1

Kelson Sporting Equipment, Inc., makes two types of baseball gloves: a

regular model and a catcher's model. The firm has 900 hours of production
time available in its cutting and sewing daprtment, 300 hours available in
its finishing department, and 100 hours available in its packaging and
shipping department. The production time requrements and the profit
contribution per glove are given in the following table:

Production Time (Hours)

Cutting Finishing Packaging
Model and Sewing and Shipping
Regular model 1 1/2 1/8
Catcher's model 1 1/2 1/3 1/4

Assuming that the company is interested in maximizing the total profit contribution, a

a. What is the linear programming model for this problem?

b. Develop a spreadsheet model and find the optimal solution using
Excel Solver. How many of each model should Kelson
manufactur?

c. What is the total profit contribution Kelson can earn with the
optimal production quantities?

d. How many hours of production time will be scheduled in each

department?

e. What is the slack time in each department?

2
The Sea Wharf Restaurant would like to determine the best way to
allocate a monthly advertising budget of $1000 between
newspaper advertising and radio advertising. Management decided
that at least 25 percent of the budget must be spent on each type
of media and that the amount of money spent on local newspaper
advertising must be at least twice the amount spent on radio
advertising. A marketing consultant developed an index that
measures audience exposure per dollar of advertising on a scale
from 0 to 100, with higher values implying greater audience
exposure. If the value of the index for local newspaper advertising
is 50 and the value of the index for spot radio advertising is 80,
how should the restaurant allocate its advertising budget to
maximize the value of total audience exposure?

a. Formulate a linear programming model that can be used to

determine how the restaurant should allocate its advertising
budget in order to maximize the value of total audience exposure.
 a. Formulate a linear programming model that can be used to
determine how the restaurant should allocate its advertising
budget in order to maximize the value of total audience exposure.

b. Develop a spreadsheet model and solve the problem using Excel

Solver.

3
Blair & Rosen, Inc. (B&R) is a brokerage firm that specializes in investment
portfolios designed to meet the specific risk tolerances of its clients. A client who
contacted B&R this past week has a maximum of $50,000 to invest. B&R's
investment advisor decides to recommend a portfolio consisting of two investment
fudns: an Internet fund and Blue Chip fund. The Internet fund has a projected
annual return of 12 percent, and the Blue Chip fund has a projected annual return
of 9 percent. The investement advisor requires that at most $35,000 of the
client's funds should be invested in the Internet fund. B&R services include a risk
rating for each investment alternative. The Internet fund, which is the more risky
of the two investment alternatives, has a risk rating of 6 per $1,000 invested. The
Blue Chip fund has a risk rating of 4 per $1,000 invested. For example, if $10,000 is
invested in each of the two invested funds, B&R's risk rating for the porfolio would
be 6(10) + 4(10) = 100, Finally, B&R developed a questionnaire to measure each
client's risk tolerance, Based on the responeses, each clinet is classified as a
conservative, moderate, or aggressive investor. Suppose that the questionnaire
results classified the current client as a moderate investor. B&R recommends that
a client who is a moderate investor limit his or her porfolio to a maximum risk
rating of 240.

a. Formulate a linear programming model to find the best

investment strategy for this client.
b.
Build a spreadsheet model and solve the problem using
Solver. What is the recommended investment portfolio for
this client? What is the annual return for the portfolio?
c.
Suppose that a second client with $50,000 to invest has
been classified as a aggressive investor. B&R recommend
tha the maximum portfolio risk rating for an aggressive
investor is 320. What is the recommended investment
portfolio for this aggressive investor?
d.
Suppose that a third client with $50,000 to invest has
been classified as a conservative investor. B&R
recommend that the maximum portfolio risk rating for a
conservative investor is 160. Develolp the recommended
investment porfolio for the conservative investor.
4
Adirondak Savings Bank (ASB) has $1 million in new funds that
must be allocated to home loans, personal loans, and automobile
loans. The annual rates of return for the three types of loans are 7
percent for home loans, 12 percent for personal loans, and 9
percent for automobile loans. The bank's planning commttee has
decided that at least 40 percent of the new funds must be
allocated to home loans. In addition, the planning committee has
specified that the amount allocated to personal loans cannot
exceed 60 percent of the amount allocated to automobile loans

a. Formulate a linear programming model that can be used to

determine the amount of funds ASB should allocate to
each type of loan to maximize the total annual return for
the new funds
b. How much should be allocated to each type of loan? What
is the total annual return? What is the annual percentage
return?
c. If the interest rate on home loans increases to 9 percent,
would the amount allocated to each type of loan change?
Explain
d. Suppose the total amount of new funds available is
inreased by $10,000. What effect would this have on the
total annual return? Explain.
e.
Assume that ASB has the original $1 million in new funds
available and that the planning committee has agreed to
relax the requirement that at least 40 percent of the new
funds must be allocated to home plans by 1 percent. How
much would the annual return change? How much would
the annual percentage return change?

5 Round Tree Manor is a hotel that provides two types of rooms

with three rental classes: Super Saver, Deluxe, and Business. The
profit per night for each type of room and rental class is as
follows:

Room Super Saver Deluxe Business

Type I $ 30.00 $ 35.00
Type II $ 20.00 $ 30.00 $ 40.00

Type I rooms do not have wireless Internet access and are not
available for the Business rental class. Round Tree's management
makes a forecast of the demand by rental class for each night in
Type I rooms do not have wireless Internet access and are not
available for the Business rental class. Round Tree's management
makes a forecast of the demand by rental class for each night in
the future. A linear prgramming model developed to maximize
profit is used to determine how many reservations to accept for
each rental class. The demand forecast for a particular night is
130 rentals in the Super Saver Class, 60 rentals in the Deluxe
class, and 50 rentals in the Business class. Round Tree has 100
type I rooms and 120 type II rooms.

a. Use linear programming to determine how many

reservaons to accept in each rental class and how the
rerservations should be allocated to room types. Is the
demand by any rental class not satisfied? Explain.
b.
How many reservations can be accommodated in each
rental class?
c.
Management is considering offering a free breakfast to
anyone upgrading from a Super Saver reservations to
Deluxe class. If the cost of the breakfast to Round Tree is
$5, should this incentive be offered?
d.
With a little work, an unused office area chould be
converted to a rental room. If the conversion cost is the
same for both types of rooms, would you recommend
converting the office to a Type I or a Type II room? Why?
e.
Could the linear programming model be modified to plan
for the allocation of rental demand for the next night?
What information would be needed and how would the
model change?
urs)
Profit/Glove

$5.00
$8.00

ofit contribution, answer the following:

 estment
ts. A client who
t. B&R's
two investment
a projected
d annual return
00 of the
s include a risk
the more risky
0 invested. The
ple, if $10,000 is
e porfolio would
measure each
ssified as a
questionnaire
ecommends that
ximum risk
1
Kelson Sporting Equipment, Inc., makes two types of baseball gloves: a
regular model and a catcher's model. The firm has 900 hours of production
time available in its cutting and sewing daprtment, 300 hours available in
its finishing department, and 100 hours available in its packaging and
shipping department. The production time requrements and the profit
contribution per glove are given in the following table:

Production Time (Hours)

Cutting Finishing Packaging
Model and Sewing and Shipping
Regular model 1 1/2 1/8
Catcher's model 1 1/2 1/3 1/4

Assuming that the company is interested in maximizing the total profit contribution, a

a. What is the linear programming model for this problem?

b. Develop a spreadsheet model and find the optimal solution using
Excel Solver. How many of each model should Kelson
manufactur?

Hal has enough clay to make 24 small vases or 6 large vases. He only has enough of a special glazing
compound to glaze 16 of the small vases or 8 of the large vases. Let X = the number of small vases and Y = the
number of large vases. The smaller vases sell for $3 each, while the larger vases would bring $9 each.

1
(a)  Identify the objective and constraint
x1 = the number of small vases ($3/each)
x2 = the number of large vases ($9/each)

max Z = 3x1 + 9x2

decition x1 x2
0 0
Profit 3 9

Constraints x_1/24+x_2/6 ≤1 which means x_1+4x

clay 1 4 0 <= 24 x_1/16+x_2/8 ≤1 which means x_1+2x_2
glaze 1 2 0 <= 16

Objective function
max 0
(b) Find the optimal solution
ours)
Profit/Glove

$5.00
$8.00

ofit contribution, answer the following:

f a special glazing
mall vases and Y = the
uld bring $9 each.

1 which means x_1+4x_2≤24

which means x_1+2x_2≤16
 Hal has enough clay to make 24 small vases or 6 large vases. He only has enough of a special glazing
1 compound to glaze 16 of the small vases or 8 of the large vases. Let X = the number of small vases and Y = the
number of large vases. The smaller vases sell for $3 each, while the larger vases would bring $9 each.
(a)  Identify the objective and constraint
x1 = the number of small vases ($3/each)
x2 = the number of large vases ($9/each)

max Z = 3x1 + 9x2

decition x1 x2
0 0
Profit 3 9

Constraints x_1/24+x_2/6 ≤1 which means x_1+4x_2≤

clay 1 4 0 <= 24 x_1/16+x_2/8 ≤1 which means x_1+2x_2≤16
glaze 1 2 0 <= 16

Objective function
max 0

(b) Find the optimal solution

decition x1 x2
8 4
Profit 3 9

Constraints
clay 1 4 24 <= 24
glaze 1 2 16 <= 16

Objective function
max 60

Solution
X1 (small vase) = 8
X2 (large vase) = 4
Z (max income) = 60
f a special glazing
mall vases and Y = the
uld bring $9 each.

1 which means x_1+4x_2≤24

which means x_1+2x_2≤16