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Or Decision Programming

This document discusses using linear programming to help a company called Red Brand Canners determine how much of various tomato products (whole cans, juice, paste) to produce from grades A and B tomatoes to maximize profits. It describes setting up the linear program with decision variables for each product, an objective to maximize total contribution, and constraints for tomato availability, product demand, and quality standards. The linear program is solved, showing an optimal solution that outperforms an alternative proposal, accurately capturing the problem to aid decision making.

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Spandana Achanta
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78 views

Or Decision Programming

This document discusses using linear programming to help a company called Red Brand Canners determine how much of various tomato products (whole cans, juice, paste) to produce from grades A and B tomatoes to maximize profits. It describes setting up the linear program with decision variables for each product, an objective to maximize total contribution, and constraints for tomato availability, product demand, and quality standards. The linear program is solved, showing an optimal solution that outperforms an alternative proposal, accurately capturing the problem to aid decision making.

Uploaded by

Spandana Achanta
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Operations Research (Session 5)

Decision Making under Certainty


Linear programming
Operations Research (Session 5)
Case : Red Brand Canners
Who is correct?
Bill Cooper?
Make more of Full Tomatoes
Or Myers?
Make tomato paste & juice
How to proceed
Decision problem
How much of various products the company should
make
Operations Research (Session 5)
Red Brand Canners: Decision Problem
Grade A
Grade B
Whole Can
Juice
Paste
TAC
TBC
TAJ
TBJ
TAP
TBP
Operations Research (Session 5)
Decision Variables
TAC : Pounds of tomato grade A used in whole
tomato cans
TBC, TAJ,TBJ, TAP, TBP
Objective
Maximise the profit
Z= (TAC+TBC)/18*-0.01 + (TAJ+TBJ)/20*0.08+ (TAP+TBP)/25*0.55
Operations Research (Session 5)
Constraints
Limits of availability
Limits on Demand
Quality Constraint
Availability
A grade: TAC+TAJ+TAP <=60,0000
B grade TBC+TBJ+TBP <=2,40,0000
Demand
Whole Tomato cans (TAC+TBC)/18 <=800,000
Juice (TAJ+TBJ)/20 <= 50,000
Paste (TAP+TBP)/25 <=80,000
Quality
Average Grade for Can is 8 : 9 TAC+ 5 TBC >= 8 (TAC+TBC)
Average Grade for Juice is 6 : 9 TAJ + 5 TBJ >= 6 (TAJ+TBJ)

Operations Research (Session 5)
Solution
Whole Cans : Nil
Juice : 50000 cases (2,50,000 lb A & 7,50,000 lb of B)
Paste : 80000 cases ( 3,50,000 lb of A &16,50,000 lb of B)
Total Profit : $48,000

Is this right?

What is wrong?
Operations Research (Session 5)
Cost of Tomotoes
0.06* 3 Million = 1,80,000
Cost of tomotoes as per the solution
1,66,000
Where is the mistake?
Sunk Cost
so the correct Objective fn. is
Maximise the contribution
Z= (TAC+TBC)/18*1.48 + (TAJ+TBJ)/20*1.32+ (TAP+TBP)/25*1.85
Operations Research (Session 5)
Constraints remain same
Constraints
Limits of availability
Limits on Demand
Quality Constraint
Availability
A grade: TAC+TAJ+TAP <=60,000
B grade TBC+TBJ+TBP <=2,40,000
Demand
Whole Tomato cans (TAC+TBC)/18 >=800,000
Juice (TAJ+TBJ)/20 >= 50,000
Paste (TAP+TBP)/25 >=80,000
Quality
Average Grade for Can is 8 : 9 TAC+ 5 TBC >= 8 (TAC+TBC)
Average Grade for Juice is 6 : 9 TAJ + 5 TBJ >= 6 (TAJ+TBJ)

Operations Research (Session 5)
Solution
Whole Cans : 38888.9 cases (525,000 lb A & 175,000 lb of B)
Juice : 15000 cases (75,000 lb A & 225,000 lb of B)
Paste : 80000 cases ( 2 Million lb of B)
Total Contribution : $225,355.6

Cost of Tomatoes : 3 Million lb *0.06 = $180,000

Contribution : $45,355

Is it inferior to Myers Solution?
Operations Research (Session 5)
Myers Solution
Make paste : 2 Million lb of B : 8000 Cases
Make juice : 0.4 Million B + 0.6 Million A = 5000 cases
What is the contribution
8000*1.85 + 5000*1.32 = $214000
Net contribution : 214000 3million*0.06 = 34,000
Model Solution is superior by $ 11,355
Operations Research (Session 5)
Operations Research (Session 5)
SOLUTION
Operations Research (Session 5)
Sample Problems

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