Assignment 1. Linear Programming Case Study
It will be a problem with at least three (3) constraints and at least two (2) decision variables. The problem will be bounded and feasible. It will also have a single optimum solution (in other words, it won't have alternate optimal solutions). The problem will also include a component that involves sensitivity analysis and the use of the shadow price. You will be turning in two (2) deliverables, a short write-up of the project and the spreadsheet showing your work.
Writeup.
Your writeup should introduce your solution to the project by describing the problem. Correctly identify what type of problem this is. For example, you should note if the problem is a maximization or minimization problem, as well as identify the resources that constrain the solution. Identify each variable and explain the criteria involved in setting up the model. This should be encapsulated in one (1) or two (2) succinct paragraphs.
After the introductory paragraph, write out the L.P. model for the problem. Include the objective function and all constraints, including any non-negativity constraints. Then, you should present the optimal solution, based on your work in Excel. Explain what the results mean.
Finally, write a paragraph addressing the part of the problem pertaining to sensitivity analysis and shadow price.Excel. As previously noted, please set up your problem in Excel and find the solution using Solver. Clearly label the cells in your spreadsheet. You will turn in the entire spreadsheet, showing the setup of the model, and the results.
CASE STUDY
Julia Robertson is a senior at Tech, and she's investigating differ- ent ways to finance her final year at school. She is considering leasing a food booth outside the Tech stadium at home football games. Tech sells out every home game, and Julia knows, from attending the games herself, that everyone eats a lot of food. She has to pay $1,000 per game for a booth, and the booths are not very large. Vendors can sell either food or drinks on Tech proper- ty, but not both. Only the Tech athletic department concession stands can sell both inside the stadium. She thinks slices of cheese pizza, hot dogs, and barbecue sandwiches are the most popular food items among fans and so these are the items she would sell.
Most food items are sold during the hour before the game starts and during half time; thus it will not be possible for Julia to prepare the food while she is selling it. She must prepare the food ahead of time and then store it in a warming oven. For $600 she can lease a warming oven for the six-game home season. The oven has 16 shelves, and each shelf is 3 feet by 4 feet. She plans to fill the oven with the three food items before the game and then again before half time.
Julia has negotiated with a local pizza delivery company to deliver 14-inch cheese pizzas twice each game-2 hours before the game and right after the opening kickoff. Each pizza will cost her $6 and will include 8 slices. She estimates it will cost her $0.45 for each hot dog and $0.90 for each barbecue sandwich if she makes the barbecue herself the night before. She measured a hot dog and found it takes up about 16 square inches of space, whereas a bar- becue sandwich takes up about 25 square inches. She plans to sell a slice of pizza and a hot dog for $1.50 apiece and a barbecue sandwich for $2.25. She has $1,500 in cash available to purchase and prepare the food items for the first home game; for the
However, Zooey has noted that Pierre has already made plans based on the number of dinners recommended by the linear programming solution. Angela has suggested a price increase that will increase profit for the fish dinner to $14. Would this be acceptable to Pierre, and how much additional profit would be realized?
remaining five games she will purchase her ingredients with money she has made from the previous game.
Julia has talked to some students and vendors who have sold food at previous football games at Tech as well as at other univer- sities. From this she has discovered that she can expect to sell at least as many slices of pizza as hot dogs and barbecue sandwiches combined. She also anticipates that she will probably sell at least twice as many hot dogs as barbecue sandwiches. She believes that she will sell everything she can stock and develop a customer base for the season if she follows these general guidelines for demand.
If Julia clears at least $1,000 in profit for each game after pay- ing all her expenses, she believes it will be worth leasing the booth. A. Formulate and solve a linear programming model for Julia
that will help you advise her if she should lease the booth. B. If Julia were to borrow some more money from a friend before the first game to purchase more ingredients, could she increase her profit? If so, how much should she borrow and how much additional profit would she make? What factor constrains her from borrowing even more money than this amount (indicated in your answer to the previous
question)? C. When Julia looked at the solution in (A), she realized that it
would be physically difficult for her to prepare all the hot dogs and barbecue sandwiches indicated in this solution. She believes she can hire a friend of hers to help her for $100 per game. Based on the results in (A) and (B), is this some- thing you think she could reasonably do and should do?
D. Julia seems to be basing her analysis on the assumption that everything will go as she plans. What are some of the uncertain factors in the model that could go wrong and adversely affect Julia's analysis? Given these uncertainties and the results in (A), (B), and (C), what do you recom- mend that Julia do?