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Attachment 1

Uploaded by

nico
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Homework 3

Formulate LP models for the following questions (define your variables, write out your
objective function and your constraints) and solve them using Excel’s solver.
Please submit both the document to answer each question and also the excel files.
Question 1
Stocking Warehouses: The Nicklaus Razor Blade Company plans to test market a new
blade next month. The blades will be stocked in their three warehouses in the following
quantities.

Warehouse A B C

Stock 50 50 50
(cartons)

 Meanwhile, the carton quantities required by the distributors in the four test markets are
as follows.
Distributor D E F G

Requirement 4 15 25 20
5

 The unit costs (in dollars per carton) of shipping the blades from warehouses to
distributors are given in the table below.
DE FG

A8 1 6 3
0

B 9 1 8 6
5

C 5 1 5 7
2

1. NRBC wishes to meet the distributor’s requirements at the minimum total


transportation cost. Find the optimal plan.
2. Show the network diagram corresponding to the solution in (a). That is, label each
of the arcs in the solution and verify that the flows are consistent with the given
information.
Question 2

A data processing department wishes to assign five programmers to five programming


tasks (one programmer to each task). Management has estimated the total number of
days each programmer would take if assigned to the different jobs, and these estimates
are summarized in the following table.

Task 1 2 3 4 5

1 5 25 7 64 60
0 8

2 4 30 7 56 72
3 0

Programmer 3 6 28 8 66 68
0 0

4 5 29 7 60 70
4 5

5 4 32 7 62 75
5 0

1. Determine the assignment that minimizes the total programmer days required to
complete all five jobs.
2. Show the network diagram corresponding to the solution in (a). That is, label
each of the arcs in the solution and verify that the flows are consistent with the
given information.
3. How would the solution change if programmer 3 could not be assigned to tasks
2 or 4?

Question 3
DeMont Chemical Company manufactures fertilizer in three plants, referred to as P1, P2, and P3.
The company ships its products from plants to two central DCs, designated D1 and D2, and then
to five regional warehouses, W1–W5. At the DCs, no demand occurs and no capacity limits
exist. Demand is associated with the warehouses, and capacities exist at the plants. The system is
described in two tables, one for each stage. The units for capacity and demand are pounds of
fertilizer, and the unit costs are given per pound. The company is trying to minimize the total
cost.

Question 4
A portfolio manager has developed a list of six investment alternatives for a multiyear horizon.
These are Treasury bills, Common stock, Corporate bonds, Real estate, Growth funds, and
Savings and loans. These investments and their various financial factors are described below. In
the table, the return is given as an annual percentage, and the length represents the estimated
number of years required for the annual return to be realized. The risk coefficient is a subjective
estimate representing the manager’s appraisal of the relative safety of each alternative, on a scale
of 1–10. The growth potential is an estimate of the potential increase in value over the horizon.

The manager wishes to maximize the return on a $4 million portfolio, subject to the following
restrictions:
The weighted average length should not exceed 6 years.
The weighted average risk coefficient should not exceed six.
The weighted average growth potential should be at least 15%.
The investment in real estate should be no more than twice the investment in stocks and bonds
(i.e., in CS, CB, and GF) combined.
1. What are the optimal return and the optimal allocation of investment funds?(Give the
optimal return in dollars and also as a percentage.)
2. What is the marginal rate of return? In other words, what would be the return on the next
dollar invested if there were one more dollar in the portfolio? (If necessary, run
sensitivity analysis)
3. For additional investment beyond the original $4million, how does the optimal allocation
change? (If necessary, run sensitivity analysis)

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