Linear Programming:

Sensitivity Analysis and Interpretation

of Solution
LEARNING OBJECTIVES

After studying this topic, you should be able to:

 Sensitivity Analysis

 Spreadsheet Solution & Sensitivity Analysis

 Be able to interpret the computer solution of a linear programming

problem.
 Standard Computer Output
Software packages such as The Management Scientist and
Microsoft Excel provide the following LP information:
• Information about the objective function:
• its optimal value
• coefficient ranges (ranges of optimality)
• Information about the decision variables:
• their optimal values
• their reduced costs
• Information about the constraints:
• the amount of slack or surplus
• the dual prices
• right-hand side ranges (ranges of feasibility)
Sensitivity Analysis

Sensitivity analysis helps answer questions

about how sensitive the optimal solution is

to changes in various coefficients in a

model.
Introduction

Sensitivity analysis is an analysis that projects how

much a solution may change if there are changes in

the variables or input data.

 Sensitivity Analysis

• Sensitivity analysis (or post-optimality analysis) is used to determine how the

optimal solution is affected by changes, within specified ranges, in:
• the objective function coefficients

• the right-hand side (RHS) values

• Sensitivity analysis is important to the manager who must operate in a dynamic

environment with imprecise estimates of the coefficients.

• Sensitivity analysis allows the manager to ask certain what-if questions about the
problem.
 Why is sensitivity analysis important?

- Coefficients and/or limits in constraints may be poorly

known

- Effect of expanding capacity, changes in costs of raw

materials or selling prices of products.

• Market demand of products vary

• Crude oil prices fluctuate

 Range of Optimality: The Objective
Function Coefficients

A range of optimality of an objective function coefficient is found by

determining an interval for the coefficient in which the original optimal

solution remains optimal while keeping all other data of the problem constant.

(The value of the objective function may change in this range.)

 The Right Hand Sides: Shadow Price (Dual
Price)
• A shadow price for a right hand side value (or resource limit) is the amount
the objective function will change per unit increase in the right hand side
value of a constraint.
• In a business application, a shadow price is the maximum
price that we can pay for an extra unit of a given limited
resource.
• The shadow price for a non-binding constraint is 0.
Sensitivity analysis

Sensitivity analysis means determining effects of changes in

parameters on the solution. It is also called What if analysis,

Parametric analysis, Post optimality analysis, etc.

 Sensitivity Report
The Sensitivity Report has two parts: Adjustable Cells and Constraints.

The Adjustable Cells table presents information regarding the impact of changes

to the objective function coefficients on the optimal solution.

The Constraints table presents information related to the impact of changes in

constraint right-hand-side (RHS) values on the optimal solution.

Set up the problem, click “Solve” and the
box appears.

If you select only “OK”, you can read
values of decision variables and the
objective function.

Instead of selecting only “OK”, select

“Answer” under Reports and then click
“OK”. A new sheet called “Answer
Report xx” is added to your workbook.

Next slides shows the report (re-formatted).

LP: Sensitivity Analysis 12
Answer
Answer The answer report has three tables:
1: Objective Cell – for the objective function
Report
Report 2: Variable Cells 3: for constraints.

Let’s try to interpret some

features..

ro fit
im al p
Op t

iable
Optimal var
values

?
You may want to
rename this Answer
Report worksheet.

LP: Sensitivity Analysis 13

Sensitivity Now we will consider changes in the
SensitivityAnalysis
Analysis objective function or the RHS coefficients –
one coefficient at a time.
Objective function

Maximize 10 x1 + 8 x2 = Z
 7/10 x1 + x2  630
Right Hand Side (RHS).
 1/2 x1 + 5/6 x2  600

 x1 + 2/3 x2  708
 1/10 x1 + 1/4 x2  135 Optimal solution:
x1 = 540, x2= 252.
 x1 + x2 ≥ 150 Z = 7416
x1 ≥ 0, x2 we
Here are some questions ≥ 0 will try to answer.
Q1: How much the unit profit of Ace can go up or down from $8 without changing the
current optimal production quantities?
Q2:What if per unit profit for Deluxe model is 12.25?

Q3: What if an 10 more hours of production time is available in

 cutting & dyeing?  inspection?
LP: Sensitivity Analysis 14
Sensitivity
SensitivityAnalysis
Analysis Maximize 10 x1 + 8 x2 = Z
 7/10 x1 + x2  630
Golf
 1/2bags
x1 + 5/6 x2  600
Q1: How much the unit profit of X1: Deluxe
Ace can go up or down from  x1 + 2/3 x2  708
X : Ace
$8 without changing the 21/10 x1 + 1/4 x2  135
current optimal production x1 ≥ 0, x2 ≥ 0  x1 + x2 ≥ 150
quantities?

As long as the slope of the objective

function isoprofit line stays within the

binding constraints.


  

LP: Sensitivity Analysis 15

Solver
Solver
“Sensitivity
“Sensitivity
Report”
Report”

If you click on Sensitivity, a new

worksheet, called Sensitivity
Report is added. It contains two
tables: Variable cells and
Constraints.
Variable cells table helps us answer questions related to changes in
the objective function coefficients.

Constraints table helps us answer questions related to changes in

the RHS coefficients.

We will discuss these tables separately.

LP: Sensitivity Analysis 16

Solver
Solver “Sensitivity
“Sensitivity Report”
Report” Z = 7416
Maximize 10 x1 + 8 x2 = Z x1 = 540, x2= 252

Q1: How much the unit profit of Ace can go up or down from $8 without
changing the current optimal production quantities?

Range for X1: 10 – 4.4 to 10 + 2

Range for X2: 8 – 1.333 to 8 + 6.286
Try per unit profit for X2 as 14.28, 14.29, 6.67 and 6.66
Q2:What if per unit profit for Deluxe model is 12.25?

Slight round off error?

Reduced cost will be explained later.

LP: Sensitivity Analysis 17

Allowable Increase.
For an objective function coefficient: The maximum amount by which the Objective Function
Coefficient of a decision variable can increase for the current optimal solution to remain
optimal.

For the right-hand side of a constraint: The maximum amount by which the RHS value of a
constraint can increase for the shadow price to be valid.

Allowable Decrease.
For an objective function coefficient: The maximum amount by which the Objective Function
Coefficient of a decision variable can decrease for the current optimal solution to remain
optimal.
For the right-hand side of a constraint: the maximum amount by which the RHS value of a
constraint can decrease for the shadow price to be valid.
What
What if
if questions
questions are
are about
about the
the RHS?
RHS?
A change in RHS can change the shape of the solution space
(objective function slope is not affected).

Q3: Add 10 more hours of production time for

 cutting & dyeing?  inspection?

Cutting & dyeing is a binding constraint; increasing the

resource will increase the solution space and move
the optimal point.

Inspection is a nonbinding
constraint; increasing the resource
will increase the solution space and
but will not move the optimal point.


LP: Sensitivity Analysis 19
Sensitivity
SensitivityReport
Report Q3
Q3

Q3: Add 10 more hours of production time for

 cutting & dyeing?  inspection?

For cutting & dyeing up to 52.36 units can be increased. Profit will
increase @ $2.50 per unit.
For inspection ?
Shadow price represents change in the objective function value per
one-unit increase in the RHS of the constraint. In a business
application, a shadow price is the maximum price that we can pay
for an extra unit of a given limited resource.
LP: Sensitivity Analysis 20
Example 2: Olympic Bike Co.
Olympic Bike is introducing two new lightweight bicycle
frames, the Deluxe and the Professional, to be made from
special aluminum and steel alloys. The anticipated unit
profits are $10 for the Deluxe and $15 for the Professional.
The number of pounds of each alloy needed per frame is
summarized below. A supplier delivers 100 pounds of the
aluminum alloy and 80 pounds of the steel alloy weekly.

Aluminum Alloy Steel Alloy

Deluxe 2 3
Professional 4 2

How many Deluxe and Professional frames should Olympic produce each week?
 Example 2: Olympic Bike Co.
• Model Formulation
• Verbal Statement of the Objective Function
Maximize total weekly profit.
• Verbal Statement of the Constraints
Total weekly usage of aluminum alloy < 100
pounds.
Total weekly usage of steel alloy < 80 pounds.
• Definition of the Decision Variables
x1 = number of Deluxe frames produced weekly.
x2 = number of Professional frames produced
weekly.
Example 2: Olympic Bike Co.
• Model Formulation (continued)

Max 10x1 + 15x2 (Total Weekly Profit)

s.t. 2x1 + 4x2 < 100 (Aluminum Available)

3x1 + 2x2 < 80 (Steel Available)

x1, x2 > 0
Example 2: Olympic Bike Co.
• Partial Spreadsheet Showing Problem Data
Example 2: Olympic Bike Co.
• Partial Spreadsheet Showing Solution
Example 2: Olympic Bike Co.
• Optimal Solution

According to the output:

x1 (Deluxe frames) = 15
x2 (Professional frames) = 17.5
Objective function value = $412.50
Example 2: Olympic Bike Co.
• Range of Optimality
Question
Suppose the profit on deluxe frames is
increased to $20. Is the above solution still
optimal? What is the value of the objective
function when this unit profit is increased to
$20?
Example 2: Olympic Bike Co.
• Sensitivity Report
Example 2: Olympic Bike Co.
• Range of Optimality
Answer
The output states that the solution remains optimal
as long as the objective function coefficient of x1 is
between 7.5 and 22.5. Since 20 is within this range,
the optimal solution will not change. The optimal
profit will change: 20x1 + 15x2 = 20(15) + 15(17.5) =
$562.50.
Example 2: Olympic Bike Co.

• Range of Optimality
Question
If the unit profit on deluxe frames were $6
instead of $10, would the optimal solution
change?
Example 2: Olympic Bike Co.
• Range of Optimality
Example 2: Olympic Bike Co.
• Range of Optimality
Answer
The output states that the solution remains
optimal as long as the objective function
coefficient of x1 is between 7.5 and 22.5.
Since 6 is outside this range, the optimal
solution would change.