331-05 - Chapter 3 Linear Programming Modeling Applications...

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Chapter 3: Linear Programming Modeling Applications with Computer Analysis in Excel

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LP Applications for Managerial Decisions Manufacturing Marketing Finance Employee staffing Logistics Operations Multiperiod planning
Modeling and Solving with LPs Define the decision variables Formulate the LP model using the decision variables Write the objective function Write each of the constraint equations/inequalities Implement the model in Excel Solve using Excel Solver

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Manufacturing Application: Product Mix Problem Produce 4 types of men's ties Use 3 materials (limited resources) Decisions: How many of each type of tie to make per month? Objective: Maximize profit Fifth Avenue_Industries
Material Cost per yard Yards available per month Silk \$20 1,000 Polyester \$6 2,000 Cotton \$9 1,250 Resource Data Resource Data Labor cost is \$0.75 per tie (of any type)

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Product Data Type of Tie Silk Polyester Blend 1* Blend 2* Selling Price (per tie) \$6.70 \$3.55 \$4.31 \$4.81 Monthly Minimum 6,000 10,000 13,000 6,000 Monthly Maximum 7,000 14,000 16,000 8,500 * Blends 1 and 2 are different mixtures of  polyester and cotton.
Material Requirements (yards per tie) Material Type of Tie Silk Polyester Blend 1 Blend 2 Silk 0.125 0 0 0 Polyester 0 0.08 0.05 0.03 Cotton 0 0 0.05 0.07

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Decision Variables S = number of silk ties to make per month P = number of polyester ties to make per month B 1 = number of poly-cotton blend 1 ties to make per month B 2 = number of poly-cotton blend 2 ties to make per month
Profit Per Tie Calculation (REVISED) Profit per tie = (selling price) – (material cost) –(labor cost) Silk Tie Profit = \$6.70 – (0.125 yds)(\$20/yd) - \$0.75 = \$3.45 per tie Polyester Tie Profit = \$3.55 – (0.08 yds)(\$6/yd) - \$0.75 = \$2.32 per tie

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This note was uploaded on 08/29/2011 for the course ACCT 331 taught by Professor A during the Spring '11 term at Ohio State.

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331-05 - Chapter 3 Linear Programming Modeling Applications...

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