1.

LPP Formulation

Vitamins Products Minimum daily Cost Per Unit

Alpha(g) Beta(g) requirements (g)
A 2 1 10 20
B 1 2 10 30

Decision variables:

X1= No. of units of Alpha per day

X2= No. of units of Beta per day

Objective Function:

Min Z=20X1+30X2

Subject to constraints:

2X1+ X2 ≥ 10

X1+ 2X2 ≥ 10

X1 X2≥0

Solution using Graphical method:

 2X1+ X2 =10

Let x1= 0 let x2= 0

2(0) +x2= 10 2x1+0= 10
X2=10 (0, 10) 2x1=10
X1= 5 (5, 0)
  X1+ 2X2= 10
Let x1=0 let x2=0

2X2=10 x1+2(0) =10

X2= 5 (0, 5) x1=10 (10, 0)

Coordination “B”

2(2x+ x2= 10)

X1+2x2= 10

4X1+2X2= 20 2(3.3) +X2=10

X1+2X2= 10 6.6+ X2=10

3X1=10 X2=10-6.6

X1= 3.3 X2=3.4

Co ordinations Variables Objective Function
(x1,x2) 20x1+ 30x2
A 10,0 200 (10*20+0*30)
B 3.3,3.4 2082 (3.3*20+3.4*30)
C 0,10 300 (0*20+10*30)

 Since the objective function is to minimize cost the optimum solution is x1=
10, x2= 0 which gives the minimum value off 200$.

2. Let x1, x2, x3 be the weekly production of Suiting's, Shirting's, and Woolen's
respectively.

1 hour has 60 minutes, so, given information is in hours, we will change it into
minutes.

Departments Profit
Weaving Processing Packing
Shirting 3 2 1 2
Suiting 4 1 3 4
Woolen 3 3 3 3
Availability 3600 2400 4800

Objective Function

Maximize Z = 2x1 + 4x2 + 3x3

Constraints

Subject to: 3x1 + 4x2 + 3x3 ≤ 3600

2X1 + X2 + 3X3 ≤ 2400

X1 + 3X2 + 3X3 ≤ 4800

X1 ≥ 0, X2 ≥ 0, X3 ≥ 0
Simplex method

Let’s change the linear programming form to standard form:

Zmax= 2x1 + 4x2 + 3x3+0S1 + 0S2 + 0S3

Subject to: 3x1 + 4x2 + 3x3+S1+0S2+0S3 = 3600

2X1 + X2 + 3X3+ 0S1 + S2+0S3 = 2400

X1 + 3X2 + 3X3+ 0S1+ 0S2+S3 =4800

X1, X2, X3, S1, S2, S3

Basic CJ 2 4 3 0 0 0
solution X1 X2 X3 S1 S2 S3 Quantity
3600/4 = 900
S1=0 3 4 3 1 0 0

S2=0 2 1 3 0 1 0 2400/1= 2400

S3=0 1 3 3 0 0 1 4800/3= 1600
Zj 0 0 0 0 0 0
Cj-Zj 2 4 3 0 0 0

S1- leaving variable X2- entering variable pivot element- 4

Basic CJ 2 4 3 0 0 0
solution X1 X2 X3 S1 S2 S3 Quantity
X2=4 3/4 1 3/4 1/4 0 0 900
S2=0 5/4 0 9/4 1/4 1 1 1500
S3=0 1/4 9/4 3/4 -3/4 0 1 2100
Zj 3 4 3 1 0 0 3600 the optimum solution
 Cj-Zj -1 0 0 -1 0 0

 3x1 + 4x2 + 3x3 ≤ 3600 the product mix that maximize the profit.
To get value of the first row divide each old row values by pivot element 4
To get the rest rows the following formula is used:
New value = Old value - Corresponding column value x Corresponding row value
Pivot element
3. A. The linear programming model for this problem is formulated in the
equations that follow.

Minimize Z = $6 x 1A + 8 x 1B + 10 x 1C + 7 x 2A + 11 x 2B + 11 x 2C + 4 x 3A + 5 x 3B +

12 x 3C
Subject to:
x 1A + x 1B + x 1C = 150
x 2A + x 2B + x 2C = 175
x 3A + x 3B + x 3C = 275
x 1A + x 2A + x 3A = 200
x 1B + x 2B + x 3B = 100
x 1C + x 2C + x 3C = 300
x ij  0

B. The Northwest Corner Method

First allocate as much as possible to cell 1A (the northwest corner). This amount is
150 tons, since that is the maximum that can be supplied by grain elevator 1 even
though 200 tons are demanded by mill A.
We next allocate to a cell adjacent to cell 1A, in this case either cell 2A or cell 1B.
The third allocation is made in the same way as the second allocation. Amount,
100 tons, is allocated to cell 2B. The fourth allocation is 25 tons to cell 2C, and the
fifth allocation is 275 tons to cell 3C appropriate rim requirements.

X 1A = 150
X 2A = 50
X 2B = 100
X 2C = 25
X 3C = 275

In to the Objective function

Z= 6X1A+ 8X1B+10X1C+7X2A+11X2C+4X3A+5X3B+12X3C
= 6(150) + 8(0) + 10(0) + 7(50) + 11(100) + 11(25) +4 (0) +5 (0) +12 (275)
=$ 5925

The Minimum Cell Cost Method

Cell 3A has the minimum cost of $4. As much as possible is allocated to this cell;
the choice is either 200 tons or 275 tons.

The next allocation is made to the cell that has the minimum cost and also is
feasible. This is cell 3B which has a cost of $5.
The third allocation is made to cell 1B, which has the minimum cost of $8. The
amount allocated is 25 tons. The fourth allocation of 125 tons is made to cell 1C,
and the last allocation of 175 tons is made to cell 2C.

The total cost of this initial solution is $4,550, as compared to a total cost of $5,925
for the initial northwest corner solution
Vogel's Approximation Model
Supply Addis Ababa from source 3 because cell 3A has the minimum cost of $4.
First, 150 tons are allocated to cell 1C because it has the lowest cell cost. This
leaves only cell 3C as a feasible possibility, so 150 tons are allocated to this cell.
  The total cost of this initial Vogel's approximation model solution is $5,125,
which is not as high as the northwest corner initial solution of $5,925. It is
also not as low as the minimum cell cost solution of $4,550. Like the
minimum cell cost method, VAM typically results in a lower cost for the
initial solution than does the northwest corner method.

4.
Job
Worker A B C D
1 45 40 51 67
2 57 42 63 55
3 49 52 48 64
4 41 45 60 55

Column reduction
Job
Worker A B C D
1 5 0 11 14
2 15 0 21 0
3 1 4 0 3
4 0 4 19 1

Job
 Worker A B C D
1 5 0 11 14
2 15 0 21 0
3 1 4 0 3
4 0 4 19 1

Since the number of lines drawn=4(=n), the optimal solution is obtained. The
assignments are made after scanning the rows and columns for unit zeros.

Job
Worker A B C D
1 5 0 11 14
2 15 0 21 0
3 1 4 0 3
4 0 4 19 1
Assignments
1-B, 2-D, 3-C, 4-A
 a total time of 40+55+48+41= 184 minutes

5.

Alternatives Growing Stable Declining

Bonds 40 45 5
Stocks 70 30 -13
Mutual funds 53 45 -5

 Maximax: the highest maximum payoff is 70 $ which happens if the

executive decide to buy stocks in growing economy.
 Maximin: looking at the payoff table :-
 If the executive decide to buy bonds, the minimum payoff is 5$
  If the executive decide to buy stocks, the minimum payoff is -13$
 If the executive decide to buy mutual funds, the minimum payoff is -5$

Therefore, the highest (Maximum) minimum payoff is 5$.

 Minimax regret:
Alternatives Growing Stable Declining
Bonds 5 0 40
Stocks 0 40 83
Mutual funds 0 8 58
Maximum regret 5 40 83

 5$ is the alternative to be chosen by the executive because it minimizes the

maximum regret.

6. i. Maximax: from the payoff table the highest maximum payoff is A1-
700,000
ii. Maximin: from the payoff table:
 If the executive apply A1, the minimum payoff is 300,000
 If the executive apply A2, the minimum payoff is 300,000
 If the executive apply A3, the minimum payoff is 0
 The executive can choose A1 or A2 since they have the same value.

iii. Hurwicz criterion

=0.7 1-0.7= 0.3

 Weighted profit from A1= 0.7 (700,000)+ 0.3(300,000)= 580,000

 Weighted profit from A2= 0.7 (450,000)+ 0.3(300,000)= 405,000
 Weighted profit from A3= 0.7 (300,000)+ 0.3(0)= 210,000

Therefore, maximum of the three weighted Alternatives is A1: 580,000.

 iv. EMV criteria
S1=0.2 S2=0.5 S3=0.3

 EMV(A1): 0.2(700,000)+ 0.5(500,000)+ 0.3(300,000)

= 140,000+ 250,000+ 90,000
= 480,000
 EMV(A2): 0.2(300,000)+ 0.5(450,000)+ 0.3(300,000)
= 60,000+ 225,000+ 90,000
= 375,000
 EMV(A3): 0.2(150,000)+ 0.5(0)+ 0.3(300,000)
= 30,000+ 0+ 90,000
= 120,000
 Alternative A1: 480,000 is selected.

v. Expected opportunity loss (EOL)

Alternative Payoffs
strategies S1 S2 S3
A1 700,000 500,000 300,000
A2 300,000 450,000 300,000
A3 150,000 0 300,000

Choose the maximum from each payoff:

S1= 700,000

S2= 500,000

S3= 300,000

Alternative Payoffs
strategies S1 S2 S3
A1 0 (700,000-700,000) 0 (500,000-500,000) 0 (300,000-300,000)
A2 400,000 (700,000-300,000) 50,000 (500,000-450,000) 0 (300,000-300,000)
A3 550,000 (700,000-150,000) 500,000 (500,000-0) 0 (300,000-300,000)
Probability 0.2 0.5 0.3

EOL: A1= 0.2(0) + 0.5(0) + 0.3(0) = 0

EOL: A2= 0.2(400,000) + 0.5(50,000) + 0.3(0)

= 80,000 + 25,000 = 105,000

EOL: A3= 0.2(550,000) + 0.5(500,000) + 0.3(0)

= 110,000 + 250,000 + 0 = 360,000

Decision: Choose A1 strategy because less loss= high profit

vi. Expected Value of Perfect Information (EVPI)

S1= 0.2 S2= 0.5 S3= 0.3

 P(S1) EMV (Decision/ S1)= 0.2(700,000) = 140,000

 P(S2) EMV (Decision/ S2)= 0.5(500,000) = 250,000
 P(S3) EMV (Decision/ S3)= 0.3(300,000) = 90,000

EMV under certainty = 480,000 (140,000+250,000+90,000)

EMV under risk = 480,000

Therefore, EVPI = 480,000-480,000 = 0