Business M athematics Department of Accounting and Finance

Chapter- 3
Introduction to Linear Programming
Linear Programming (LP):- is a problem solving method that has been developed to help anyone
make decision. It is a mathematical optimization technique which shows how to allocate scarce
resources (financial, human and material resources).
Linear programming- is an optimization method which shows how to allocate scarce resources in
the best possible way subject to more than one limiting condition expressed in the form of
inequalities and /or equations.
It enables users to find optional solution to certain problems in which the solution must satisfy a
given set of requirements or constraints. Involves linearly related multi-variety functions i.e.
functions with more than one independent variables.The goal in linear programming is to find the
best solution given the constraints imposed by the problem, hence the term constrained optimization.
Optimization in linear programming implies maximization (max) Profit, revenue, sales, market share
or minimization (min) Cost, time, distance, or a certain objective function.
Linear programming is characterized by an objective function to be optimized which is subject to
constraints such as the availability of resources and other limitations which used in determining
feasible solution region. Finally the objective function will be used to select the best solution.
Characteristics of Linear Programming Model (LPM)
LPM is mathematical representation of Linear programming problems. The characteristics of the
model can be grouped into two categories: Components and assumptions. The components relate to
the structure of a model, where as the assumptions describe the conditions under which the model is
valid.
Components of LPM
a) Objective function
b) Decision variables Model
c) Constraints Structure
d) Parameters and Right.
Hand Side Values
e) Non-negativity
a) Objective Function: it is the mathematical/ quantitative expression of the objective of the
company/ model.
F It is used in examining all possible courses of actions that will maximize (revenue or profit)
and minimize (costs) of the objective function. In other words, it is a mathematical
expression that describes the problems objective.
F Moreover, because we are dealing with optimization, the objective will be either
maximization or minimization, but not both at a time.
b) Decision Variable: in any linear programming certain decisions need to be made. This decision
represented by decision variables (Xi)is used in the formula of linear programming model.
N.B.Decision variables always defines unknown of a problem which are suppose to be solved. These
decision variables may represent:
- The number of units of different products to be sold.

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- The amounts of dollars to invest in various projects.

- The number of advertising to place with different media.
c) Constraints (Restrictions):are restrictions which define or limit the attainability (achievability)
feasibility of a proposed course of action. They limit the degree to which the objective can be
pursued. A typical restriction embodies scarce resources (such as labor supply, raw materials,
production capacity, machine time, storage space), legal or contractual requirements (Product
standards, work standards).
Constraints have three elements: Example: 3x1 + 2x2 + 7x3≤ 250.
1. A right hand side (RHS) quantity that specifies the limit for the constraints (RHS = 250)
2. An algebraic sign that indicate whether the limit is upper limit bound “≤”, lower limit bound
“≥” or equal “ = ”
3. The decision variables to which the constraint applies.(x1, x2& x3 are decision variables)
d) Parameter:are fixed values that specify the impact that one unit of each decision variable will
have on the objective function and on any constraint it pertains. (3,2 and 7 are parameters)
Assumptions of Linear Programming Model (LPM)
1) Linearity: itis a requirement that each decision variableshavea linear impact on objective
function and on each constraint in which it appears.
2) Certainty: it refers to parameters that should be remaining constant at any level and
identified constraints should be as they are at any point.
3) Divisibility: this requirement pertains to the potential values of the decision variables.
4) Non- Negativity: negative values of variables are unrealistic and therefore will not be
considered as a potential solution.

Example Max (Profit) = 150x1 + 300x2 Objective function x1 = Quantity of production 1

Subject to: x2 = Quantity of production 2
2x1 + 3x2≤ 150 x1, x2 are decision Variables
3x1 + 9x2≤ 60 Constraints
4x1 + 8x2≤ 110
x1, x2≥ 0 Non-Negative

Formulation of Linear Programming Models

Once a problem has been defined, the attention of the analyst shifts to formulating a model. Just as it
is important to carefully formulate the model that will be used to solve the problem. If the LP model
is ill formulated, ill-structured, it can easily lead to poor decisions.
Steps in formulating Linear Programming Model (LPM)
1) Define the problem/ problems definition: to determine the no. of type 1 and type 2 products
to be produced per month so as to maximize the monetary profit given the restriction.
2) Identity the decision variables or represent unknown quantities.
* Let X1 and X2 be the monthly quantities of type 1 and type 2 products.

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3) Determine the objective function: Either Maximization or Minimization Once the variables have
been identified, the objective function can be specified. It is necessary to decide whether the problem
is maximization or a minimization problem.
4).Identify the constraints
- system constraints- more than one variable
- individual constraints- one variable
- non-negativity constraints
5) Summarize the model.

Formulating the Maximization Problem

E.g.3.1 (Product Mix Problem)
Assume that Philips Company produces two types of TV set called Model A and Model B. The
Company is make money; its objective is to maximize profit. The profit realized from set A&B are
Br. 300 per unit and Br. 250 per unit respectively. The Company wants to produce and sell thousands
of sets weekly but this is not possible due to some limitations. These limitations are;
1. There are only 40 hours of labor available in the production department each week.
2. There are only 45 hours of machine time each week.
3. No more than 12 sets of model A can be sold each week.
F It is known that each set of model “A” being in higher quality requires 2 hours of
labor hour and each set of model “B” only require one hour of labor to be produced.
F Machine processing time for one unit of model “A” & “B” is one hour and 3 hours
respectively.
Required:
a) Describe the problem situation with a linear programming model (LPM)
b) How many set of model A & B should be produced each week using graphic method?
E.g.3.2 (Blending/Combination Problem)
Ready Company owns a small paint factory that produces both exterior and interior house paint for
whole distribution. Two basic raw materials namely raw material A and B are used to manufacture
the paints. The maximum availability of raw material A is 6 tons a week and that of raw material B is
8 tons a week. The weekly requirements of raw materials per ton of exterior and interior paints are
summarized below.
Ton(s) of raw material per ton of paint
Exterior Interior Maximum available of raw material
Raw material A 1 2 6
Raw material B 2 1 8
A market survey has established that the weekly demand interior paint cannot exceed exterior paint
by more than 1 ton. The survey also shows that the maximum demand for interior paint is limited to
two tons a week. The whole sale price per ton is 3,000 birr for exterior and birr 2,000 for interior.
Required:
1) Formulate the linear programming model
2) How much exterior and interior paint should produce to maximize the gross income
(revenue) using graphic method?
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Formulating the Minimization Problem

E.g.3.3 (A Diet Mix Problem)
Mr. X has learned from nutrition book that is family need at least 330 grams of protein and 45
milligrams of iron per day for sound diet. These nutrients can be obtained from meat and vegetable
products. Each pound of meat costs an average of birr 1.6 and contains an average of 150gm of
protein and 15mg of iron. While each pound of vegetable costs birr 0.5 has 10gm of protein and 5mg
of iron. X wants to determine the quantities of food that meet the nutritional requirements of his
family at least cost.
Required:
a) Formulate the linear programming model
b) Determine the quantities of food that meet its family need at least cost using graphic method
E.g.3.4 (A Diet Mix Problem)
A dietitian explains the menu for the evening meal at University hall two main items will be served
each having different nutritional content. The dietician is interested in provide at least the minimum
daily requirements of each of the three vitamins in the meal. The table below summarizes the vitamin
content per ounce of each food. The cost per ounce of the meal and minimum daily levels for the
three vitamins.
Vitamins
Food Item Vitamin Vitamin Vitamin Cost/Ounce
Food 1 50mg 20mg 10mg 0.1 birr
Food 2 30mg 10mg 50mg 0.5 birr
Minimum daily vitamin requirement 290mg 200mg 210mg
Determine the number of ounces of each food to be induced in the meal that minimize the cost and at
the same time that can satisfy the minimum daily levels of the three vitamins.

Solution Approaches to Linear Programming Problem

There are two approach of solving linear programming models. These are
 Graphic Approach
 Algebraic (Simplex) Approach
 Graphic Approach
It’s a relatively straight forward method for determining the optional solution to certain linear
programming problems. It gives us a clear picture. This method can be used only to solve problems
that involve two decision variables. However, most linear programming applications involve
situations that have more than two decision variables, so the graphic approach is not used to solve
these. Steps in graphic solution.
Step1: Formulate Linear Programming Model.
Step2: Draw the graph and identify corners.
Step3: Identify the feasible solution space/region. It is the shaded region that simultaneously satisfy
all the constraints.
Step4: Identify the feasible region points that satisfy the constraints simultaneously in LPM.
Step5: Evaluate the objective function against the feasible solutions.
Step6: Find the optimum solution

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 The maximum value in the case of maximization

 The minimum value in the case of minimization.
Graphic solution for Maximization LPM E.g. 3.1 and E.g.3.2 above
Graphic solution for Minimization LPM E.g. 3.3 above.

 Algebraic (Simplex) Approach

Simplex Method: is an iteration (step by step) ways of getting an optimum solution to linear
programming problem it starts to the smallest corner that is in the solution space then moves to
another corner that improves the objective function.
Basic Solutions
 Solution which represent interaction of constraints which can be basic feasible solution and
basic infeasible solution. Basic feasible solutions are solutions which satisfies all constraints
including non negativity.
 A simplex procedure or a maximization problem with all less than or equals to constraints
consists of the following steps.
Step1: Write the linear programming model in standard form
 When all constraints are written as equalities, the linear programming model is said to be in
standard form.
 For maximization problems a given LPM is changed in to in standard form by applying slack
variables (variables representing unused scarce resources) S i which carries the subscript which
applies to denotes (S1, S2, S3, …,Sn). the coefficient of slack variables is zero in the objective
function and one in the constraints.
Step2: Developinitial tableau
 The initial tableau always represents the “do nothing strategy” so, that the decision variables
are initially non basic.
 Basic Variables are variables which have in solution (slack basic variables for initial
tableau)
 Non basic variables: are variables which are not in the solution (decision variables are non
basic variables at initial tableau)
a) List the variables across the top of the table and write the objective function coefficient of
each variable below it.
b) There should be one row in the body of the table for each constraint. List the slack variables
in the basic column.
c) Compute values for Zjrow. The row Zj values are determined by column by column and it
obtained by multiplying the coefficient of basis by respective column numbers.
d) Compute values for row Cj-Zj. These values can be determined by subtracting Zj from Cj
rows.
Note: Decision variables that are in solution zero appear in the bottom of the tableau.
 The values in the bottom row (Cj-Zj) indicate any potential improvement.
General Rule: a Simplex solution in maximization problem is optimal if Cj –Zj row consists
initially zero and negative numbers (if there are no positive numbers in the bottom row.
Step3:- Develop the subsequent tableau
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 Develop the second tableau

a) Identify the entering variable:- it is a variable that has the largest positive value in the Cj-Zj
row.
b) Identify the leaving variable:- it is the one which has the smallest non-negative ratio of
Right Hand Said (RHS) value divided by the substitution rate in the entering variable column.
 The top row of the objective function is unchanged but to develop the next tableau, we must
compute three sets of values.
1. Revised constraint coefficient
2. Revised for Zj row
3. Revised for Cj-Zj row.
c) Find unit vector for the new basic variables using row operations. Then change pivot element
in to one and using this number change the other pivot column in to zeros. Repeat the above
steps until you reach the optimal point.
E.g.3.5max = 60x1 + 50x2
Subject to (St):
4x1 + 10x2≤ 100
2x1 + x2≤ 22
3x1 + 3x2≤ 39
x1, x2≥ 0
E.g.3.6 A farmer own a 100 acre farm and plus two plant at most three croups. The seed for croup a,
b and c costs Br. 40, Br. 20 andBr. 30 per acre respectively. A maximum of Br. 3,200 can spent on
seed croups a, b & c required 1, 2, & 1 work days per acre respectively and there are a maximum of
160 work days available. If the farmer can make a profit of Br. 100, Br. 300 and Br. 200 per acre of
croup a, b & c respectively. How many acres of each croup should be planted to maximize profit.

Minimization by Maximization the Dual

In this section we shall learn how to change a minimization problem with ≥ constraints into a
maximization problem with ≤constraint; so, that the solution method already developed can be
applied to either type of problem. Thus, we shall solve a “less than or equal to max or min by the
methods already shown, but change a greater than or equal to min” to a “less than or equal to max”
and then solve by the method already shown.

The original “greater than or equal to min” will be called the primal problem. The less than or equal
to max to which we change will be called the dual problem.
The following steps are important to change the Primal to Dual
Step1: Rewritethe primal for ease of manipulation with the non negativity constraints first and the
objective function last.
Step2: Attaching the column of x1 coefficient to p1, p2; the same to attaching the column of x2
coefficient to p1, p2 and using min coefficient in the x1 column as the constraint for the first equation,
the same to in the x2 column as min coefficient taken as the constraint for the second equation.

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 Finally the new objective function is formed in a similar manner from the right hand column of
constraints
E.g.3.7 How change the Primal to Dual
min = 2x1 + 3x2
Subject to (St):
3x1 + 2x2≥12
7x1 + 2x2≥ 20
x1, x2≥ 0
E.g.3.8 A diet is to contain at least 10 Ounce of nutrients of nutrient R, 12 ounce of nutrient S and 20
ounces of nutrient T. These nutrients are to be obtained by some combination of food A, B & C. Each
pound of A costs 4 cents and has 4 ounce of R, 3 ounce of S and no ounce of T. Each pound of B
costs 7 cents and has 1 ounce of R, 2 ounce of S and 4 ounce of T. Each pound of C costs 5 cents and
has no ounce of R, 2 ounce of S and 5 ounce of T. how many pounds of A, B & C should be
combined to provide the required amount of nutrient at minimum cost?

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