IE 426N: Operations Research 2

LINGO Exercise No. 1

For each problem, show the (a) syntax, (b) solver status, and (c) solution report. Use short bond paper,
stapled. Submit in class. Due on Saturday 13th January.

1. Ronald Thump is interested in expanding his firm. After careful consideration, he has
determined three areas in which he might invest additional funds: (1) product research and
development, (2) manufacturing operations improvements, and (3) advertising and sales
promotion. He has $500,000 available for investment in the firm. He can invest in its advertising
and sales promotion program every year, and each dollar invested in this manner is expected to
yield a return of the amount invested plus 20% yearly. He can invest in manufacturing
operations improvements every 2 years, with an expected return of the investment plus 30% (at
the end of each 2-year period). An investment in product research and development would be
for a 3-year period, with an expected return of the investment plus 50% (at the end of the 3-
year period). To diversify the total initial investment, he wishes to include the requirement that
at least $30,000 must be invested in the advertising and sales promotion program, at least
$40,000 in manufacturing operations improvements, and at least $50,000 in product research
and development initially (at the beginning of the first year). Ronald wants to know how much
should be invested in each of the three alternatives, during each year of a 4-year period, to
maximize the total ending cash value of the initial $500,000 investment.

2. A severe winter ice storm has swept across North Carolina and Virginia, followed by over a foot
of snow and frigid, single-digit temperatures. These weather conditions have resulted in
numerous downed power lines and power outages, causing dangerous conditions for much of the
population. Local utility companies have been overwhelmed and have requested assistance from
unaffected utility companies across the Southeast. The following table shows the number of utility
trucks with crews available from five different companies in Georgia, South Carolina, and Florida;
the demand for crews in seven different areas that local companies cannot get to; and the weekly
cost (in thousands of dollars) of a crew going to a specific area (based on the visiting company’s
normal charges, the distance the crew has to come, and living expenses in an area):

Determine the number of crews that should be sent from each utility to each affected area to
minimize total costs.
Partial answers:
1. Let: xij = dollar amount invested in alternative i in year j, where i = p (product research and
development), m (manufacturing operations improvements), a (advertising and sales
promotion) and j = 1,2,3,4 (denoting year)
Partial constraints: xm1 ≥ 40,000; xa1 + xm1 + xp1 + s1 = 500,000; xa4 + xs4 = s3 + 1.2xa3 +
1.3xm2 + 1.5xp1
Partial answers: xa1 = 410,000; xp1 = 50,000; Z = $1,015,056

2.
GA - 1 to NC - W = 2
GA - 1 to VA - SW = 10
GA - 2 to NC - SW = 6
GA - 2 to VA - C = 4
SC - 1 to NC - SW = 1
SC - 1 to NC - P = 6
SC - 1 to VA - T = 7
FL - 1 to NC - E = 9
FL - 1 to NC - W = 6
FL - 2 to VA - C = 5
Z = $841,000