Premier University: Department of Business Administration

Premier University
Department of Business Administration

Batch 44, section [E]
Topic: Post Optimility Analysis
Course Title: Operational Research
Submitted to:
Shafaitun Nahar
Premier University, Chattogram
ID NAME
0222210004081206 Sadia Sanim
Question 1 [ I ]
Sensitivity analysis is a process that helps determine how independent

variables affect dependent variables.
Question 1 [ ii ]
Sensitivity analysis is a powerful tool for decision-makers because it helps

them understand how changes in key variables affect outcomes, allowing for
better-informed decisions. Here are several reasons why sensitivity analysis
is useful:
1. Identifying Critical Variables: Sensitivity analysis shows which

factors have the most significant impact on the decision. Decision-
makers can focus their attention on managing these critical factors.
2. Managing Risk and Uncertainty: By testing different scenarios (e.g.,
best-case, worst-case, and most likely outcomes), sensitivity analysis
helps decision-makers anticipate risks and prepare strategies to
mitigate them.
3. Improving Decision Confidence: It helps build confidence in
decisions by highlighting how robust or vulnerable a plan is to changes
in assumptions or inputs, leading to more resilient strategies.
4. Resource Allocation: Sensitivity analysis can guide how resources
should be allocated by revealing which areas or variables need more
attention or investment.
Sensitivity analysis in business decision-making is assessing the financial

viability of a new project or investment. Suppose a company is
considering launching a new product line, and they need to determine
whether the project is worth the investment.
The business might estimate key variables like production costs, sales
volume, and market demand to calculate projected profits. However, these
variables are uncertain, so sensitivity analysis can be used to test how
changes in them affect profitability.
For instance, they can analyze how profits will change if:
 Production costs increase by 10% due to rising material prices.

 Sales volume is 20% lower than expected because of lower demand.
 Selling prices need to be reduced to stay competitive.
The sensitivity analysis might show that the project is still profitable even if
production costs rise slightly but becomes unprofitable if sales volumes drop
significantly. This insight helps the company decide whether to proceed with
the project, delay it, or revise their strategy by addressing key risk factors,
such as controlling costs or focusing on marketing to boost demand.
Question 2 [b] c2
BASIS CJ X1 X2 S1 S2 S3 BI
50 C2 0 0 0
X2 C2 0 1 8/25 0 -3/25 20
S2 0 0 0 -8/25 1 3/25 0
X1 50 1 0 -5/25 0 5/25 25
MAXZ=
ZJ 50 C2 8C2- 0 - 20C2+12
250 3C2+2 50
25 50
25
CJ-ZJ 0 0 - 0 3C2-
8C2+2 250
50 25
25
The range of optimality for an objective function coefficient is determined by

those coefficient values that maintain Cj-ZJ ≤ 0 , Hence the coloumn for S1
and S3.
S1
-8C2+250 ≤ 0
25
8C2-250 ≥ 0
8C2 ≥250
C2 ≥ 250/8 = 25
S3
3C2-250 ≤ 0
25
3C2-250 ≤ 0
3C2 ≤ 250
C2 ≤ 250/3 = 83
Range of Optimlity 25 ≤ C2 ≤ 83
Range of feasibility [ B2]
New solution = [ old solution] + change in b2 [s2 column]
X2 20 0
S2 = 0 + ∆ B2 1
X1 25 0
20 + ∆ B 2 0≥ 0 EQ1
0+ ∆ B 2 1≥ 0 EQ2
25 + ∆ B 2 0≥ 0 EQ3
From eq1
20 + ∆ b 20 ≥ 0
∆ b 2≥−20
From eq2
0+∆ b 21 ≥ 0
∆ b 2≥ 0
From eq3
25+∆ b 20 ≥ 0
∆ b 2≥−25
Range of feasibility -20 ≤ b2 ≤ 0
Intial amount = 20
b 2=20+∆ b 2
20−20 ≤20+ ∆ b 2 ≤0+ 20
0 ≤ ∆ b 2 ≤ 20
CS2
BASIS CJ X1 X2 S1 S2 S3 BI
50 40 0 CS2 0
X2 40 0 1 8/25 0 -3/25 20
S2 CS2 0 0 -8/25 1 3/25 0
X1 50 1 0 -5/25 0 5/25 25
MAXZ=
ZJ 50 40 70- CS2 130 - 2050
8CS2 3CS2
25 25
CJ-ZJ 0 0 -70 + 0 -
8CS2 130+3C
25 S2
25
CS2≤ 8.75
Question 2 [ b]
For product x1: coefficient is 50
For product x2: coefficient is 40
If the profit per unit for x1 and x2 increases or decreases by 20, the new
coefficients will be:
Increased by 20:
o New profit for x1 = 50+20=70

o New profit for x2= 40+20=60
Decreased by 20:
o New profit for x1 = 50−20=30

o New profit for x2 = 40−20=20
The optimality condition requires that all reduced costs (cj−zj ) in the last
row of the tableau be non-positive for a maximization problem.
If the profit coefficients change, you’ll substitute the new values into the
equation cj−zj to see if any of the reduced costs become positive.
If x1 and x2 increase by 20:

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Premier University

Department of Business Administration

Sensitivity analysis is a process that helps determine how independent

Sensitivity analysis is a powerful tool for decision-makers because it helps

1. Identifying Critical Variables: Sensitivity analysis shows which

Sensitivity analysis in business decision-making is assessing the financial

 Production costs increase by 10% due to rising material prices.

The range of optimality for an objective function coefficient is determined by

Range of feasibility [ B2]

New solution = [ old solution] + change in b2 [s2 column]

S2 CS2 0 0 -8/25 1 3/25 0

o New profit for x1 = 50+20=70

o New profit for x1 = 50−20=30

If x1 and x2 increase by 20:

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