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Solutions:
1. a. Let T = number of television spot advertisements R = number of radio advertisements N = number of newspaper advertisements
Max 100,000T + 18,000R + 40,000N s.t. 2,000T + 300R + 600N 18,200 Budget T 10 Max TV R 20 Max Radio N 10 Max News -0.5T + 0.5R - 0.5N 0 Max 50% Radio 0.9T - 0.1R - 0.1N 0 Min 10% TV
T, R, N, 0
Budget $ Solution: T = 4 $8,000 R = 14 4,200 N = 10 6,000 $18,200 Audience = 1,052,000.
OPTIMAL SOLUTION
Optimal Objective Value 1052000.00000
Variable Value Reduced Cost T 4.00000 0.00000 R 14.00000 0.00000 N 10.00000 11826.08695
b. The dual value for the budget constraint is 51.30. Thus, a $100 increase in budget should provide an increase in audience coverage of approximately 5,130. The right-hand-side range for the budget constraint will show this interpretation is correct.
2. a. Let x1 = units of product 1 produced x2 = units of product 2 produced
Max 30x1 + 15x2 s.t. x1 + 0.35x2 100 Dept. A 0.30x1 + 0.20x2 36 Dept. B 0.20x1 + 0.50x2 50 Dept. C
x1, x2 0
Solution: x1 = 77.89, x2 = 63.16 Profit = 3284.21
b. The dual value for Dept. A is $15.79, for Dept. B it is $47.37, and for Dept. C it is $0.00. Therefore we would attempt to schedule overtime in Departments A and B. Assuming the current labor available is a sunk cost, we should be willing to pay up to $15.79 per hour in Department A and up to $47.37 in Department B.
c. Let xA = hours of overtime in Dept. A xB = hours of overtime in Dept. B xC = hours of overtime in Dept. C
7. a. Let F = total funds required to meet the six years of payments G1 = units of government security 1 G2 = units of government security 2 Si = investment in savings at the beginning of year i
Note: All decision variables are expressed in thousands of dollars
The current investment required is $1,484,967. This calls for investing $232,394 in government security 1 and $720,388 in government security 2. The amounts, placed in savings are $329,404, $180,186 and $442,308 for years 1,2 and 5 respectively. No funds are placed in savings for years 3, and 4.
b. The dual value for constraint 6 indicates that each $1 increase in the payment required at the beginning of year 6 will increase the amount of money Hoxworth must pay the trustee by $0.78551. A per unit decrease would therefore decrease the cost by $0.78551. The allowable decrease on the right-hand-side range is $460,000 so a reduction in the payment at the beginning of year 6 by $60,000 will save Hoxworth $60,000 (0.78551) = $47,131.
c. The dual value for constraint 1 shows that every dollar of reduction in the initial payment leads to a drop in the objective function value of $1.00. So Hoxworth should be willing to pay anything less than $40,000.
d. To reformulate this problem, one additional variable needs to be added, the right-hand sides for the original constraints need to be shifted ahead by one, and the right-hand side of the first constraint needs to be set equal to zero. The value of the optimal solution with this formulation is $1,417,739. Hoxworth will save $67,228 by having the payments moved to the end of each year.
8. Let x1 = the number of officers scheduled to begin at 8:00 a.m. x2 = the number of officers scheduled to begin at noon x3 = the number of officers scheduled to begin at 4:00 p.m. x4 = the number of officers scheduled to begin at 8:00 p.m. x5 = the number of officers scheduled to begin at midnight x6 = the number of officers scheduled to begin at 4:00 a.m.
The objective function to minimize the number of officers required is as follows:
Min x1 + x2 + x3 + x4 + x5 + x6
The constraints require the total number of officers of duty each of the six four-hour periods to be at least equal to the minimum officer requirements. The constraints for the six four-hour periods are as follows:
x1 = 3 begin at 8:00 a.m. x2 = 3 begin at noon x3 = 7 begin at 4:00 p.m. x4 = 0 begin at 8:00 p.m. Chapter 4 x5 = 4 begin at midnight x6 = 2 begin at 4:00 a.m.
9. Let Xi = the number of call center employees who start work on day i (i=1 = Monday, i=2=Tuesday…)
Note: There are alternative optima to this problem (Number of employees may differ from above, but will have objective function value = 95).
10. a. Let S = the proportion of funds invested in stocks B = the proportion of funds invested in bonds M = the proportion of funds invested in mutual funds C = the proportion of funds invested in cash
The linear program and optimal solution are as follows:
The annual return associated with the optimal portfolio is 8.2%
The total risk = 0.75(0.8) + 0.0(0.2) + 0.15(0.3) + 0.10(0.0) = 0.65
d. Note that a maximum risk of 0.7 was specified for this aggressive investor, but that the risk index for the portfolio is only 0.65. Thus, this investor is willing to take more risk than the solution shown above provides. There are only two ways the investor can become even more aggressive: increase the proportion invested in stocks to more than 75% or reduce the cash requirement of at least 10% so that additional cash could be put into stocks. For the data given here, the investor should ask the investment advisor to relax either or both of these constraints.
e. Defining the decision variables as proportions means the investment advisor can use the linear programming model for any investor, regardless of the amount of the investment. All the investor advisor needs to do is to establish the maximum total risk for the investor and resolve the problem using the new value for maximum total risk.