Sensitivity Problems - Exercise

Prof Harish Rao

 Problem 1
 Snacks 'R Us is deciding what to produce in the upcoming month. Due to past purchases, they have 500 kg
of walnuts, 1000 kg of peanuts, and 500 kg of chocolate. They currently sell three mixes:
 Trail Mix - 1 unit of which consists of 1 kg of each material;
 Nutty Crunch - 1 unit of which has 2 kgs of peanuts and 1 kg of walnut; and
 Choc-o-plenty – 1 unit of which has 2 kgs of chocolate and 1 kg of peanuts.
 They can sell an unlimited amount of these mixes, except they can sell no more than 100 units of Choc-o-
plenty. The income on the three mixes is $2, $3, and $4, respectively.
 The linear programming formulation for maximizing total income subject to these constraints is developed
with the following decision variables
𝑥1- Units of Trail Mix to be produced
𝑥2 - Units of Nutty Crunch to be produced
𝑥3- Units of Choc-o-plenty to be produced
Problem 1 - Formulation
 
Maximize z = 2𝑥1 + 3𝑥2 + 4𝑥3
Subject to
𝑥1 + 𝑥2 <= 500
𝑥1 + 2𝑥2 + 𝑥3 <= 1000
𝑥1 + 2𝑥3 <= 500
𝑥3 <= 100
𝑥1, 𝑥2, 𝑥3 >=0
 

This formulation was run in Microsoft Excel Solver to obtain the sensitivity analysis report
Problem 1 – Sensitivity Analysis
Variable Cells
    Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$B$2 Trail Mix 100 0 2 1 0.5
$B$3 Nutty Crunch 400 0 3 1 1
$B$4 Choc-o-plenty 100 0 4 1E+30 3

Constraints
    Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$D$5 Walnuts 500 1 500 100 50
$E$5 Peanuts 1000 1 1000 100 200
$F$5 Chocolates 300 0 500 1E+30 200
$G$5 Choc-o-plenty demand 100 3 100 66.667 100
Problem 1 - Questions:
From the sensitivity table, answer the following questions
 What is the total income from the optimal production mix?
 Suppose the income for Trail Mix is only an estimate. For what range of values would the basis given by the
above table still be optimal? What would be the solution (both production quantities and total income), if the
income from Trail Mix was only $2.75?
 How much should Snacks 'R Us willing to spend to procure an extra kg of peanuts? How about a kg of walnuts?
How about an extra kg of chocolate?
 What if the availability of walnuts reduces by 10%? Would this effect the income of the firm? If yes, by how
much and why? If no, then why not?
 If the firm could sell more Choc-o-plenty’s, would it be beneficial? If yes, how much would the firm gain for
every additional unit of Choc-o-plenty sold?
 A new product, Extra-Walnutty Trail Booster, consists of 1 kg of each of peanuts and chocolate, and 2 kgs of
walnuts. What income do we need to make on this product in order to consider producing it? And explain why?
 What if the availability of peanuts reduces to 900 kgs? Would this affect the income of the firm? If yes, by how
much and why? If no, then why not? The firm has committed 320 units of Nutty Crunch to a long term client.
Will they be able to meet the commitment? If not, how many units are they falling short? How many kgs of
peanuts need to be urgently sourced to honor the commitment? Any additional resource MUST be used optimally.
 Problem 2
 A furniture company assembles four kinds of tables (A, B, C, D) from procured components. The profit per unit for each
table (A, B, C, D) is Rs. 330, Rs. 460, Rs. 570 and Rs. 730 respectively. The maximum demand in the next week for each
table (A, B, C, D) is expected to be 50, 60, 85 and 70 units respectively. The assembly takes place in three stages, Stages 1,
2 and 3. The man hours needed for each table type at each stage as well as total time available at each stage is given below

Stage 1 Stage 2 Stage 3

Table A 1 1 2
Table B 2 3 2
Table C 4 1 3
Table D 2 2 7
Total time available 60 120 150

 The firm wants to find a daily product mix that would maximize its contribution and also examine which stages of
production need capacity expansion.
 A linear programming formulation to help in this decision making process is developed
Problem 2 - Formulation
 Variables:
Max z = 330a + 460b + 570c + 730d
a: number of A tables to assemble
Subject to    
b: number of B tables to assemble
c: number of C tables to assemble a + 2b + 4c + 2d ≤ 60 Stage 1 Capacity
d: number of D tables to assemble
a + 3b + c + 2d ≤ 120 Stage 2 Capacity

2a + 2b + 3c + 7d ≤ 150 Stage 3 Capacity

a <= 50, b <= 60, Maximum Demand

c <= 85, d<=70 Constraints

a, b, c, d >= 0 (Non-negativity)

This formulation was run in Microsoft Excel Solver to obtain the sensitivity analysis report
Problem 2 – Sensitivity Analysis
Variable Cells
    Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$B$2 Table A 40 0 330 35 46
$B$3 Table B 0 -153.33 460 153.33 1E+30
$B$4 Table C 0 -633.33 570 633.33 1E+30
$B$5 Table D 10 0 730 230 70

Constraints
    Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$D$6 Stage 1 60 283.33 60 4.285 17.142
$E$6 Stage 2 60 0 120 1E+30 60
$F$6 Stage 3 150 23.33 150 60 15
$G$6  a 40 0 50 1E+30 10
$H$6  b 0 0 60 1E+30 60
$I$6  c 0 0 85 1E+30 85
$J$6  d 10 0 70 1E+30 60
Problem 2 - Questions:
From the sensitivity table, answer the following questions
 What is the maximum daily contribution that the firm can achieve?
 From the table, which product seems to be the most underpriced? By how much is it underpriced?
 Firm’s floor manager says that capacity expansion must be done on the basis of current capacity of the
three stages, i.e., stage 1 first and so on. Is this argument correct? Capacity of which stage must be
augmented immediately? Why?
 A neighboring assembler is willing to lend 30 hours of Stage 3 capacity, at Rs. 10/hour. Should the firm
take this offer up? How much would the firm gain with this offer? What would be the new production
numbers with those 30 extra hours?
 Another assembler is willing to lease 50 hours of Stage 2 capacity, at just Rs. 5/hour. Should the firm take
this offer up?
 The firm thinks that an additional finishing stage could help them increase their prices. Table A, B, C and D
would take 1, 1, 2 and 3 hours respectively at this stage. Total capacity expected to be added in this stage
would be 60 hours. Would the current optimal solution work even in this situation?
 A long term client has requested for 3 units of Table B. The firm doesn’t want to say no to the long term
client. What is the hit that the firm would take due to this? What would be the new production numbers?
 Problem 3
 A commercial printing firm is trying to determine the best mix of printing jobs it should seek, given its current capacity
constraints in its four capital-intensive departments: typesetting, camera, pressroom, and bindery. It has classified its
commercial work into three classes: A, B, and C, each requiring different amounts of time in the four major departments.
The production requirements in hours, capacity availability in hours and contribution per unit of product are given as
follows:
Department Class of work Capacit
A B C y
availabl
e

Typesetting 0 2 3 40
Camera 3 1 3 60
Pressroom 3 6 2 200
Bindery 5 4 0 160
Contribution $200 $300 $100
 Since the firm wants to find the optimal job mix for its equipment, management assumes it can sell all it produces.
 Formulate a linear programming problem that can help the firm in its decision making process.
Problem 3 - Formulation
 Variables:
A – Units of Class A work undertaken
B – Units of Class B work undertaken
C – Units of Class C work undertaken
 
Maximize z = 200A + 300B + 100C
Subject to
2B + 3C <= 40
3A + B + 3C <= 60
3A + 6B + 2C <= 200
5A + 4B <= 160
A,B,C >=0
 

This formulation was run in Microsoft Excel Solver to obtain the sensitivity analysis report
Problem 3 – Sensitivity Analysis
Variable Cells
    Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$B$2 A 13.333 0 200 700 200
$B$3 B 20 0 300 1E+30 233.333
$B$4 C 0 -450 100 450 1E+30

Constraints
    Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$D$5 Typesetting 40 116.667 40 11.429 40
$E$5 Camera 60 66.667 60 8 40
$F$5 Pressroom 160 0 200 1E+30 40
$G$5 Bindery 146.667 0 160 1E+30 13.333
Problem 3 - Questions:
From the sensitivity table, answer the following questions
 What is the optimal mix of work undertaken? What is the expected contribution to the firm from this mix?
 What is the value of one additional hour in Typesetting? Based on this, how much should the firm be
willing to pay for 10 more hours in typesetting?
 An outsourcing company offers 50 hours of Bindery at $15 per hour. Should the firm take up this offer?
Why or why not?
 Class C work is not included in the optimal mix. Based on the resource utilization pattern, how undervalued
is the Class C work? In other words, what should be the contribution from the Class C work for it to justify
the resource usage and thus, be included in the optimal mix?
 In the coming time period, the firm expects a shortfall of 10 hours in the Camera department. What would
be the expected loss in contribution to the firm from this shortage?
 The firm also expects a shortfall of 20 hours in the Pressroom. What would be the expected loss in
contribution to the firm from this shortage?
Problem 4
 A firm produces three fruit mixes, Mix 1, Mix 2, and Mix 3. The composition of the mixes (per kg), their
contributions (per kg) and the availability of the raw materials is given in the table below
Oranges Bananas Pineapples Contribution/kg

Mix 1 0.6 0.3 0.1 4

Mix 2 0.3 0.5 0.2 3
Mix 3 0.4 0.2 0.4 6
Availability (kg) 920 900 800
Peeling time (min/kg) 2 1 3

 Firm can devote a maximum of 4800 man minutes to cutting and peeling each day.
 The firm wants to find a daily product mix that would maximize its contribution.
 A linear programming formulation to help in this decision making process needs to be developed
Problem 4 - Formulation
 Variables:
𝑋1: Kilos of Mix 1 to produce each day
𝑋2: Kilos of Mix 2 to produce each day
𝑋3: Kilos of Mix 3 to produce each day
Max z = 4 𝑋1 + 3 𝑋2 + 6 𝑋3
Subject to    
0.6 𝑋1 + 0.3 𝑋2 + 0.4 𝑋3 ≤ 920 (Orange Availability)
0.3 𝑋1 + 0.5 𝑋2 + 0.2 𝑋3 ≤ 900 (Banana Availability)

0.1 𝑋1 + 0.2 𝑋2 + 0.4 𝑋3 ≤ 800 (Pineapple Availability)

2(0.6 𝑋1 + 0.3 𝑋2 + 0.4 𝑋3) +

1(0.3 𝑋1 + 0.5 𝑋2 + 0.2 𝑋3) +

3(0.1 𝑋1 + 0.2 𝑋2 + 0.4 𝑋3) ≤ 4800 (Peeling and cutting time)

𝑋1, 𝑋2, 𝑋3 ≥0 (Non-negativity)

This formulation was run in Microsoft Excel Solver to obtain the sensitivity analysis report
Problem 4 – Sensitivity Analysis
Variable Cells
    Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$B$2 X1 240 0 4 5 2.5
$B$3 X2 0 -0.5 3 0.5 1E+30
$B$4 X3 1940 0 6 10 1.111

Constraints
    Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$D$5 Orange availability 920 5 920 40 120
$E$5 Banana Availability 460 0 900 1E+30 440
$F$5 Pineapple Availability 800 10 800 33.333 646.667
$G$5 Peeling time 4700 0 4800 1E+30 100
Problem 4 - Questions:
From the sensitivity table, answer the following questions
 What is the maximum daily contribution that the firm can achieve?
 Due to adverse market conditions, only 850 kilos of oranges are available to the firm each day. Would the
overall contribution change? If yes, by how much? If no, why not?
 A truckload (100 kg) of bananas are available at a throwaway price of just Rs.50. Should the firm invest in this?
If yes, what would be the impact on the contribution? If no, why not?
 If the availability of oranges reduces to 780 kilos, can you compute the impact on the firm’s overall
contribution? If yes, how much would the impact be? If no, why not?
 At what minimum contribution from each kilo of Mix 2 would the firm find it profitable to produce Mix 2?
 A group of unemployed people (5 people) come knocking on the firm’s doors. They offer to work for the firm
for 4 hours every day for Rs. 50 per day. Should the firm consider the offer? If yes, how much would the firm
gain? If no, why not?
 The firm anticipates loss of supply for pineapples for tomorrow. They expect to have a supply of only 500 kgs of
pineapples. They have committed 1100 kgs of Mix 3 to their largest client. If they optimally utilize all the
resources, will they be able to serve the client tomorrow? How much Mix 1 are they falling short of? How many
kgs of pineapples they need to procure additionally so that they can satisfy the client? Every kg of pineapple is
used optimally.