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Linear Programming Applications

Chapter 4
Linear Programming Applications

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 price 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

Max 30x1 + 15x2 - 18xA - 22.5xB - 12xC


s.t.
x1 + 0.35x2 - xA ≤ 100
0.30x1 + 0.20x2 - xB ≤ 36
0.20x1 + 0.50x2 - xC ≤ 50
xA ≤ 10
xB ≤ 6
xC ≤ 8
x1, x2, xA, xB, xC ≥ 0
x1 = 87.21
Chapter 4

x2 = 65.12
Profit = $3341.34
Overtime
Dept. A 10 hrs.
Dept. B 3.186 hrs
Dept. C 0 hours

Increase in Profit from overtime = $3341.34 - 3284.21 = $57.13

6. Let x1 = units of product 1


x2 = units of product 2
b1 = labor-hours Dept. A
b2 = labor-hours Dept. B

Max 25x1 + 20x2 + 0b1 + 0b2


s.t.
6x1 + 8x2 - 1b1 = 0
12x1 + 10x2 - 1b2 = 0
1b1 + 1b2 ≤ 900

x1, x2, b1, b2 ≥ 0

Solution: x1 = 50, x2 = 0, b1 = 300, b2 = 600 Profit: $1,250

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:

Time of Day
8:00 a.m. - noon x1 + x6 ≥ 5
noon to 4:00 p.m. x1 + x2 ≥ 6
Linear Programming Applications

4:00 p.m. - 8:00 p.m. x2 + x3 ≥ 10


8:00 p.m. - midnight x3 + x4 ≥ 7
midnight - 4:00 a.m. x4 + x5 ≥ 4
4:00 a.m. - 8:00 a.m. x5 + x6 ≥ 6
x1, x2, x3, x4, x5, x6 ≥ 0

Schedule 19 officers 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.
x5 = 4 begin at midnight
x6 = 2 begin at 4:00 a.m.

11. Let xij = units of component i purchased from supplier j

Min 12x11 + 13x1 + 14x13 + 10x21 + 11x22 + 10x23


2
s.t.
x11 + x1 + x13 = 1000
2
x21 + x22 + x23 = 800
x11 + x21 ≤ 600
x1 + x22 ≤ 1000
2
x13 + x23 ≤ 800

x11, x12, x13, x21, x22, x23 ≥ 0

Solution:
Supplier
1 2 3

Component 1 600 400 0


Component 2 0 0 800
Purchase Cost = $20,400

17. a. Let FM = number of frames manufactured


FP = number of frames purchased
SM = number of supports manufactured
SP = number of supports purchased
TM = number of straps manufactured
TP = number of straps purchased
Chapter 4

Min 38FM + 51FP + 11.5SM + 15SP + 6.5TM + 7.5TP


s.t.
3.5FM + 1.3SM + 0.8TM ≤ 21,000
2.2FM + 1.7SM ≤ 25,200
3.1FM + 2.6SM + 1.7TM ≤ 40,800
FM + FP ≥ 5,000
SM + SP ≥ 10,000
TM + TP ≥ 5,000
FM, FP, SM, SP, TM, TP ≥ 0.

Solution:
Manufacture Purchase
Frames 5000 0
Supports 2692 7308
Straps 0 5000

b. Total Cost = $368,076.91

c. Subtract values of slack variables from minutes available to determine minutes used. Divide by 60
to determine hours of production time used.

Constraint
1 Cutting: Slack = 0 350 hours used
2 Milling: (25200 - 9623) / 60 = 259.62 hours
3 Shaping: (40800 - 18300) / 60 = 375 hours

d. Nothing, there are already more hours available than are being used.

e. Yes. The current purchase price is $51.00 and the reduced cost of 3.577 indicates that for a
purchase price below $47.423 the solution may improve. Resolving with the coefficient of FP =
45 shows that 2714 frames should be purchased.

The optimal solution is as follows:

OPTIMAL SOLUTION

Objective Function Value = 361500.000

Variable Value Reduced Costs


-------------- --------------- ------------------
FM 2285.714 0.000
FP 2714.286 0.000
SM 10000.000 0.000
SP 0.000 0.900
TM 0.000 0.600
TP 5000.000 0.000
Linear Programming Applications

Constraint Slack/Surplus Dual Prices


-------------- --------------- ------------------
1 0.000 2.000
2 3171.429 0.000
3 7714.286 0.000
4 0.000 -45.000
5 0.000 -14.100
6 0.000 -7.500

19. a. Let x11 = amount of men's model in month 1


x21 = amount of women's model in month 1
x12 = amount of men's model in month 2
x22 = amount of women's model in month 2
s11 = inventory of men's model at end of month 1
s21 = inventory of women's model at end of month 1
s12 = inventory of men's model at end of month 2
s22 = inventory of women's model at end of month

The model formulation for part (a) is given.

Min 120x11 + 90x21 + 120x12 + 90x22 + 2.4s11 + 1.8s21 + 2.4s12 + 1.8s22


s.t.
20 + x11 - s11 = 150
or
x11 - s11 = 130 Satisfy Demand [1]

30 + x21 - s21 = 125


or
x21 - s21 = 95 Satisfy Demand [2]

s11 + x12 - s12 = 200 Satisfy Demand [3]


s21 + x22 - s22 = 150 Satisfy Demand [4]
s12 ≥ 25 Ending Inventory [5]
s22 ≥ 25 Ending Inventory [6]

Labor Hours: Men’s = 2.0 + 1.5 = 3.5


Women’s = 1.6 + 1.0 = 2.6

3.5 x11 + 2.6 x21 ≥ 900 Labor Smoothing for [7]


3.5 x11 + 2.6 x21 ≤ 1100 Month 1
[8]

3.5 x11 + 2.6 x21 - 3.5 x12 - 2.6 x22 ≤ 100 Labor Smoothing for
[9]
Chapter 4

-3.5 x11 - 2.6 x21 + 3.5 x12 + 2.6 x22 ≤ 100 Month 2 [10]

x11, x12, x21, x22, s11, s12, s21, s22 ≥ 0

The optimal solution is to produce 193 of the men's model in month 1, 162 of the men's model in
month 2, 95 units of the women's model in month 1, and 175 of the women's model in month 2.
Total Cost = $67,156

Inventory Schedule

Month 1 63 Men's 0 Women's


Month 2 25 Men's 25 Women's

Labor Levels

Previous month 1000.00 hours


Month 1 922.25 hours
Month 2 1022.25 hours

b. To accommodate this new policy the right-hand sides of constraints [7] to [10] must be changed to
950, 1050, 50, and 50 respectively. The revised optimal solution is given.

x11 = 201
x21 = 95
x12 = 154
x22 = 175 Total Cost = $67,175

We produce more men's models in the first month and carry a larger men's model inventory; the
added cost however is only $19. This seems to be a small expense to have less drastic labor force
fluctuations. The new labor levels are 1000, 950, and 994.5 hours each month. Since the added
cost is only $19, management might want to experiment with the labor force smoothing restrictions
to enforce even less fluctuations. You may want to experiment yourself to see what happens.

21. Decision variables : Regular

Model Month 1 Month 2


Bookshelf B1R B2R
Floor F1R F2R

Decision variables : Overtime

Model Month 1 Month 2


Bookshelf B1O B2O
Floor F1O F2O
Labor costs per unit

Model Regular Overtime


Bookshelf .7 (22) = 15.40 .7 (33) = 23.10
Linear Programming Applications

Floor 1 (22) = 22 1 (33) = 33

IB = Month 1 ending inventory for bookshelf units


IF = Month 1 ending inventory for floor model

Objective function

Min 15.40 B1R + 15.40 B2R + 22 F1R + 22 F2R


+ 23.10 B1O + 23.10 B2O + 33 F1O + 33 F2O
+ 10 B1R + 10 B2R + 12 F1R + 12 F2R
+ 10 B1O + 10 B2O + 12 F1O + 12 F2O
+ 5 IB + 5 IF

or

Min 25.40 B1R + 25.40 B2R + 34 F1R + 34 F2R


+ 33.10 B1O + 33.10 B2O + 45 F1O + 45 F2O
+ 5 IB + 5 IF
s.t.
.7 B1R + 1 F1R ≤ 2400 Regular time: month 1
.7 B2R + 1 F2R ≤ 2400 Regular time: month 2
.7B1O + 1 F1O ≤ 1000 Overtime: month 1
.7B2O + 1 F2O ≤ 1000 Overtime: month 2
B1R + B1O - IB = 2100 Bookshelf: month 1
IB + B2R + B2O = 1200 Bookshelf: month 2
F1R + F1O - IF = 1500 Floor: month 1
IF + F2R + F2O = 2600 Floor: month 2

OPTIMAL SOLUTION

Objective Function Value = 241130.000

Variable Value Reduced Costs


-------------- --------------- ------------------
B1R 2100.000 0.000
B2R 1200.000 0.000
F1R 930.000 0.000
F2R 1560.000 0.000
B1O 0.000 0.000
B2O 0.000 0.000
F1O 610.000 0.000
F2O 1000.000 0.000
IB 0.000 1.500
IF 40.000 0.000

Constraint Slack/Surplus Dual Prices


-------------- --------------- ------------------
1 0.000 11.000
2 0.000 16.000
3 390.000 0.000
4 0.000 5.000
Chapter 4

5 0.000 -33.100
6 0.000 -36.600
7 0.000 -45.000
8 0.000 -50.000
OBJECTIVE COEFFICIENT RANGES

Variable Lower Limit Current Value Upper Limit


------------ --------------- --------------- ---------------
B1R 23.900 25.400 25.400
B2R No Lower Limit 25.400 25.400
F1R 34.000 34.000 36.143
F2R 34.000 34.000 50.000
B1O 33.100 33.100 No Upper Limit
B2O 33.100 33.100 No Upper Limit
F1O 40.000 45.000 45.000
F2O No Lower Limit 45.000 45.000
IB 3.500 5.000 No Upper Limit
IF 0.000 5.000 7.143

RIGHT HAND SIDE RANGES

Constraint Lower Limit Current Value Upper Limit


------------ --------------- --------------- ---------------
1 2010.000 2400.000 3010.000
2 2010.000 2400.000 2440.000
3 610.000 1000.000 No Upper Limit
4 610.000 1000.000 1040.000
5 1228.571 2100.000 2657.143
6 1142.857 1200.000 1757.143
7 890.000 1500.000 1890.000
8 2560.000 2600.000 2990.000

23. Let F = number of windows manufactured in February


M = number of windows manufactured in March
A = number of windows manufactured in April
Im = increase in production level necessary during month m
Dm = decrease in production level necessary during month m
sm = ending inventory in month m

Min 1I1 + 1I2 + 1I3 + 0.65D1 + 0.65D2 + 0.65D3

s.t.
9000 + F - s1 = 15,000 February Demand
or

(1) F1 - s1 = 6000

(2) s1 + M - s2 = 16,500 March Demand

(3) s2 + A - s3 = 20,000 April Demand


Linear Programming Applications

F - 15,000 = I1 - D1 Change in February Production


or

(4) F - I1 + D1 = 15,000

M - F = I2 - D2 Change in March Production


or

(5) M - F - I2 + D2 = 0

A - M = I3 - D3 Change in April Production


or

(6) A - M - I3 + D3 = 0

(7) F ≤ 14,000 February Production Capacity

(8) M ≤ 14,000 March Production Capacity

(9) A ≤ 18,000 April Production Capacity

(10) s1 ≤ 6,000 February Storage Capacity

(11) s2 ≤ 6,000 March Storage Capacity

(12) s3 ≤ 6,000 April Storage Capacity

Optimal Solution: Cost = $6,450

February March April


Production Level 12,000 14,000 16,500
Increase in Production 0 2,000 2,500
Decrease in Production 3,000 0 0
Ending Inventory 6,000 3,500 0

Case Problem 3: Textile Mill Scheduling

Let X3R = Yards of fabric 3 on regular looms


X4R = Yards of fabric 4 on regular looms
X5R = Yards of fabric 5 on regular looms
X1D = Yards of fabric 1 on dobbie looms
X2D = Yards of fabric 2 on dobbie looms
X3D = Yards of fabric 3 on dobbie looms
X4D = Yards of fabric 4 on dobbie looms
X5D = Yards of fabric 5 on dobbie looms
Y1 = Yards of fabric 1 purchased
Y2 = Yards of fabric 2 purchased
Y3 = Yards of fabric 3 purchased
Y4 = Yards of fabric 4 purchased
Y5 = Yards of fabric 5 purchased
Chapter 4

Profit Contribution per Yard


Manufactured Purchased
1 0.33 0.19
2 0.31 0.16
Fabric 3 0.61 0.50
4 0.73 0.54
5 0.20 0.00

Production Times in Hours per Yard


Regular Dobbie
1 — 0.21598
2 — 0.21598
Fabric 3 0.1912 0.1912
4 0.1912 0.1912
5 0.2398 0.2398

Model may use a Max Profit or Min Cost objective function.

Max 0.61X3R + 0.73X4R + 0.20X5R


+ 0.33X1D + 0.31X2D + 0.61X3D + 0.73X4D + 0.20X5D
+ 0.19Y1 + 0.16Y2 + 0.50Y3 + 0.54Y4
or

Min 0.49X3R + 0.51X4R + 0.50X5R


+ 0.66X1D + 0.55X2D + 0.49X3D + 0.51X4D + 0.50X5D
+ 0.80Y1 + 0.70Y2 + 0.60Y3 + 0.70Y4 + 0.70Y5

Regular Hours Available

30 Looms x 30 days x 24 hours/day = 21600

Dobbie Hours Available

8 Looms x 30 days x 24 hours/day = 5760

Constraints:

Regular Looms:
0.192X3R + 0.1912X4R + 0.2398X5R ≤ 21600

Dobbie Looms:
0.21598X1D + 0.21598X2D + 0.1912X3D + 0.1912X4D + 0.2398X5D ≤ 5760

Demand Constraints

X1D + Y1 = 16500
X2D + Y2 = 22000
X3R + X3D + Y3 = 62000
X4R + X4D + Y4 = 7500
X5R + X5D + Y5 = 62000
Linear Programming Applications

OPTIMAL SOLUTION

Objective Function Value = 62531.91797

Variable Value Reduced Costs


-------------- --------------- ------------------
X3R 27711.29297 0.00000
X4R 7500.00000 0.00000
X5R 62000.00000 0.00000
X1D 4669.13672 0.00000
X2D 22000.00000 0.00000
X3D 0.00000 0.01394
X4D 0.00000 0.01394
X5D 0.00000 0.01748
Y1 11830.86328 0.00000
Y2 0.00000 0.01000
Y3 34288.70703 0.00000
Y4 0.00000 0.08000
Y5 0.00000 0.06204
Constraint Slack/Surplus Dual Prices
-------------- --------------- ------------------
1 0.00000 0.57531
2 0.00000 0.64821
3 0.00000 0.19000
4 0.00000 0.17000
5 0.00000 0.50000
6 0.00000 0.62000
7 0.00000 0.06204

OBJECTIVE COEFFICIENT RANGES

Variable Lower Limit Current Value Upper Limit


------------ --------------- --------------- ---------------
X3R 0.50000 0.61000 0.62394
X4R 0.71606 0.73000 No Upper Limit
X5R 0.18252 0.20000 No Upper Limit
X1D 0.31426 0.33000 0.34000
X2D 0.30000 0.31000 No Upper Limit
X3D No Lower Limit 0.61000 0.62394
X4D No Lower Limit 0.73000 0.74394
X5D No Lower Limit 0.20000 0.21748
Y1 0.18000 0.19000 0.20574
Y2 No Lower Limit 0.16000 0.17000
Y3 0.48606 0.50000 0.61000
Y4 No Lower Limit 0.54000 0.62000
Y5 No Lower Limit 0.00000 0.06204

RIGHT HAND SIDE RANGES

Constraint Lower Limit Current Value Upper Limit


------------ --------------- --------------- ---------------
Chapter 4

1 16301.60059 21600.00000 28156.00000


2 4751.55957 5760.00000 8315.23047
3 4669.13672 16500.00000 No Upper Limit
4 10169.13672 22000.00000 26669.13672
5 27711.29297 62000.00000 No Upper Limit
6 0.00000 7500.00000 35211.29297
7 34660.54688 62000.00000 84095.07813

Production/Purchase Schedule (Yards)

Regular Dobbie
Looms Looms Purchased
1 4669 11831
2 22000
Fabric 3 27711 34289
4 7500
5 62000

Projected Profit: $62,531.92

Value of 9th Dobbie Loom

Dual Price (Constraint 2) = 0.64821 per hour dobbie

Monthly Value of 1 Dobbie Loom

(30 days)(24 hours/day)($0.64821) = $466.71

Note: This change is within the Right-Hand Side Ranges for Constraint 2.

Discussion of Objective Coefficient Ranges

For example, fabric one on the dobbie loom shares ranges of 0.31426 to 0.34 for the profit maximization
model or 0.64426 to 0.67 for the cost minimization model.

Note here that since demand for the fabrics is fixed, both the profit maximization and cost minimization
models will provide the same optimal solution. However, the interpretation of the ranges for the objective
function coefficients differ for the two models. In the profit maximization case, the coefficients are profit
contributions. Thus, the range information indicates how price per unit and cost per unit may vary
simultaneously. That is, as long as the net changes in price per unit and cost per unit keep the profit
contributions within the ranges, the solution will remain optimal. In the cost minimization model, the
coefficients are costs per unit. Thus, the range information indicates that assuming price per unit remains
fixed how much the cost per unit may vary and still maintain the same optimal solution.

Case Problem 4: Workforce Scheduling

1. Let tij = number of temporary employees hired under option i (i = 1, 2, 3) in month j (j = 1 for
January, j = 2 for February and so on)

The following table depicts the decision variables used in this case problem.
Linear Programming Applications

Jan. Feb. Mar. Apr. May June


Option 1 t11 t12 t13 t14 t15 t16
Option 2 t21 t22 t23 t24 t25
Option 3 t31 t32 t33 t34

Costs: Contract cost plus training cost

Option Contract Cost Training Cost Total Cost


1 $2000 $875 $2875
2 $4800 $875 $5675
3 $7500 $875 $8375

Min. 2875(t11 + t12 + t13 + t14 + t15 + t16)


+ 5675(t21 + t22 + t23 + t24 + t25)
+ 8375(t31 + t32 + t33 + t34)

One constraint is required for each of the six months.

Constraint 1: Need 10 additional employees in January

t11 = number of temporary employees hired under Option 1 (one-month contract) in January
t21 = number of temporary employees hired under Option 2 (two-month contract) in January
t31 = number of temporary employees hired under Option 3 (three-month contract) in January

t11 + t21 + t31 = 10

Constraint 2: Need 23 additional employees in February

t12 , t22 and t32 are the number of temporary employees hired under Options 1, 2 and 3 in February.

But, temporary employees hired under Option 2 or Option 3 in January will also be available to satisfy
February needs.

t21 + t31 + t12 + t22 + t32 = 23

Note: The following table shows the decision variables used in this constraint

Jan. Feb. Mar. Apr. May June


Option 1 t12
Option 2 t21 t22
Option 3 t31 t32

Constraint 3: Need 19 additional employees in March

Jan. Feb. Mar. Apr. May June


Option 1 t13
Option 2 t22 t23
Option 3 t31 t32 t33
Chapter 4

t31 + t22 + t32 + t13 + t23 + t33 = 19

Constraint 4: Need 26 additional employees in May

Jan. Feb. Mar. Apr. May June


Option 1 t14
Option 2 t23 t24
Option 3 t32 t33 t34

t32 + t23 + t33 + t14 + t24 + t34 = 26

Constraint 5: Need 20 additional employees in May

Jan. Feb. Mar. Apr. May June


Option 1 t15
Option 2 t24 t25
Option 3 t33 t34

t33 + t24 + t34 + t15 + t25 = 20

Constraint 6: Need 14 additional employees in June

Jan. Feb. Mar. Apr. May June


Option 1 t16
Option 2 t25
Option 3 t34

t34 + t25 + t16 = 14

Optimal Solution: Total Cost = $313,525

Jan. Feb. Mar. Apr. May June


Option 1 0 1 0 0 6 0
Option 2 3 0 0 0 0
Option 3 7 12 0 14

2.
Option Number Hired Contract Cost Training Cost Total Cost
1 7 $14,000 $6,125 $20,125
2 3 $14,400 $2,625 $17,025
3 33 $247,500 $28,875 $276,375
Total: $275,900 $37,625 $313,525

3. Hiring 10 full-time employees at the beginning of January will reduce the number of temporary employees
needed each month by 10. Using the same linear programming model with the right-hand sides of 0, 13, 9,
16, 10 and 4, provides the following schedule for temporary employees:

Jan. Feb. Mar. Apr. May June


Option 1 0 4 0 0 3 0
Option 2 0 0 0 3 0
Linear Programming Applications

Option 3 0 9 0 4

Option Number Hired Contract Cost Training Cost Total Cost


1 7 $14,000 $6,125 $20,125
2 3 $14,400 $2,625 $17,025
3 13 $97,500 $11,375 $108,875
Total: 23 $146,025

Full-time employees cost:

Training cost: 10($875) = $8,750


Salary: 10(6)(168)($16.50) = $166,320
Total Cost = $146,025 + $8750 + $166,320 = $321,095

Hiring 10 full-time employees is $321,095 - $313,525 = $7,570 more expensive than using temporary
employees. Do not hire the 10 full-time employees. Davis should continue to contract with WorkForce to
obtain temporary employees.

4. With the lower training costs, the costs per employee for each option are as follows:

Option Cost Training Cost Total Cost


1 $2000 $700 $2700
2 $4800 $700 $5500
3 $7500 $700 $8200

Resolving the original linear programming model with the above costs indicates that Davis should hire all
temporary employees on a one-month contract specifically to meet each month's employee needs. Thus, the
monthly temporary hire schedule would be as follows: January - 10; February - 23; March - 19; April - 26;
May - 20; and June - 14. The total cost of this strategy is $302,400. Note that if training costs were any
lower, this would still be the optimal hiring strategy for Davis.

Case Problem 5: Cinergy Coal Allocation


A linear programming model can be used to determine how much coal to buy from
each of the mining companies and where to ship it. Let

xij = tons of coal purchased from supplier i and used by generating unit j

The objective function minimizes the total cost to buy and burn coal. The objective
function coefficients, cij , are the cost to buy coal at mine i, ship it to generating unit j,
and burn it at generating unit j. Thus, the objective function is ∑ ∑ cij xij . In computing
the objective function coefficients three inputs must be added: the cost of the coal,
the transportation cost to the generating unit, and the cost of processing the coal at
the generating unit.

There are two types of constraints: supply constraints and demand constraints. The
supply constraints limit the amount of coal that can be bought under the various
Chapter 4

contracts. For the fixed-tonnage contracts, the constraints are equalities. For the
variable-tonnage contracts, any amount of coal up to a specified maximum may be
purchased. Let Li represent the amount that must be purchased under fixed-tonnage
contract i and Si represent the maximum amount that can be purchased under
variable-tonnage contract i. Then the supply constraints can be written as follows:

∑x
j
ij = Li for all fixed-tonnage contracts

∑x
j
ij ≤ Si for all variable-tonnage contracts

The demand constraints specify the number of mWh of electricity that must be
generated by each generating unit. Let aij = mWh hours of electricity generated by a
ton of coal purchased from supplier i and used by generating unit j, and Dj = mWh of
electricity demand at generating unit j. The demand constraints can then be written
as follows:

∑a
i
ij ijx = Dj for all generating units

Note: Because of the large number of calculations that must be made to compute the
objective function and constraint coefficients, we developed an Excel spreadsheet
model for this problem. Copies of the data and model worksheets are included after
the discussion of the solution to parts (a) through (f).

1. The number of tons of coal that should be purchased from each of the mining
companies and where it should be shipped is shown below:

Miami Fort Miami Fort


#5 #7 Beckjord East Bend Zimmer
RAG 0 0 61,538 288,462 0
Peabody 217,105 11,278 71,617 0 0
American 0 0 0 0 275,000
Consol 0 0 33,878 0 166,122
Cyprus 0 0 0 0 0
Addingto
n 0 200,000 0 0 0
Waterloo 0 0 98,673 0 0

The total cost to purchase, deliver, and process the coal is $53,407,243.

2. The cost of the coal in cents per million BTUs for each generating unit is as follows:

Miami Fort Miami Fort Beckjor East Zimme


#5 #7 d Bend r
111.84 136.97 127.24 103.85 114.51

3. The average number of BTUs per pound of coal received at each generating unit is
shown
below:
Linear Programming Applications

Miami Fort Miami Fort Beckjor East Zimme


#5 #7 d Bend r
13,300 12,069 12,354 13,000 12,468

4. The sensitivity report shows that the shadow price per ton of coal purchased from
American Coal Sales is -$13 per ton and the allowable increase is 88,492 tons. This
means that every additional ton of coal that Cinergy can purchase at the current price
of $22 per ton will decrease cost by $13. So even paying $30 per ton, Cinergy will
decrease cost by $5 per ton. Thus, they should buy the additional 80,000 tons; doing
so will save them $5(80,000) = $400,000.

5. If the energy content of the Cyprus coal turns out to be 13,000 BTUs per ton the
procurement plan changes as shown below:

Miami Fort Miami Fort


#5 #7 Beckjord East Bend Zimmer
RAG 0 0 61,538 288,462 0
Peabody 36,654 191,729 71,617 0 0
American 0 0 0 0 275,000
Consol 0 0 33,878 0 166,122
Cyprus 0 0 85,769 0 0
Addington 200,000 0 0 0 0
Waterloo 0 0 0 0 0

6. The shadow prices for the demand constraints are as follows:

Miami Fort Miami Fort Beckjor East Zimme


#5 #7 d Bend r
21 20 20 18 19

The East Bend unit is the least cost producer at the margin ($18 per mWh), and the
allowable increase is 160,000 mWh. Thus, Cinergy should sell the 50,000 mWh over
the grid. The additional electricity should be produced at the East Bend generating
unit. Cinergy’s profit will be $12 per mWh.

The Excel data and model worksheets used to solve the Cinergy coal allocation
problem are as follows:
Chapter 4