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ODM2022 Tutorial-5

This document discusses optimal decision making and the simplex method for solving linear programs. It provides 4 exercises: 1) Convert a linear program to standard form and use the simplex method to find the optimal solution. 2) Interpret a simplex tableau to determine if a solution is feasible, bounded, or optimal. 3) Formulate a linear program to maximize profit for a refinery based on crude oil amounts and production processes. 4) Analyze how changes to parameters like prices or constraints could impact the optimal solution.

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85 views

ODM2022 Tutorial-5

This document discusses optimal decision making and the simplex method for solving linear programs. It provides 4 exercises: 1) Convert a linear program to standard form and use the simplex method to find the optimal solution. 2) Interpret a simplex tableau to determine if a solution is feasible, bounded, or optimal. 3) Formulate a linear program to maximize profit for a refinery based on crude oil amounts and production processes. 4) Analyze how changes to parameters like prices or constraints could impact the optimal solution.

Uploaded by

ME
Copyright
© © All Rights Reserved
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Download as PDF, TXT or read online on Scribd
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Optimal Decision Making MGT-483


Tutorial 5 — Exercises
RAO

In this tutorial, you will first practice the full tableau implementation of the simplex
algorithm. Second, you will interpret the tableau corresponding to a particular basic
solution and judge (i) whether the problem is bounded, (ii) whether the basic solution is
feasible, and (iii) whether it is optimal. Last, given a linear program, you will examine
how its optimal solution reacts to changes in the problem formulation. In particular, we
will study the effects of a change in a cost coefficient and of removing a constraint. This
kind of examination is called sensitivity analysis and will be covered in detail in lecture 7.

Exercise 1 (Simplex algorithm). Consider the problem

max 2x1 + x2
s.t. x1 − x2 ≤ 2
x1 + x2 ≤ 6
x1 , x2 ≥ 0.

(a) Convert the problem into standard form and construct a basic feasible solution at
which
(x1 , x2 ) = (0, 0).

(b) Carry out the full tableau implementation of the simplex method, starting with the
basic feasible solution of part (a).

(c) Draw a graphical representation of the problem in terms of the original variables
x1 , x2 only, and indicate the path taken by the simplex algorithm.

Exercise 2 (Interpreting the simplex tableau). While solving some standard form problem,
we arrive at the following tableau, with x3 , x4 , and x5 being the basic variables:

−x0 x1 x2 x3 x4 x5
−10 δ −2 0 0 0
x3 4 −1 η 1 0 0
x4 1 α −4 0 1 0
x5 β γ 3 0 0 1

The entries α, β, γ, δ, and η in the tableau are unknown parameters. For each one of the
following statements, find some parameter values that will make the statement true.

(a) The optimal cost is −∞.


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(b) The current solution is feasible but not optimal.

(c) The current solution is optimal and there are multiple optimal solutions.

Exercise 3 (Refinery management). A manager of an oil refinery has 8 million barrels of


crude oil A and 5 million barrels of crude oil B allocated for production during the coming
month. These resources can be used to make either gasoline, which sells for $38 per barrel,
or home heating oil, which sells for $33 per barrel. There are three production processes
through which crude oil can be transformed into gasoline and heating oil. Table 1 describes
their characteristics.

Process 1 Process 2 Process 3


Input crude A 3 1 5
Input crude B 5 1 3
Output gasoline 4 1 3
Output heating oil 3 1 4
Cost $51 $11 $40

Table 1: Process characteristics

All quantities are in barrels. For example, with the first process, 3 barrels of crude
oil A and 5 barrels of crude oil B are used to produce 4 barrels of gasoline and 3 barrels
of heating oil. The costs in this table refer to variable and allocated overhead costs, and
there are no separate cost items for the cost of the crudes.

(a) Formulate a linear optimization problem that would help the manager maximize net
revenue over the next month.

(b) Use the simplex method to solve the problem formulated in (a).

(c) Suppose that the selling price of heating oil is sure to remain constant over the next
month, but the selling price of gasoline may rise. How high can it go without causing
the optimal solution to change?

(d) The refinery manager can trade crude oil B on the spot market at $40/barrel, in
unlimited quantities. How much should she sell or buy?

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