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A Product Mix Problem With "Fixed Charge" Variables

The company produces three types of apparel - shirts, shorts, and pants - using separate machines for each. [1] The problem is to determine the optimal production quantities to maximize profits given machine rental costs, labor hours and material required per unit, revenue per unit, and variable costs.[2] The constraints include a weekly limit of 150 labor hours and 160 yards of material.[3] The optimal solution is formulated as a linear programming problem to maximize the objective function of profits subject to the capacity and logical constraints.

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Siddhant Wangdi
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50 views

A Product Mix Problem With "Fixed Charge" Variables

The company produces three types of apparel - shirts, shorts, and pants - using separate machines for each. [1] The problem is to determine the optimal production quantities to maximize profits given machine rental costs, labor hours and material required per unit, revenue per unit, and variable costs.[2] The constraints include a weekly limit of 150 labor hours and 160 yards of material.[3] The optimal solution is formulated as a linear programming problem to maximize the objective function of profits subject to the capacity and logical constraints.

Uploaded by

Siddhant Wangdi
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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Problem:

A Product Mix Problem with "Fixed Charge" Variables


Raymond’s Cloths India Ltd. Produces the following kinds of apparels: a) Suits b) Shirts
and c) Pants. Each type of apparel produced requires a particular type of machine. The
company does so by renting a particular type of machine which is assumed to be having
an unlimited capacity and cannot be used for any other kind of clothing. The production
process is shown in the following table.

Apparel Cost of Labor Hours Yards of Revenue Variable


Machine Per Unit Cloth per Unit Cost
(Rs/Week) Per Unit per Unit

Shirts Rs 200 3 4 Rs 12 Rs 6
Shorts Rs 150 2 3 Rs 8 Rs 4
Pants Rs 100 6 4 Rs 15 Rs 8

The company has the limit of obtaining layout of 150 man hours and can produce 160
yards of cloth per week.

Find how will the firm “maximize its profits”.


Solution:

Let,

Xi = Number of units produced where i=1,2,3

Yi = 1 if we rent machine i=1,2,3

=0 if we do not rent the ith machine.

Calculation of Profit:

Rent = 200 Y1 + 150 Y2 + 100 Y3 ---------------- (1)

Variable Cost = 6 X1+4 X2+8 X3 ---------------- (2)

Total Cost = (1) + (2) = 200 Y1 + 150 Y2 + 100 Y3 + 6 X1+4 X2+8 X3

Revenues = 12 X1+8 X2+15 X3

Profit = Revenues – Total Cost

= 12 X1+8 X2+15 X3 – [6 X1+4 X2+8 X3+200Y1+150Y2+100Y3]

Constraints:

• Capacity Constraints:
Company can obtain maximum 150 man hours in terms of labor and can
produce maximum 160 yards of cloth

• Logical Constraints:
Maximum Unit Produced by 

Machine 1 = min(150/3, 160/4)=40


Machine 2 = min(150/2, 160/3)=53.33
Machine 3 = min(150/6, 160/4)=25
Final LPP

Objective Function:

Max Z = 12 x1+8 x2+15 x3 – [6 x1+4 x2+8 x3+200y1+150y2+100y3]

S.T.

3x1 + 2x2 + 6x3 ≤ 150


Capacity Constraints
4x1 + 3x2 + 4x3 ≤ 160

x1 ≤ 40y1
Logical Constraints
x2 ≤ 53.33y2

x3 ≤ 25y3

y1, y2, y3 ε{0,1}, x1, x2, x3≥0

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