Sensitivity Analyses

1. A small firm makes three similar products, which all follow the same three-step process, consisting of
milling, inspection, and drilling. Product A requires 12 minutes of milling, 5 minutes for inspection, and 10
minutes of drilling per unit; product B requires 10 minutes of milling, 4 minutes for inspection, and 8
minutes of drilling per unit; and product C requires 8 minutes of milling, 4 minutes for inspection, and 16
minutes of drilling. The department has 20 hours available during the next period for milling, 15 hours for
inspection, and 24 hours for drilling. Product A contributes $2.40 per unit to profit, B contributes $2.50 per
unit, and C contributes $2.5 per unit. The aim is to maximize profit. The computer solution of the problem is
provided below.

Variable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
-
$C$2 X1 0 0.620833333 2.4 0.620833333 1E+30
$D$2 X2 80 0 2.5 0.625 0.5321428
$E$2 X3 50 0 2.5 2.5 0.5
Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$B$6 Milling LHS 1200 0.208333333 1200 600 480
Inspection
$B$7 LHS 520 0 900 1E+30 380
$B$8 Drilling LHS 1440 0.052083333 1440 960 480

a. Formulate the LP model?

X1= numbers of product A produced

X2= numbers of product B produced
X3= numbers of product C produced

Max 2.4 X1+ 2.5 X2 + 2.5 X3

s.t.
12 X1+ 10 X2 + 8 X3 ≤ 1200 "Milling"
5 X1+ 4 X2 + 4 X3 ≤ 900 "Inspection"
10 X1+ 8 X2 + 16 X3 ≤ 1440 "Drilling"
X1, X2, X3>= 0

b. What is the product mix? What are the basic and non-basic variables?

X1 = 0, non-basic, because it equals to zero

X2 = 80, X3 = 50, basic variable because it is greater than zero

c. What is the maximum profit?

 Max 2.4 X1+ 2.5 X2 + 2.5 X3
2.4 (0) + 2.5(80) + 2.5 (50) = 325

d. A new competitor entered the market providing product B with a competitive price, the manager
decided to decrease the profit contribution of product B by $0.4. What is the effect of the manager
decision?

Optimality range of x2:

Lower Limit ≤ c2 ≤ Upper Limit

Objective Coefficient – Allowable decrease ≤ c2 ≤ Objective Coefficient + Allowable increase
2.5 – 0.53 ≤ c2 ≤ 2.5+ 0.625
1.97 ≤ c2 ≤ 3.125

Increase in profit for x2 by 0.4  2.5 - 0.4 = 2.1  within the optimality range so it is accepted.
New objective function is Max 2.4 X1+ 2.1 X2 + 2.5 X3  Max 2.4 (0) + 2.1 (80) + 2.5 (50) = 293

If the change is out of the optimality range then it is rejected and a new solution has to be found.

Important note: that you HAVE to check you optimality range before answering the question.

e. If the manager wants to produce product A, what change should be made to the objective function?

The cost of X1 should be reduced by the value of the reduced cost which equals to (0.62)

f. Calculate the range of optimality of product C and interpret the result.

Optimality range of x3:

Lower Limit ≤ c3 ≤ Upper Limit

Objective Coefficient – Allowable decrease ≤ c3 ≤ Objective Coefficient + Allowable increase
2.5 – 0.5 ≤ c3 ≤ 2.5+2.5
2 ≤ c3 ≤ 5

Any changes in the coefficient of X3 should be within the optimality range. If the change is within
the range it is accepted and the new objective is found. If the change is not within the range, the it is
rejected and a new solution has to be found.

g. If the cost of product B increased by 0.25 and cost of product C decreased by 0.20? What is the
effect on the optimal solution?

When we have more than one change at the same time,  use the 100% rule.

𝐶ℎ𝑎𝑛𝑔𝑒
𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 = ∗ 100
𝐴𝑙𝑙𝑜𝑤𝑎𝑏𝑙𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 (𝑖𝑛𝑐𝑟𝑒𝑎𝑠𝑒 𝑜𝑟 𝑑𝑒𝑐𝑟𝑒𝑎𝑠𝑒)
 For X2: the cost increased by 0.25  profit decreased by 0.25

0.25
𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 = ∗ 100 = 47.1
0.53

For X3: the cost decreased by 0.20  profit increased by 0.20

0.20
𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 = ∗ 100 = 8
2.5

Total percentage change = 47.1 + 8 = 55.1  Since it is less than 100, the change is accepted and the
new profit is Max 2.4 X1+ 2.25 X2 + 2.7 X3 = 2.4 (0)+ 2.25 (80) + 2.7 (50) = 315

If the total percentage is more than 100, the changes are rejected and a new solutions should be
found.

h. Are there any non-binding constraints? Does it have a slack or surplus? Explain?

Binding constraints: LHS = RHS  milling and drilling are binding with no slack or surplus.
Non-binding constraints: LHS > RHS  surplus
Non-binding constraints: LHS < RHS  inspection  slack = the difference between LHS & RHS
= 380

i. The manager would like to make sure that the number of Product B produced not exceed 80% of the
total units produced?

X2 ≤ 80% (X1 + X2+ X3)

X2 ≤ 0.8X1 + 0.8X2 + 0.8X3
X2 - 0.8X1 - 0.8X2 - 0.8X3 ≤ 0
0.8X1 + 0.2 X2 - 0.8X3 ≤ 0
Computer Output for Question 15

Variable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$B$3 D.V results X1 0 -10.2 12 10.2 1E+30
$C$3 D.V results X2 4 0 18 2 7.285714286
$D$3 D.V results X3 48 0 15 21 1.5

Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$D$8 LHS 160 4.2 160 17.5 10
$D$9 LHS 232 0 288 1E+30 56
$D$10 LHS 200 0.6 200 13.33333333 40
$D$11 LHS 4 0 16 1E+30 12

Computer Output for Question 16

Variable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$B$3 D.V results X1 75 0 9 1 1
$C$3 D.V results X2 0 -1.5 9 1.5 1E+30
$D$3 D.V results X3 75 0 6 3 0.6

Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$D$8 LHS 600 1.5 600 150 50
$D$9 LHS 525 0 600 1E+30 75
$D$10 LHS 375 0 480 1E+30 105
$D$11 LHS 150 1.5 150 7.894736842 30