per tie)
Materials
Labour 0.75 0.75 0.75 0.75
Selling price
($ per tie) $6.70 $3.55 $4.31 $4.81
Profit margin
($ per tie) $5.95 $2.80 $3.56 $4.06

Decision variables Silk tie Polyester tie Blend 1 tie Blend 2 tie
S P B1 B2
No. of ties to produce

Results (output variables)

Total profit per tie $0.00 $0.00 $0.00 $0.00
Total profit $0.00
 Product Mix Problem

Ch 2, 3 - LP business decision problem

S P B1 B2
All silk All poly Blend-1 Blend-2
Number of units 7000.0 13625.0 13100.0 8500.0
Profit $3.45 $2.32 $2.81 $3.25 $120,196
Constraints:
Yards of silk 0.125 875
Yards of polyester 0.08 0.05 0.03 2000
Availability Yards of cotton 0.05 0.07 1250
(yards per month) Maximum all silk 1 7000
1000 Maximum all poly 1 13625
2000 Maximum blend-1 1 13100
1250 Maximum blend-2 1 8500
Minimum all silk 1 7000
Minimum all poly 1 13625
Minimum blend-1 1 13100
Minimum blend-2 1 8500
LHS
 <= 1000
<= 2000
<= 1250
<= 7000
<= 14000
<= 16000
<= 8500
>= 6000
>= 10000
>= 13000
>= 6000
Sign RHS Shadow price
Make versus Buy Problem

Ch 1 - Business decision problem

Input variables

Products Silk tie Polyester tie Blend 1 tie

make buy make buy make buy

S SO P PO B1 B1O
Demands
(ties per month)
Total 7,000 14,000 16,000
Material usage
(yards per tie)
Silk 0.125 0 0
Polyester 0 0.08 0.05
Cotton 0 0 0.05
Costs
($ per tie)
Materials 2.5 0.48 0.75
Labour 0.75 0.75 0.75
Outsourcing 4.25 2 2.5
Selling price
($ per tie) $6.70 $3.55 $4.31
Profit margin
($ per tie) $3.45 $2.45 $2.32 $1.55 $2.81 $1.81

Decision variables Silk tie Polyester tie Blend 1 tie

make buy make buy make buy
S SO P PO B1 B1O
No. of ties to
5,000 2,000 7,000 7,000 10,000 6,000
produce or buy

Results (output variables)

Total profit per tie $17,250.00 $4,900.00 $16,240.00 $10,850.00 $28,100.00 $10,860.00
Total profit $114,865.00
 Make versus Buy Problem

Ch 2, 3 - LP business decision pro

Blend 2 tie S
All silk to
make buy make
B2 B2O Number of units 7000.0
Profit $3.45
Constraints:
8,500 Yards of silk 0.125
Cost Availability Yards of polyester
($ per yard) (yards per month) Yards of cotton
0 $20 1000 All silk demand 1
0.03 $6 2000 All poly demand
0.07 $9 1250 Blend-1 demand
Blend-2 demand

0.81
0.75
2.2

$4.81

$3.25 $2.61

Blend 2 tie
make buy
B2 B2O
7,000 1,500

$22,750.00 $3,915.00
s Buy Problem

business decision problem

P B1 B2 SO PO B1O B2O
All poly to Blend-1 Blend-2 All silk All poly Blend-1 Blend-2
make to make to make to buy to buy to buy to buy
12589.3 16000.0 6428.6 0.0 1410.7 0.0 2071.4
$2.32 $2.81 $3.25 $2.45 $1.55 $1.81 $2.61 $126,803.04

875.00 <= 1000

0.08 0.05 0.03 2000.00 <= 2000
0.05 0.07 1250.00 <= 1250
1 7000.00 = 7000
1 1 14000.00 = 14000
1 1 16000.00 = 16000
1 1 8500.00 = 8500
LHS Sign RHS
Shadow price
Vehicle Loading Problem Vehicle Loading Problem

Shipment Value Weight Volume Value

item ($) (pounds) (cubic feet per pound) ($ per pound)
W1 $15,500 5,000 0.125 $3.10 Weight in pounds
W2 $14,400 4,500 0.064 $3.20 Load value
W3 $10,350 3,000 0.144 $3.45 Constraints:
W4 $14,525 3,500 0.448 $4.15 Weight limit
W5 $13,000 4,000 0.048 $3.25 Volume limit
W6 $9,625 3,500 0.018 $2.75 Item 1 limit (pounds)
Item 2 limit (pounds)
Constraints: Item 3 limit (pounds)
1. Total weight capacity of the truck is 15,000 pounds Item 4 limit (pounds)
2. Total volume capacity of the truck is 1,300 cubic feet. Item 5 limit (pounds)
Item 6 limit (pounds)

Note:
The 'Value' above for item W3 is $10,350.
There is a typo error in the lecture notes (on page 17).
The lecture notes state $10,300 for item W3; they should state $10,350.
e Loading Problem

W1 W2 W3 W4 W5 W6
Item 1 Item 2 Item 3 Item 4 Item 5 Item 6
3,037.38 4,500.00 3,000.00 0.00 4,000.00 462.62
$3.10 $3.20 $3.45 $4.15 $3.25 $2.75 $48,438.08

1 1 1 1 1 1 15000.00 <= 15000

0.125 0.064 0.144 0.448 0.048 0.018 1300.00 <= 1300
1 3037.38 <= 5000
1 4500.00 <= 4500
1 3000.00 <= 3000
1 0.00 <= 3500
1 4000.00 <= 4000
1 462.62 <= 3500
LHS Sign RHS Shadow price
Vehicle Loading Problem - expanded

W1 W2 W3 W4 W5 W6 X1
Item 1 Item 2 Item 3 Item 4 Item 5 Item 6 Item 1
Truck 1 Truck 1 Truck 1 Truck 1 Truck 1 Truck 1 Truck 2
Weight in pounds 5,000.00 1,718.75 0.00 246.37 0.00 3,034.88 0.00
Load value $3.10 $3.20 $3.45 $4.15 $3.25 $2.75 $3.10
Constraints:
Weight limit truck #1 1 1 1 1 1 1
Volume limit truck #1 0.125 0.064 0.144 0.448 0.048 0.018
Weight limit truck #2 1
Volume limit truck #2 0.125
Item 1 limit (pounds) 1 1
Item 2 limit (pounds) 1
Item 3 limit (pounds) 1
Item 4 limit (pounds) 1
Item 5 limit (pounds) 1
Item 6 limit (pounds) 1
Same weight 1 1 1 1 1 1

Note:
The solution in the notes is an alternate optimal solution.
It has the same objective function value so it and this solution are both optimal.
There may be more alternate optimal solutions.
 X2 X3 X4 X5 X6
Item 2 Item 3 Item 4 Item 5 Item 6
Truck 2 Truck 2 Truck 2 Truck 2 Truck 2
2,781.25 3,000.00 218.75 4,000.00 0.00
$3.20 $3.45 $4.15 $3.25 $2.75 $63,526.16

10000.00 <= 10000

900.00 <= 900
1 1 1 1 1 10000.00 <= 10000
0.064 0.144 0.448 0.048 0.018 900.00 <= 900
5000.00 <= 5000
1 4500.00 <= 4500
1 3000.00 <= 3000
1 465.12 <= 3500
1 4000.00 <= 4000
1 3034.88 <= 3500
10000.00 = 10,000.00
LHS Sign RHS Shadow price