Sensitivity Analysis
A simple maximization case
Par, Inc., is a small manufacturer of golf equipment and supplies whose management has decided to
move into the market for medium- and high-priced golf bags. Par, Inc.’s distributor has agreed to buy
all the golf bags Par, Inc., produces over the next three months.
Each golf bag produced will require the following operations:
1. Cutting and dyeing the material
2. Sewing
3. Finishing (inserting umbrella holder, club separators, etc.)
4. Inspection and packaging
The director of manufacturing analyzed each of the operations and concluded that if the company
produces a medium-priced standard model, each bag will require 7/10 hour in the cutting and dyeing
department, ½ hour in the sewing department, 1 hour in the finishing department, and 1/10 hour in
the inspection and packaging department. The more expensive deluxe model will require 1 hour for
cutting and dyeing, 5/6 hour for sewing, 2/3 hour for finishing, and ¼ hour for inspection and
packaging. This production information is summarized in Table 2.1.
Par, Inc.’s production is constrained by a limited number of hours available in each department. After studying
departmental workload projections, the director of manufacturing estimates that 630 hours for cutting and
dyeing, 600 hours for sewing, 708 hours for finishing, and 135 hours for inspection and packaging will be available
for the production of golf bags during the next three months.
The accounting department analyzed the production data, assigned all relevant variable costs, and arrived at
prices for both bags that will result in a profit contribution1 of $10 for every standard bag and $9 for every deluxe
bag produced. Let us now develop a mathematical model of the Par, Inc., problem that can be used to determine
the number of standard bags and the number of deluxe bags to produce in order to maximize total profit
contribution.
This production information is summarized in this table:
1/14/2026
A Simple Maximization Problem (4 of 4)
The complete model for the Par, Inc., problem is as
follows: Production Time (hours)
Department Standard Bag Deluxe Bag
Cutting and Dyeing 7/10 1
Sewing 1/2 5/6
Finishing 1 2/3
Inspection and Packaging 1/10 1/4
Graphical Solution Procedure (1 of 5)
Earlier, we saw that the inequality representing the cutting
and dyeing constraint is:
To show all solution
points that satisfy this
relationship, we start by
graphing the solution
points satisfying the
constraint as an equality.
Graphical Solution Procedure (2 of 5)
We continue by identifying the solution points satisfying each of the
other three constraints.
Graphical Solution Procedure (3 of 5)
The graph shown identifies the feasible region:
Extreme Points and the Optimal Solution (2 of 2)
Here are the 5 extreme points of the feasible region
for the Par, Inc., Problem:
Extreme Points and the Optimal Solution (1 of 2)
• The corners or vertices of the feasible region are referred to as the
extreme points.
• An optimal solution to an LP problem can be found at an extreme
point of the feasible region.
• When looking for the optimal solution, you do not have to evaluate
all feasible solution points.
• You have to consider only the extreme points of the feasible region.
Graphical Solution Procedure (4 of 5)
The optimal solution point is at the intersection of the cutting and
dyeing and the finishing constraint lines.
Graphical Solution Procedure (5 of 5)
The optimal values of the decision variables S and D must satisfy
dyeing and the finishing constraints simultaneously.
Dyeing Constraint
Finishing Constraint
This system of equations can be solved using substitution.
The exact location of the optimal solution point is S = 540 and D = 252.
The optimal production quantities for Par, Inc., are 540 standard bags
and 252 deluxe bags, with a resulting profit contribution of 10(540) +
9(252) = $7,668.
Summary of the Graphical Solution Procedure
for Maximization Problems
1. Prepare a graph of the feasible solutions for each of the constraints.
2. Determine the feasible region that satisfies all the constraints
simultaneously.
3. Draw an objective function line.
4. Move parallel objective function lines toward larger objective
function values without entirely leaving the feasible region.
5. Any feasible solution on the objective function line with the largest
value is an optimal solution.
Slack and Surplus Variables (1 of 2)
• A linear program in which all the variables are non-negative and all
the constraints are equalities is said to be in standard form.
• Standard form is attained by adding slack variables to "less than or
equal to" constraints and subtracting surplus variables from "greater
than or equal to" constraints.
• Slack and surplus variables represent the difference between the left
and right sides of the constraints.
• Slack and surplus variables have objective function coefficients equal
to 0.
Slack and Surplus Variables (2 of 2)
The complete solution tells management that the production of 540
standard bags and 252 deluxe bags will require all available cutting and
dyeing time (630 hours) and all available finishing time (708 hours),
while 600 - 480 = 120 hours of sewing time and 135 - 117 = 18 hours of
inspection and packaging time will remain unused. The 120 hours of
unused sewing time and 18 hours of unused inspection and packaging
time are referred to as slack for the two departments.
Constraint Hours Required forS = 540 and D = 252 Hours Available Unused Hours
Cutting and Dyeing 7/10(540) + 1(252) = 630 630 0
Sewing 1/2(540) + 5/6(252) = 480 600 120
Finishing 1(540) + 2/3(252) = 708 708 0
Inspection and Packaging 1/10(540) + 1/4(252) = 117 135 18
Slack Variables (2 of 2)
Referring to the standard form of the Par, Inc., problem,
we see that at the optimal solution (S = 540 and D = 252),
the values for the slack variables are
Constraint Value of Slack Variable
Cutting and Dyeing
Sewing
Finishing
Inspection and Packaging
On the other hand, the sewing and the inspection and
packaging constraints are not binding the feasible region
at the optimal solution, which means we can expect some
unused time or slack for these two operations.
Real-World Challenges for Decision Makers
• Dynamic Environments: Businesses operate in constantly changing
conditions.
• Examples of Change:
• Fluctuating raw material prices
• Changes in product demand
• New machinery acquisitions
• Employee turnover
• Products become obsolete and have to provide discounts,
• Changes in currency in international trade, and so on
Introduction to Sensitivity Analysis
Sensitivity analysis (or post-optimality analysis) is used to determine how the
optimal solution is affected by changes, within specified ranges, in:
• the objective function coefficients
• the right-hand side (RHS) values
• Also referred to as post-optimality analysis.
• Sensitivity analysis is essential to a manager who must operate in a dynamic
environment with imprecise estimates of the coefficients.
• Sensitivity analysis allows a manager to ask specific what-if questions about
the problem.
Objective Function Coefficients
•Let us consider how changes in the objective function coefficients
might affect the optimal solution.
•The range of optimality for each coefficient provides the range of
values over which the current solution will remain optimal.
•Managers should focus on those objective coefficients with a
narrow range of optimality and coefficients near the endpoints of
the range.
Remember: A Simple Maximization Problem
The complete model for the Par, Inc., problem is as
follows: Production Time (hours)
Department Standard Bag Deluxe Bag
Cutting and Dyeing 7/10 1
Sewing 1/2 5/6
Finishing 1 2/3
Inspection and Packaging 1/10 1/4
S = 540 and D = 252.
resulting profit contribution of 10(540)
+ 9(252) = $7,668.
Remember: Graphical Solution
The optimal solution point is at the intersection of the cutting and
dyeing and the finishing constraint lines.
Range of Optimality
(1 of 7)
Graphically, the limits of a range of
optimality are found by changing the
slope of the objective function line
within the limits of the slopes of the
binding constraint lines.
Range of Optimality
(2 of 7)
As long as the slope of the objective
function line is between the slope of line
A (which coincides with the cutting and
dyeing constraint line) and the slope of
line B (which coincides with the finishing
constraint line), extreme point 3 with
S = 540 and
D = 252 will be optimal.
Range of Optimality (3 of 7)
Extreme point 3 will be the optimal solution
as long as
Slope of line B ≤ slope of the objective
function line ≤ slope of line A.
In slope-intercept form.
Line A:
Line B:
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Range of Optimality (4 of 7)
Let us now consider the general form of the slope of the objective function line. Let CS
denote the profit of a standard bag, CD denote the profit of a deluxe bag, and P denote the
value of the objective function.
Using this notation, the objective function line can be written as
In slope-intercept form:
Extreme point 3 will be optimal as long as
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Range of Optimality (5 of 7)
To compute the range of optimality for the standard-bag profit contribution, we
hold the profit contribution for the deluxe bag fixed at its initial value
Therefore
and
The range of optimality for CS tells Par, Inc.’s management that, with other coefficients
unchanged, the profit contribution for the standard bag can be anywhere between $6.30
and $13.50 and the production quantities of 540 standard bags and 252 deluxe bags will
remain optimal.
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In this case, the range of optimality for the deluxe-bag profit contribution
can be determined. Check to see that this range is
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Range of Optimality (6 of 7)
In cases where the rotation
of the objective function line
about an optimal extreme
point causes the objective
function line to become
vertical, there will be either
no upper limit or no lower
limit for the slope.
Range of Optimality (7 of 7)
In this case
Following the previous procedure of
holding C constant at its original
value,
we have
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Right-Hand Sides (1 of 4)
Let us consider how a change in the right-hand side for a constraint might
affect the feasible region and perhaps cause a change in the optimal
solution.
• The change in the value of the optimal solution per unit increase in the
right-hand side of the constraint is called the dual price/shadow price.
• As the RHS increases, other constraints will become binding and limit the
change in the value of the objective function.
Right-Hand Sides (2 of 4)
Let us consider what happens if an additional 10 hours of production time become
available in the cutting and dyeing department of Par, Inc. The right-hand side of
the cutting and dyeing constraint is changed from 630 to 640, and the constraint is
rewritten as
By obtaining an additional 10 hours of cutting and dyeing time, we expand the
feasible region for the problem.
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Right-Hand Sides (3 of 4)
Using the graphical solution procedure with
the enlarged feasible region shows that the
extreme point S = 527.5 and D = 270.75 now
provides the optimal solution.
The increase in profit is $7711.75 - $7668.00
= $43.75.
Right-Hand Sides (4 of 4)
• The change in the value of the optimal solution per unit increase in the
right-hand side of the constraint is called the dual value/Shadow price.
• Here, the dual value for the cutting and dyeing constraint is $4.375
• If we increase the right-hand side of the cutting and dyeing constraint by 1 hour,
the value of the objective function will increase by $4.375.
• Conversely, if the right-hand side of the cutting and dyeing constraint were to
decrease by 1 hour, the objective function would go down by $4.375.