Problems for Presentation

Problem 1: The Philbrick Company has two plants on opposite sides of the United States. Each
of these plants produces the same two products and then sells them to wholesalers within its half
of the country. The orders from wholesalers have already been received for the next 2 months
(February and March), where the number of units requested are shown below. (The company is
not obligated to completely fill these orders but will do so if it can without decreasing its profits.)

Each plant has 20 production days available in February and 23 production days available in March
to produce and ship these products. Inventories are depleted at the end of January, but each plant
has enough inventory capacity to hold 1,000 units total of the two products if an excess amount is
produced in February for sale in March. In either plant, the cost of holding inventory in this way
is $3 per unit of product 1 and $4 per unit of product 2. Each plant has the same two production
processes, each of which can be used to produce either of the two products. The production cost
per unit produced of each product is shown below for each process in each plant.

The production rate for each product (number of units produced per day devoted to that product)
also is given for each process in each plant below.

The net sales revenue (selling price minus normal shipping costs) the company receives when a
plant sells the products to its own customers (the wholesalers in its half of the country) is $83 per
unit of product 1 and $112 per unit of product 2. However, it also is possible (and occasionally
desirable) for a plant to make a shipment to the other half of the country to help fill the sales of the
other plant. When this happens, an extra shipping cost of $9 per unit of product 1 and $7 per unit
of product 2 is incurred.
Management now needs to determine how much of each product should be produced by each
production process in each plant during each month, as well as how much each plant should sell
of each product in each month and how much each plant should ship of each product in each month
to the other plants customers. The objective is to determine which feasible plan would maximize
the total profit (total net sales revenue minus the sum of the production costs, inventory costs, and
extra shipping costs). Formulate a complete linear programming model in algebraic form that
shows the individual constraints and decision variables for this problem. Solve the problem using
Excel Solver.
Problem 2: Case 3.3 (Hillier and Lieberman)

Problem 3: Case 3.4 (Hillier and Lieberman)

Problem 4: Case 3.5 (Hillier and Lieberman)

Problem 5: Case 4.2 (Hillier and Lieberman)

Problem 6: The Hi-V Company manufactures and cans three orange extracts: juice concentrate,
regular juice, and jam. The products, which are intended for commercial use, are
manufactured in 5 gallon cans. Jam uses Grade I oranges, and the remaining two products
use Grade II. Table 1 lists the usages of oranges as well as next years demand. A market
survey shows that the demand for regular juice is at least twice as high as that for the
concentrate.

In the past, Hi-V bought Grade I and Grade II oranges separately at the respective prices
of 25 cents and 20 cents per pound. This year, an unexpected frost forced growers to
harvest and sell the crop early without sorting them into Grade I and Grade II. It is
estimated that 30% of the 3,000,000-Ib crop falls into Grade I and only 60% into Grade II.
For this reason, the crop is being offered at the uniform discount price of 19 cents per
pound. Hi-V estimates that it will cost the company about 2.15 cents per pound to sort the

oranges into Grade I and Grade II. The below-standard oranges (10% of the crop) will be
discarded.

For the purpose of cost allocation, the accounting department uses the following
argument to estimate the cost per pound of Grade I and Grade II oranges. Because 10%
of the purchased crop will fall below the Grade II standard, the effective average cost per
(19 2.15)
23.5 cents. Given that the ratio of Grade I to
pound can be computed as
.9
Grade II in the purchased lot is 1 to 2, the corresponding average cost per pound based on
(20 2 25 1)
21.67 cents. Thus the increase in the average price
the old prices is
3
(=23.5 cents 21.67 cents = 1.83 cents) should be reallocated to the two grades by a 1:2
1
ratio, yielding a Grade I cost per pound of 20 +1.83 ( ) =21.22 cents and a Grade II cost
3
2
of 25 + 1.83 ( ) =25.61 cents. Using this information, the accounting department
3
compiles the profitability sheet for the three in Table 2. Establish a production plan for
the Hi-V Company.
Table 1
Product

Orange grade

Jam
Concentrate
Juice

I
II
II

Pounds of oranges
per 5-gal can
5
30
15

Maximum demand
(cans)
10,000
12,000
40,000

Table 2

Sales price
Variable costs
Allocated fixed overhead
Total cost
Net profit

Product (5-gal can)

Jam
Concentrate
$15.50
$30.25
9.85
21.05
1.05
2.15
$10.90
$23.20
4.60
7.05

Juice
$20.75
13.28
1.96
$15.24
5.51

Problem 7: The Elk Hills oil field has a majority ownership (80%) by the U.S. Federal
Government. The Department of Energy (DOE) is authorized by law to sell the
governments share of the oil produced to the highest qualified bidders. At the same time,
the law limits the quantity of oil delivered to any one bidder. The oil field has six delivery
points with different production capacities (bbl/day). The amounts of daily production (in
bbl/day) at each of the delivery points are presented daily as line items, and a bidder may
submit bids on any number of line items. DOE collects the bids and evaluates them,
starting with line item 1 and terminating with line item 6, awarding delivery to the highest
bidder but taking into account the caps set by law on the quantity of oil any one bidder can
receive. To be specific, Table 1 provides a summary of bonus prices bid on a certain day.
A bonus is an increment over the highest price offered for similar grade oil produced in the
delivery point area. No bidder can receive more than 20% of the total daily production of
180,000 bbl from all delivery points.
TABLE 1

Line
item

1
2
3
4
5
6

1.10
1.05
1.00
1.30
1.09
.89

.99
1.02
.95
1.25
1.12
.87

1.20
1.12
.97
1.31
1.15
.90

Bonus in $/bbl bid by bidder

4
5
6
7

1.10
1.08
.94
1.27
1.07
.86

.95
1.09
.93
1.28
1.08
.85

1.00
1.06
1.01
1.26
1.11
.91

1.05
1.11
1.02
1.32
1.05
.88

1.02
1.07
.98
1.32
1.10
.91

Production
(1000
bbl/day)
20
30
25
40
35
30

DOE uses a ranking scheme for awarding the bids. Starting with line item 1, bidder 3 has
the highest bid (bonus = $1.20) and hence is awarded the maximum amount allowed by
both line item 1 production and the 20% limit imposed by law (=.2 x 180,000 = 36,000
bbl). From the data in the table, all line 1 item production (20,000 bbl) is allocated to
bidder 3. Moving to line item 2, bidder 3 again offers the highest bonus but can only be
awarded a maximum of 16,000 bbl because of the 20% limit. The remaining quantity is
assigned to the bidder with the next-best bonus (=$1.11), thus allocating 14,000 bbl
(=30,000-16,000) to bidder 7. The process is repeated until line item 6 is awarded.
Does the proposed scheme guarantee maximum daily revenue for the government? Can
the government do better by changing the 20% limit either up or down?

Problem 8: ABC Cola operates a plant in the northern section of the island nation of Tawanda.
The plant produces soft drinks in three types of packages that include returnable glass
bottles, aluminum cans, and nonreturnable plastic bottles. Returnable (empty) bottles are
shipped to the distribution warehouses for reuse in the plant.
Because of the continued growth in demand, ABC wants to build another plant. The
demand for the soft drinks (expressed in cases) over the next 5 years is given in Table 1.
The planned production capacities for the existing plant extrapolated over the same 5-year
horizon are given in Table 2. The company owns six distribution warehouses: N1 and N2
are located in the north, C1 and C2 in the central section, and S1 and S2 in the south. The
share of sales by each warehouse within its zone is given in Table 3. Approximately 60%
of the sales occur in the north, 15% in the central section, and 25% in the south.

The company wants to construct the new plant either in the central section or in the south.
The transportation cost per case of returnable bottles is given in Table 4. It is estimated
that the transportation costs per case of cans and per case of non-returnables are,
respectively, 60% and 70% of that of the returnable bottles.
Should the new plant be located in the central or the southern section of the country?

Table 1
Year
Package
1
Returnables
2400
Cans
1750
Nonreturnables 490

2450
2000
550

2600
2300
600

4
2800
2650
650

5
3100
3050
720

Table 2
Year
Package
1
Returnables
1800
Cans
1250
Nonreturnables 350

2
1400
1350
380

3
1900
1400
400

4
2050
1500
400

5
2150
1800
450

Table 3
Warehouse
N1
N2
C1
C2
S1
S2

Share percentage
85
15
60
40
80
20

Table 4

Warehouse
N1
N2
C1
C2
S1
S2

Transportation cost per case ($)

Existing plant
Central plant
0.80
1.30
1.20
1.90
1.50
1.05
1.60
0.80
1.90
1.50
2.10
1.70

South plant
1.90
2.90
1.20
1.60
0.90
0.80

Problem 9:
A steel company operates a foundry and two mills. The foundry casts three types of steel rolls that
are machined in its machine stop before being shipped to the mills. Machined rolls are used by the
mills to manufacture various products.
At the beginning of each quarter, the mills prepare their monthly needs of rolls and submit
them to the foundry. The foundry manager then draws a production plan that is essentially
constrained by the machining capacity of the shop. Shortages are covered by direct purchase at a
premium price from outside sources. A comparison between the cost per roll when acquired from
the foundry and its outside purchase price is given in Table1. However, management points out
that such shortage is not frequent and can be estimated to occur about 5% of the time.
The processing times on the four different machines in the machine shop are given in Table 2. The
demand for rolls by the two mills over the next 3 months is given in Table 3.
Devise a production schedule for the machine shop

TABLE 1
Roll type
price

Weight(lb)

1
2
3

800
1200
1650

Internal cost

External purchase

($ per roll)

($ per roll)

90
130
180

108
145
194

TABLE 2
Processing time per roll
Roll 1 Roll 2
Roll 3

Number of machines

Available

hour
per machine
per
month
Machine type
1
2
3
4

1
0
6
3

5
4
3
6

7
6
0
9

10
8
9
5

320
310
300
310

TABLE 3
Demand in rolls
Mill 1

Mill 2

Month
Roll 1
1
2
3

500
0
100

Roll 2 Roll 3

Roll 1

200
300
0

200
300
0

400
500
300

Roll 2

Roll 3

100
200
400

0
200
200

Problem 10:
The Construction of Brisbane International Airport requires the pipeline movement of about
1,355,000 m of sand dredged from five clusters at a nearby bay to nine sites at the airport location.
The sand is used to help stabilize the swampy grounds at the proposed construction area. Some of
the sites to which the sand is moved are dedicated to building roads both within and on the
perimeter of the airport. Excess sand from a site will be moved by trucks to other outlying areas
around the airport, where a perimeter road will be built. The distances (in 100 m) between the
source clusters and the sites are summarized in Table 1. The table also shows the supply and
demand quantities in 100 m at the different locations.
(a) The project management has estimated a [volume (m) distance (100 m)] sand movement
of 2,495,000 units at the cost of $ 0.65 per unit. Is the estimate given by the project
management for sand movement on target?

TABLE 1
1

1
2
3
4
5

22
20
16
20
22

26
28
20
22
26

12
14
26
26
10

10
12
20
22
4

18
20
1.5
6
16

18
20
28

11
13
6
2
24

8.5
10
22
21
14

20
22
18
18
21

Demand

62

217

444

315

50

20

90

150

Supply
960
201
71
24
99

(b) The project management has realized that sand movement to certain sites cannot be carried
out until some of the roads are built. In particular, the perimeter road (destination 9) must
be built before movement to certain sites can be done. In Table 2, the blocked routes that
require the completion of the perimeter road are marked with x. In view of these
restrictions, how should the sand movement be made?

TABLE 2
1
2
3
4
5

1
x
x

2
x
x

5
x
x

x
x
x

x
x
x

Problem 11:
Ten years ago, a wholesale dealer started a business distributing pharmaceuticals from a central
warehouse (CW). Orders were delivered to customers by vans. The warehouse has since been
expanded in response to growing demand. Additionally, two new warehouses (W1 and W2) have
been constructed. The central warehouse, traditionally well stocked, occasionally supplies the new
warehouses with short items. The occasional supply of short items has grown into a large scale
operation in which the two new warehouses receive for redistribution about one-third of their stock
directly from the central warehouse. Table 1 gives the number of orders shipped out by each of the
three warehouses to customer locations C1 to C6. A customer location is a town with several
pharmacies.
The dealers delivery schedule has evolved over the years to its present status. In essence, the
schedule was devised in a rather decentralized fashion, with each warehouse determining its
delivery zone based on self-fulfilling criteria. Indeed, in some instances, warehouses managers
competed for new customers mainly to increase their sphere of influence. For instance, the
manager of the central warehouse boast that their delivery zone includes not only regular customers
but the other two warehouses as well. It is not unusual, then, that several warehouses deliver
supplies to different pharmacies within the same town (customer location). The distances in miles
traveled by vans between locations are given in Table 2. A vanload usually hauls 100 orders.
Evaluate the present distribution policy of the dealer.

TABLE 1
Route
From

To

CW
CW
CW
CW
CW
W1
W1
W1
W1
W2
W2
W2

W1
W2
C1
C2
C3
C1
C3
C4
C5
C2
C5
C6

Number of orders
2000
1500
4800
3000
1200
1000
1100
1500
1800
1900
600
2200

TABLE 2
CW
W1
W2
C1
C2
C3
C4
C5
C6

CW
0
5
45
50
30
30
60
75
80

W1
5
0
80
38
70
30
8
10
60

W2
45
80
0
85
35
60
55
7
90

C1
50
38
85
0
20
40
25
30
70

C2
30
70
35
20
0
40
90
15
10

C3
30
30
60
40
40
0
10
6
90

C4
60
8
55
25
90
10
0
80
40

C5
75
10
7
30
15
6
80
0
15

C6
80
60
90
70
10
90
40
15
0

Problem 12:
Walshs Juice Company produces three products from unprocessed grape
juice bottled
juice, frozen juice concentrate, and jelly. It purchases grape juice from three vineyards near Great
Lakes. The grapes are harvested at the vineyards and immediately converted in to a juice at plants
at the vineyards and immediately converted into juice at plants at the plants in Virginia, Michigan,
Tennessee, and Indiana, where it is processed into bottled grape juice, frozen juice concentrate,
and jelly. Vineyard output typically differs each month in the harvesting season, and the plants
have different processing capacities.
In a particular month the vineyard in New York has 1,400 tons of unprocessed grape juice
available, whereas the vineyard into Ohio has 1,700 tons and the vineyard in Pennsylvania has
1,100 tons. The processing capacity per month is 1,200 tons of unprocessed juice at the plant in
Virginia, 1,100 tons of juice at the plant in Indiana. The cost per ton of transporting unprocessed
juice from the vineyards to the plant is as follows:

Plant
Vineyard

Virginia

Michigan

Tennessee

New York
Pennsylvania
Ohio

$850
970
900

$720
790
830

$910
1,050
780

Indiana
$750
880
820

The plants are different ages, have different equipment, and have different wage rates; thus, the
cost of processing each product each product at each plant ($/ton) differs, as follows:

Plant
Product
Juice
Concentrate
Jelly

Virginia
$2,100
4,100
2,600

Michigan
$2,350
4,300
2,300

Tennessee
$2,200
3,950
2,500

Indiana
$1,900
3,900
2,800

This month the company needs to process a total of 1,200 tons of bottled juice, 900 tons of frozen
concentrate, and 700 tons of jelly at the four plants combined. However, the production process
for frozen concentrate results in some juice dehydration, and the process for jelly includes a
cooking stage that evaporates water content. To process 1 ton of frozen concentrate requires 2
tons of unprocessed juice; 1 ton of jelly requires 1.5 tons of unprocessed juice; and 1 ton of bottled
juice requires 1 ton of unprocessed juice.
Walshs management wants to determine how many tons of grape juice to ship from each of the
vineyards to each of the plants and the number of tons of each product to process at each plant.
Thus, management needs a model that includes both the logistical aspects of this problem and the
production processing aspects. It wants a solution that will minimize total costs, including the cost
of transporting grape juice from the vineyards to plants and the product processing costs. Help
Walsh Solve this problem by formulating a linear programming model and solve it by using the
computer.

Problem 13:
The Spring family has owned and operated a garden tool and implements manufacturing company
since 1952. The company sells garden tools to distributors and also directly to hardware stores and
home improvement discount chains. The Spring Companys four most popular small garden tools
are a trowel, a hoe, a rake, and a shovel. Each of these tools is made from durable steel and has a
wooden handle. The Spring family prides itself on its high-quality tools
The manufacturing process encompasses two stages. The first stage includes two
operationsstamping out the metal tool heads and drilling screw holes in them. The completed
tool heads then flow to the second stage, which includes an assembly operation where the handles

are attached to the tool heads, a finishing step, and packaging. The processing times per tool for
each operation are provided in the following table:

Tool(hr./unit)
Operation
Stamping
Drilling
Assembly
Finishing
Packaging

Trowel
0.04
0.05
0.06
0.05
0.03

Hoe
0.17
0.14
0.13
0.21
0.15

Rake
0.06

0.05
0.02
0.04

Shovel
0.12
0.14
0.10
0.10
0.15

Total Hours
Available per Month
500
400
600
550
500

The Steel the company uses is ordered from an iron and steel works in Japan. The company has
10,000 square feet of sheet steel available each month. The metal required for tool and the monthly
contracted production volume per tool are provided in the following table:

Trowel
Hoe
Rake
Shovel

Sheet Metal (ft.)

1.2
1.6
2.1
2.4

Monthly Contracted Sales

1,800
1,400
1,600
1,800

The primary reasons the company has survived and prospered are its ability to meet customer
demand on time and its high quality. As a result, the Spring Company will produce on an overtime basis in order to meet its sales requirements, and it also has a long-standing arrangement with
a local tool and die company to manufacture its tool heads. The Spring Company feels comfortable
subcontracting the first-stage operations because it is easier to detect defects prior to assembly and
finishing. For the same reason, the company will not subcontract for the entire tool because defects
would be particularly hard to detect after the tool because defects would be particularly hard to
detect after the tool is finished and packaged. However, the company does have 100 hours of
overtime available each month for each operation in both stages. The regular production and
overtime costs per tool for both stages are provided in the following table:

Stage 1

Trowel
Hoe
Rake
Shovel

Regular
Cost
$6.20
10.00
8.00
10.00

Stage 2
Overtime
Cost
$6.20
10.70
8.50
10.70

Regular
Cost
$3.00
5.00
4.00
5.00

Overtime
Cost
$3.10
5.40
4.30
5.40

The cost of subcontracting in stage 1 adds 20% to the regular production cost. The Spring
Company wants to establish a production schedule for regular and overtime production in each
stage and for the number of tool heads subcontracted, at the minimum cost. Formulate a linear
programming model for this problem and solve the model using the computer. Which resources
appear to be most critical in the production process?

Problem 14:
International textile Company, Ltd., is a Hong Kong- based firm that distributes textiles worldwide. The company is owned by the Lao family. Should the Peoples Republic of China continue
its economic renaissance, the company hopes to use its current base to expand operations to the
mainland. International Textile has mills in the Bahamas, Hong Kong, Korea, Nigeria, and
Venezuela, each weaving fabrics out of two or more raw fibers: cotton, polyester, and/or silk. The
mills service eight company distribution centers located near the customers geographical centers
of activity.
Because transportation costs historically have been less than 10% of total expenses,
management has paid little attention to extracting savings through judicious routing of shipments.
Ching Lao is returning from the United States, where he has just completed his bachelors degree
in marketing. He believes that each year he can save International Textile hundreds of thousands
of dollarsperhaps millionsjust by better routing of fabrics from mills to distribution centers.
One glaring example of poor routing is the current assignment of fabric output to the Mexico City
distribution center from Nigeria instead of from Venezuela, less than a third the distance. Similarly,
the Manila center now gets most of its textiles from Nigeria and Venezuela, although the mills in
Hong Kong itself are much closer.
Of course, the cost of shipping a bolt of cloth does not depend on distance alone. Table 1 provides
the actual costs supplied to Lao from company headquarters. Distribution center demands are
seasonal, so a new shipment plan must be made each month. Table 2 provides the fabric

requirements for the month of March. International Textiles mills have varying capacities for
producing the various types of cloth. Table 3 provides the quantities that apply during March.
Lao wants to schedule production and shipments in such a way that the most costly customers are
shorted when there is insufficient capacity, and the least efficient plants operate at less than full
capacity when demand falls below maximum production capacity.

Table 1

Shipping cost Data(Dollars per Bolt)

Distribution Center

Mill
Los Angles Chicago
Bahamas
2
2
Hong Kong
6
7
Korea
5
6
Nigeria
14
12
Venezuela
4
3

London
3
8
8
6
5

Mexico City Manila

3
7
10
2
11
4
9
11
1
9

Rome
4
9
9
7
6

Tokyo
7
4
1
5
11

New York
1
8
7
10
4

Rome
100
700
200

Tokyo
200
900
700

New York
700
2,500
200

Table 2 Fabric Demands for March (Bolts)

Distribution Center
Fabric
Los Angles Chicago
Cotton
500
800
Polyester 1,000
2,000
Silk
100
100

Table 3

London
900
3,000
200

Mexico City Manila

900
800
1,500
400
50
400

March Production Capacities

(Bolts)
Production Capacity

Mill
Bahamas
Hong Kong
Korea
Nigeria
Venezuela

Cotton
1,000
2,000
1,000
2,000
1,000

Polyester
3,000
2,500
3,500
0
2,000

Silk
0
1,000
500
0
0

1) Find the optional March shipment schedule and its total transportation cost for each of the
following:
a. Cotton
b. Polyester
c. silk
2) The company will be opening a silk-making department in the Nigeria mill. Although it
will not be completed for several months, a current capacity of 1,000 bolts for that fabric
might be used during March for an added one- time cost of $2,000. Find the new optional
shipment and the total cost for that fabric. Should the Nigeria mill process silk in March?