Quantitative Analysis lecture 2 Date: 17/1/2017

What are the main steps of Quantitative Analysis?

1. Problem Definition: Define the problem (which is given to you in

a specific area)
2. Model Development: Build a model
3. Data Preparation: Put data in this model (profit = revenue
cost), and that model is mathematical model.
4. Model Solution: Solve this model
5. Report Generation: Report to GM to make a decision in the
problem solving.

This will end up with what we call Quantitative Analysis.

- Every week we will have a mathematical model, which has the

following:
left hand side
Right hand side: Something I do not know and will investigate
in order to improve the left hand side.

Linear Programming

Linear Programming is a quantitative problem

solving approach that has been developed to help
managers make rational managerial decision.

- It is one of the important models that are used in the world; it

is used in any type of solving methodology especially in
operations and production.
- We do not need to change the data of the unit to another unit
or to change the data into a certain value. But it has some
characteristics; it has to be linear which means we have no
square, no curves in the problem.
- In this lecture, linear programming will be the graphical
presentation because it is only 2 products in the company.

Prof. Maged Morcos

Quantitative Analysis lecture 2 Date: 17/1/2017

- Ex: if a manager wants to get the best blend between two

products in his company, what is the best blend that he can
have in order to get the maximum profit or to minimize the
total cost? These are the two directions of the objective
function.

Objecti
ve
Increase a certain
Reduce certain value
value

Maximize Reduce
Minimize
Maximize Return Advertising cost on
Cost
Campaign inventory

- All these type of things can be a model; we put it on the left

hand side, then put the parameter on the right hand side and
try to investigate into the right hand side what is the best
combination of this right hand side in order to get the best
profit out of it or the cost.
- Linear programming is a chosen course of action for making
rational decision.
- Linear programming has some characteristic that I want to
reach a certain objective, but this objective has to be done
within constraints, which should be linear.
- Linear objective function that is to be maximized or
minimized, a set of linear constraints and another third one
which is very important, it is called variable that is all
restricted to non negative value, the product can be 0 units,
but it cannot be negative, it has to be in the positive section.
product 0

Prof. Maged Morcos

Quantitative Analysis lecture 2 Date: 17/1/2017

- In linear programming, we do not need to force the problem

into hours or units or dollars, we can take from each
department its own measurement.

1) Maximization Problem

Problem identification:
- A toy company produces two types of toy models (model 1)
and (model 2). The company has 900 hours of production time
available in its producing department, 300 hours in its
finishing department and 100 hours in its packing and
shipping department.
- The production time of model 1 is 1 hour while that for model
2 is 3/2 hours.
- The finishing time required for model 1 is 1/2 hours and for
model 2 is 1/3 hours.
- Finally, the packing and shipping department requires 1/8
hours for model 1 and 1/4 hours for model 2.
- The company estimated the profit of contribution of models 1
and 2 to be $5 and $8 per toy respectively.
- Formulate problem as linear program and solve it for an
optimal solution.

What is the objective function of this problem?

- Maximize the profit.
- Objective Function: Max P=5 x+8 y

What type of programs is this problem?

- It is linear programming maximization.

1) Table Format
Productio Finishing Packing Profit
n
Prof. Maged Morcos
Quantitative Analysis lecture 2 Date: 17/1/2017

Model 1 (X) 1 1/8 5

Model 2 (Y) 3/2 1/3 8
Capacity 900 hrs 300 hrs 100 hrs
- We do not need to force the units into hours; we will leave it
as it is because they are after X and Y, and they are all linear
which means we can put them in a certain diagram.
- From this diagram, we can get the best X and Y, which can
satisfy all three constraints (Production, Finishing and
Packing).
- This is the idea of the linear programming which is to satisfy
the constraints and at the same time get the best
rational/optimal X and Y.

2) Free Format
Max P=5 x+8 y
-
- Subject to the following constraints:
C 1 : X +3 2 Y 900hrs

If X = 0, 0+(3/2Y) = 900, Y = 900*2/3 = 600

If Y = 0, 1X + 0 = 900, X = 900

C 2 :1 2 X +1 8 Y 300 hrs

If X = 0, 0+(1/8Y) = 300, Y = 300*3/1 = 900

If Y=0, (1/2X) + 0 = 300, X= 300*2/1 = 600

1 1
C 3 : X + Y 100hrs
8 4

If X = 0, 0+(1/4Y) = 100, Y = 100*4/1 = 400

If Y=0, (1/8X) + 0 = 100, X= 100*8/1 = 800

C4 :X ,Y 0

Notes:

Prof. Maged Morcos

Quantitative Analysis lecture 2 Date: 17/1/2017

- We use the sign , because in the problem he mentioned

the word available.
- If the word was at least or minimum, we will use the sign
.

Then draw the lines as per determined for each constrain.

3) Standard Format
- Max P = 5X + 8Y + 0 S1 + 0 S2 + 0 S3

Prof. Maged Morcos

Quantitative Analysis lecture 2 Date: 17/1/2017

S = Slack, we have to imagine that there will be a slack and

we reflect that into the constraint, but at the same time the
slack does not affect the objective function. Because the
constraints are either amount or hours or units, which means
it does not have any implication on X and Y.
- Subject to the following constraints: (use the extreme
point values x and y)

C1: X + 3/2Y + S1 = 900 hrs

500 + 3/2(150) + S1 = 900 then S1 = 175 hrs
C2: 1/2X + 1/3Y + S2 = 300 hrs
(500) + 1/3(150) + S2 = 300 then S2 = 0
C3: 1/8X + 1/4Y + S3 = 100 hrs
1/8(500) + 1/4(150) + S2 = 100 then S3 = 0
C4: X , Y, S1, S2, S3, 0

Prof. Maged Morcos

Quantitative Analysis lecture 2 Date: 17/1/2017

Optimal Solution:
- 5(500) + 8(150) = 3700$
- Will every point give me the 3700?
It depends on the slope of the objective function, which is the
relation between the X and Y contribution.

Homework:
1) P = 15X + 8Y
2) P = 5X + 18Y

Prof. Maged Morcos

Quantitative Analysis lecture 2 Date: 17/1/2017

2) Minimization Problem

Problem identification:
- A company produces two types of products (product 1) and
(product 2). The company management estimated that
combined production of both products must total to at least 4
units per hour.
- They also estimated that the processing units of product 1
take about 1 hour while that of product 2 takes about 3 hours.
- The minimum number of hours to be worked in a shift is 6
hours.
- The company estimated the cost of production of both
products to be $3 and $4 per unit respectively.
- Formulate problem as linear program and solve it for an
optimal solution.

Note: the word combined is the trick which means

that x and y are equal in their chances to have a
value in the equation so, x and y = 1 in the
Production constrain (process)

What is the objective function of this problem?

- The problem is minimizing cost
- Objective Function: MinC=3 x +4 y

What type of programs is this problem?

- It is linear programming minimization.

1) Table Format
Producti Processin Cost
on g
X 1 1 3
Y 1 3 4
Capacity 4 units 6 Hrs

2) Free Format
MinC=3 x +4 y
-
- Subject to the following constraints:
Prof. Maged Morcos
Quantitative Analysis lecture 2 Date: 17/1/2017

C 1 : X +Y 4

If X = 0, 0+Y = 4, Y = 4
If Y = 0, X + 0 = 4, X=4

C 2 : X +3 Y 6

If X = 0, 0+ (3Y) = 6, Y = 6*1/3 = 2
If Y=0, X + 0 = 6, X= 6

C3: X ,Y 0

3) Standard Format
- Min C = 3X + 4Y + 0 S1 + 0 S2
- Subject to the following constraints:
(You consider x=0 and use the y in free format to get the S or
consider y=0 and use x in free format to get the S)
C1: X+ Y - S1 = 4
then S1 = 0
C2: X + 3Y - S2 = 6
then S2 = 0
C3: X , Y, 0

Prof. Maged Morcos

Quantitative Analysis lecture 2 Date: 17/1/2017

Optimal Solution:
- 3(3) + 4(1) = 13$

Homework:
3) P = 15X + 8Y
4) P = 5X + 18Y

Prof. Maged Morcos