COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT

Masters of business administration (MBA)

Group assignment on operational research

BY:

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QUESTION 1.

Answer

The graphical method of solving linear programming problems is a simple way to find a
solution since the optimum solution is searched among the corner points of the solution
space.
However, the graphical method is restricted to problems with two decision variables.
When the number of variables and the number of constraints increase, it becomes
difficult to visualize the solution space.
As a result, the graphical method cannot be employed successfully in such cases.
In order to avoid this limitation, the simplex method, or iterative or step by step method is
efficient method for solving linear programming problems, which was developed by
George [Link] in 1947.
The simplex method is an algebraic procedure that starts with a feasible solution that is
not optimal and systematically moves from one feasible solution to another until an
optimal solution is found.
In case of the graphical approach, optimal solution occurs at the extreme points where
the constraints intersect. Solutions where constraints intersect are called basic solutions,
and those satisfying all of the constraints together with non-negativity constraints are
called basic feasible solutions.
Question -2

Answer

Step 1

Formulate LPP Model

Step 2

Standardize the problem

i.e Convert constraint inequality into equality form by introducing a variable called Slack
variable

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Slack Variables:

 A slack variable(s) is added to the left hand side of a < constraint to covert the constraint
inequality in to equality. The value of the slack variable shows unused resource.
 A slake variable emerges when the LPP is a maximization problem.
 Slack variables represent unused resource or idle capacity. Thus, they don’t produce any
product and their contribution to profit is zero.
 Slack variables are added to the objective function with zero coefficients.

Step 3

Obtain the initial simplex tableau

To represent the data, the simplex method uses a table called the simplex table or the simplex
matrix.

==> In constructing the initial simplex tableau, the search for of the optimal solution begins at
the origin. Indicating that nothing can be produced;

Thus, first assumption, No production implies that x1 =0 and x2=0

Step 4

Construct the initial simplex tableau

Step 5:

Choose the “incoming” or “entering” variables

Note:

The entering variable is the variable that has the most positive value in the Cj - Zj row also called
as indicator row. Or the entering variable is the variable that has the highest contribution to
profit per unit.

a. X1 in our case is the entering variable

b. The column associated with the entering variable is called key or pivot column ( X1 column
in our case )

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Step 6

Choose the “leaving “or “outgoing” variable

==> In this step, we determine the variable that will leave the solution for X1 (or entering
variable)

Note:

 The row with the minimum or lowest positive (non-negative) replacement ratio shows the
variable to leave the solution.

Replacement Ratio (RR) = Solution Quantity (Q)

Corresponding values in pivot column

Note: RR>0

 The variable leaving the solution is called leaving variable or outgoing variable.
 The row associated with the leaving variable is called key or pivot row (s3 column in our case)
 The element that lies at the intersection of the pivot column and pivot row is called pivot
element(No 1 in our case)
Step 7

Repeat step 3-5 till optimum basic feasible solution is obtained.

Or: repeat step 3-5 till no positive value occurs in the Cj - Zj row.

Note:

 Divide each element of the pivot row by the pivot element to find new values in the key or
pivot row.

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 QUESTION -3

Solution

First understanding the figures before pass to calculation:-

Step 1: list the objective and constraint equations

Step2: introduces the slack variables

Step3: arrange in the form of initial tables

Step4: find out the profit margins from given sales price

Step5: generate solution

The detailed solutions are as under

Step 1: list the objective and constraint equations

Max Z=150x1+125x2

Subject to:

350x1+200x2<750

200x1+100x2<450

50x1+100x2<475

550x1+600x2<1500

X3>0 for all j

Then calculate profit margin

First find the time taken to manufacture 1000kg of both [Link] is the required for allocating
variable production in cash to finished product.

Second ,1250kg Gariis made in 1 hour

1000kg of Gari =0.8hr

Variable production cost for Gari 0.8*500-=Rs400

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Variable production cost for Bekam Rs500(in 1 hr100kg) is made.

Particulars revenue/sale(given) Quick (Rs) Teff(Rs)

(-) variable costs Direct material 1010 845
N 310 120
A 20 40
P 110 120
I 20 40
SUBTOTAL 360 320
Direct paid cost 500 400
Total VC 860 720
Contribution margin 150 125

3) all calculation as been done to obtain the contribution margin (I,e profit)

Let x1:thousand of kg of quick to be produced

X2: thousand of kg of ceff to be produced

Now we have to find those values of x1 and x2 for which the contribution is [Link] ,the
constraint is the availability of raw material .Hence ,the problem is formulated as :

Maximimize Z:150x1 +125x2

Subject to:300x1 +200x2<750

200x1 +100x2<459

50x1 +100x2<475

550x1 +600x2<1500

X1,x2>0

Note: In general, whenever there are n variables and m constraints (excluding) the non-
negativety),where m is less than n(m<n).n-m variables must be set equal to [Link] the
solution can be solved algebraically.

A) basic variables are variables with non zero solution value is or :-basic variables are variables
that are in the basic solution .

Basic variables have zero values in the row.

B) non basic variables are variables with zero solution values or :-non basic variables are
variables that are out of the solution .

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  N=6 variables (x1,x2,s1,s2,s3 and s4)
 M=y constraints (labor ,machine and marketing constraints),excluding non negatively.

Therefore ,n-m =6-4=2 variables (x1and x2) are set equal to zero in the 1st simplex table.

These are non basic [Link] variables (s1,s2 ,s3 and s4) are basic variables (the 1st
simplex table) because the leave non-zero solutions values.

Note: we have dropped :50x1 +100x2<300 as it is already contained in 50x1 +100x2<250

Slack cannot be larger than the constant on right hand side (RHS) I,e variables must negative
for equality to exist is not feasible.

Max Z=150x1 +125x2

Subject to:350x1 +200x2+s1=750

200x1+100x2+s2=450

50x1+100x2+s3=475

550x1+600x2+s4=1500

X1>for all j

Given cost of 1000kg of 200

Given cost of 350kg of birr 40(for Bekam)

Given cost of 200kg of birr 120(for Gari)

Given cost 200kg of 80 birr for Bekam

Given cost 100kg of 40 birr for Gari

Given cost 50kg of 20 birr for Bekam

Given cost 100kg of 40 birr for Gari

Given cost 550kg of 330 birr for Bekam

Given cost 600kg 0f 360 birr for Gari respectively.

Max Z=150x1+125x2

Subject to:350x1+200x2<750

200x1+100x2<450

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 50x1+100x2<475

550x1+600x2<1500

X1,x2>0

Max cost margin=150x1 +125x2

Subject to: 350x1+200x2+s1=750

200x1+100x2+s2=450

50x1+100x2+s3=475

550x1+600x2+s4=1500

Si,xj>0 for all I and j

Written as

Maximize cost margin = 150x1 +125x2 +0S2 +0S5+0S4

Subject to =350x1+200x2 +S1+0S2+0S3+0S4= 750

200X1+100X2+0S1+S2+0S3+0S4=450

50X1+100X2+0S1+ 0S2+53+0S4=475

550X1+600X2+0S1+0S2+053+S4=1500

Si &>0 for all i and j

Cs Basic activity 150 125 0 0 0 0 Birr Min ratio 2.142

(birr)
X1 X2 S1 S2 S3 S4 Qi RHS/X1 2.142
0 S1 350 200 1 0 0 0 750 750/350 2.1428
0 S2 200 100 0 1 0 0 450 450/200 2.25
0 S3 50 100 0 0 1 0 475 475/5 9.5
0 S4 550 600 0 0 0 1 150 1500/550 2.727
0
Zs 150 125 0 0 0 0 0

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 New S1

Old R Cp upd New s1

750 350x 2.142 0.3
350 350x 1 0
200 350x 0.575 0.15
1 350x 0.004 -0.15
0 350x 0 0
0 350x 0 0
0 350x 0 0

New S2

Old R Cp Upd New s1

450 200x 2.25 0
200 200x 1 0
1000 200x 0.5 0
0 200x 0.005 -1
1 200x 0 1
0 200x 0 0
0 200x 0 0

New S3

Old R Cp Up d New s1
475 50x 9.5 0
50 50x 1 0
100 50x 2 0
0 50x 0.02 1
0 50x 0 0
1 50x 0 1
0 50x 0 0

New S4

Old R Cp Up d New s1
1500 550x 2.727 0.15
550 550x 1 0
600 550x 1.09 0.5
0 550x 0.0018 -0.99
0 550x 0 0

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 0 550x 0 0
01 550x 0 1

Therefore x1 is entering variable but s1 is leave variable

Initial table -2

cs Basic Birr 150 125 0 0 0 0

solutio Qt X1 X2 S1 S2 S3 S4
n
150 X1 2.142 1 0.5 0.0029 0 0 0
0 S2 2.25 0 1 0.5 0.05 0 0
0 S3 9.5 0 0 1 2 0.02 0.028
0 S4 2.727 0 0 0 1 0.09 0
Cs-Zj 1.3 150 50 0.435 0 0 0
0 0 0

Then also the final result or the objective of the ABC company was not riched then, its try to
develop other table .

New table

Cj Basic Birr 150 125 0 0 0 0

solution In X1 X2 S1 S2 S3 S4
Qty
15 X1 1.68 0.5432 -0.453 0 0 0 -0.99
0 s2 1.45 1 0.5 -0.795 0 0 0
0 s3 7.6 0 1.855 0 0 0 -0.0135
125 X2 0.8 0 1 0.005 0 0 -0.037
21 birr 460 150 125 0.02 0 1 -0.1375
Cj-zj 0 0 -0.0 0 -1 -0.1375

Therefore the final result of Cj-Zj is Zero and negative values then the objective of ABC
company are rich .

Basic solution is

X1=1.68

X2=0.8

Therefore values of different variables

S2=1.45 and Z1=460

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S3=7.6

S4=1.855

Interpretation: The ABC private limited company is advised to produce 1.68 units of Bekam
and 0.8 units of Gari per week to maximize its early profit to Br. 460 .

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