Deck 4: Linear Programming Applications in Marketing, finance, and OM

Question 1

The primary limitation of linear programming's applicability is the requirement that all decision variables be nonnegative.

Answer 1

False

Question 2

A decision maker would be wise to not deviate from the optimal solution found by an LP model because it is the best solution.

Answer 2

False

Question 3

Portfolio selection problems should acknowledge both risk and return.

Answer 3

True

Question 4

To properly interpret dual prices,one must know how costs were allocated in the objective function.

Question 5

Using minutes as the unit of measurement on the left-hand side of a constraint and using hours on the right-hand side is acceptable since both are a measure of time.

Question 6

It is improper to combine manufacturing costs and overtime costs in the same objective function.

Question 7

A company makes two products,A and B.A sells for $100 and B sells for $90.The variable production costs are $30 per unit for A and $25 for B.The company's objective could be written as: Max 190x₁ − 55x₂.

Question 8

Media selection problems can maximize exposure quality and use number of customers reached as a constraint,or maximize the number of customers reached and use exposure quality as a constraint.

Question 9

An important part of the LP process is to take the time to ensure the linear programming model accurately reflects the real problem.

Question 10

It can take longer to collect the data for a large-scale linear programming model than it does for either the formulation of the model or the development of the computer solution.

Question 11

A marketing research firm must determine how many daytime interviews (D)and evening interviews (E)to conduct.At least 40% of the interviews must be in the evening.A correct modeling of this constraint is: -0.4D + 0.6E > 0.

Question 12

The purpose of media selection applications of linear programming is to help marketing managers allocate a fixed advertising budget to various advertising media.

Question 13

For the multiperiod production scheduling problem in the textbook,period n − 1's ending inventory variable was also used as period n's beginning inventory variable.

Question 14

The marketing research model presented in the textbook involves minimizing total interview cost subject to interview quota guidelines.

Question 15

Compared to the problems in the textbook,real-world problems generally require more variables and constraints.

Question 16

Linear programming is appropriate for financial problem situations involving capital budgeting,asset allocation,financial planning,and portfolio selection.

Question 17

A company produces two different products from steel.One requires 3 tons of steel and the other requires 5 tons.There are 100 tons of steel available daily.A constraint on daily production could be written as: 3x₁ + 5x₂ ≥ 100.

Question 18

Production constraints frequently take the form:
​
Beginning inventory + Sales − Production = Ending inventory

Question 19

If a real-world problem is correctly formulated,it is NOT possible to have alternative optimal solutions.

Question 20

Double-subscript notation for decision variables should be avoided unless the number of decision variables exceeds nine.

Question 21

A mutual fund manager must decide how much money to invest in Atlantic Oil (A)and how much to invest in Pacific Oil (P).At least 60% of the money invested in the two oil companies must be in Pacific Oil.A correct modeling of this constraint is

A)0.4A + 0.6P > 0.
B)-0.4A + 0.6P > 0.
C)0.6A + 0.4P > 0.
D)-0.6A + 0.4P > 0.

Question 22

Blending problems arise whenever a manager must decide how to

A)mix several different asset types in one investment strategy.
B)mix two or more resources to produce one or more products.
C)combine the results of two or more research studies into one.
D)allocate workers with different skill levels to various work shifts.

Question 23

An ad campaign for a new snack chip will be conducted in a limited geographical area and can use TV time,radio time,and newspaper ads.Information about each medium is shown below. If the number of TV ads cannot exceed the number of radio ads by more than 4,and if the advertising budget is $10,000,develop the model that will maximize the number reached and achieve an exposure quality of at least 1000.​
​

Question 24

Tots Toys Company is trying to schedule production of two very popular toys for the next three months: a rocking horse and a scooter.Information about both toys is given below. ​ ​
Develop a model that would tell the company how many of each toy to produce during each month.You are to minimize total cost.Inventory cost will be levied on any items in inventory on June 30,July 31,or August 31 after demand for the month has been satisfied.Your model should make use of the relationship:
Beginning inventory + Production − Demand = Ending inventory
for each month.The company wants to end the summer with 150 rocking horses and 60 scooters as beginning inventory for September 1.Don't forget to define your decision variables.

Question 25

An LP model for a marketing research application uses the variable HD to represent the number of homeowners interviewed during the day.The objective function minimizes the cost of interviewing this and other categories.There is a constraint that HD ≥ 100.The solution indicates that interviewing another homeowner during the day will increase costs by 10.00.What does this tell you about the HD variable? ​

A)The objective function coefficient of HD is 10.
B)The dual price for the HD constraint is 10.
C)The objective function coefficient of HD is −10.
D)The dual price for the HD constraint is −10.

Question 26

Department 3 has 2500 hours.Transfers are allowed to departments 2 and 4,and from departments 1 and 2.If A_i measures the labor hours allocated to department i and T_ij the hours transferred from department i to department j,then ​

A)T₁₃ + T₂₃ − T₃₂ − T₃₄ − A₃ = 2500.
B)T₃₁ + T₃₂ − T₂₃ − T₄₃ + A₃ = 2500.
C)A₃ + T₁₃ + T₂₃ − T₃₂ − T₃₄ = 2500.
D)A₃ − T₁₃ − T₂₃ + T₃₂ + T₃₄ = 2500.

Question 27

Let A,B,and C be the amounts invested in companies A,B,and C.If no more than 50% of the total investment can be in company B,then

A)B ≤ 5.
B)A − 0.5B + C ≤ 0.
C)0.5A − B − 0.5C ≤ 0.
D)−0.5A + 0.5B − 0.5C ≤ 0.

Question 28

Media selection problems usually determine

A)how many times to use each media source.
B)the coverage provided by each media source.
C)the cost of each advertising exposure.
D)the relative value of each medium.

Question 29

Tots Toys makes a plastic tricycle that is composed of three major components: a handlebar-front wheel-pedal assembly,a seat and frame unit,and rear wheels.The company has orders for 12,000 of these tricycles.Current schedules yield the following information: The company obviously does not have the resources available to manufacture everything needed for the completion of 12,000 tricycles so it has gathered purchase information for each component.Develop a linear programming model to tell the company how many of each component should be manufactured and how many should be purchased in order to provide 12,000 fully completed tricycles at the minimum cost.

Question 30

Information on a prospective investment for Wells Financial Services is given below. ​
In each period,funds available for investment come from two sources: loan funds and income from the previous period's investment.Expenses,or cash outflows,in each period must include repayment of the previous period's loan plus 8.5% interest,and the current payroll payment.In addition,to end the planning horizon,investment income from period 4 (at 110% of the investment)must be sufficient to cover the loan plus interest from period 4.The difference in these two quantities represents net income and is to be maximized.How much should be borrowed,and how much should be invested each period?
​

Question 31

Which operations management application model is most likely to have an objective function that minimizes the sum of manufacturing costs,purchasing costs,and overtime costs?

A)blending
B)make-or-buy decision
C)workforce assignment
D)production scheduling

Question 32

Blending problems occur frequently in which of the following industries?

A)chemical
B)petroleum
C)food services
D)All of these are correct.

Question 33

The dual price for a constraint that compares funds used with funds available is 0.058.This means that

A)the cost of additional funds is 5.8%.
B)if more funds can be obtained at a rate of 5.5%,some should be.
C)no more funds are needed.
D)the objective was to minimize.

Question 34

If P_ij = the production of product i in period j,then to indicate that the limit on production of the company's three products in period 2 is 400,we would express it as ​

A)P₂₁ + P₂₂ + P₂₃ ≤ 400.
B)P₁₂ + P₂₂ + P₃₂ ≤ 400.
C)P₃₂ ≤ 400.
D)P₂₃ ≤ 400.

Question 35

Let P_ij = the production of product i in period j.To specify that production of product 1 in period 3 and in period 4 differs by no more than 100 units,we would write it as ​

A)P₁₃ − P₁₄ ≤ 100; P₁₄ − P₁₃ ≤ 100.
B)P₁₃ − P₁₄ ≤ 100; P₁₃ − P₁₄ ≥ 100.
C)P₁₃ − P₁₄ ≤ 100; P₁₄ − P₁₃ ≥ 100.
D)P₁₃ − P₁₄ ≥ 100; P₁₄ − P₁₃ ≥ 100.

Question 36

To study consumer characteristics,attitudes,and preferences,a company would engage in

A)client satisfaction processing.
B)marketing research.
C)capital budgeting.
D)production planning.

Question 37

The production scheduling problem modeled in the textbook involves capacity constraints on all of the following types of resources EXCEPT

A)material.
B)labor.
C)machine.
D)storage.

Question 38

A&C Distributors represents many outdoor products companies and schedules deliveries to discount stores,garden centers,and hardware stores.Currently,scheduling needs to be done for two lawn sprinklers,the Water Wave and Spring Shower models.Requirements for shipment to a warehouse for a national chain of garden centers are shown below. Let S_ij be the number of units of sprinkler i shipped in month j,where i = 1 or 2,and j = 1,2,or 3.Let W_ij be the number of sprinklers that are at the warehouse at the end of a month,in excess of the minimum requirement.

Question 39

Let M be the number of units to make and let B be the number of units to buy.If it costs $2 to make a unit and $3 to buy a unit,and 4000 units are needed,the objective function is

A)Max 2M + 3B.
B)Min 4000 (M + B).
C)Max 8000M + 12,000B.
D)Min 2M + 3B.

Question 40

In a production scheduling LP,the demand requirement constraint for a time period takes the form

A)Beginning inventory + Production + Ending inventory > Demand.
B)Beginning inventory -Production - Ending inventory = Demand.
C)Beginning inventory + Production - Ending inventory = Demand.
D)Beginning inventory - Production - Ending inventory > Demand.

Question 41

Super City Discount Department Store is open 24 hours a day.The number of cashiers need in each four-hour period of a day is listed below. ​
If cashiers work for eight consecutive hours,how many should be scheduled to begin working in each period in order to minimize the number of cashiers needed?

Question 42

Larkin Industries manufactures several lines of decorative and functional metal items.The most recent order was for 1200 door lock units for an apartment complex developer.The sales and production departments must work together to determine delivery schedules.Each lock unit consists of three components: the knob and face plate,the actual lock itself,and a set of two keys.Although the processes used in the manufacture of the three components vary,there are three areas where the production manager is concerned about the availability of resources.These three areas,their usage by the three components,and their availability are detailed in the table below. ​
A quick look at the amounts available confirms that Larkin does not have the resources to fill this contract.A subcontractor,who can make an unlimited number of each of the three components,quotes the prices below. ​
Develop a linear programming model that would tell Larkin how to fill the order for 1200 lock sets at the minimum cost.

Question 43

Island Water Sports provides rental equipment and instruction for a variety of water sports in a resort town.On one particular morning,a decision must be made on how many Wildlife Raft Trips and how many Group Sailing Lessons should be scheduled.Each Wildlife Raft Trip requires one captain and one crew person and can accommodate six passengers.The revenue per raft trip is $120.Ten rafts are available,and at least 30 people are on the list for reservations this morning.Each Group Sailing Lesson requires one captain and two crew people for instruction.Two boats are needed for each group.Four students form each group.There are 12 sailboats available,and at least 20 people are on the list for sailing instruction this morning.The revenue per group sailing lesson is $160.The company has 12 captains and 18 crew available this morning.The company would like to maximize the number of customers served while generating at least $1800 in revenue and honoring all reservations.

Question 44

Evans Enterprises bought a prime parcel of beachfront property and plans to build a luxury hotel on it.After meeting with the architectural team,the Evans family has drawn up some information to make preliminary plans for construction.Excluding the suites,which are not part of this decision,the hotel will have four kinds of rooms: beachfront non-smoking,beachfront smoking,lagoon view non-smoking,and lagoon view smoking.To decide how many of the four kinds of rooms to plan for,the Evans family will consider the following information:
​
a.​
​
After adjusting for expected occupancy,the average nightly revenue for a beachfront non-smoking room is $175.The average nightly revenue for a lagoon view non-smoking room is $130.Smokers will be charged an extra $15.
b.​
​
​
Construction costs vary.The cost estimate is $12,000 for a lagoon view room and $15,000 for a beachfront room.Air purifying systems and additional smoke detectors and sprinklers ad $3000 to the cost of any smoking room.Evans Enterprises has raised $6.3 million in construction guarantees for this portion of the building.
c.There will be at least 100 but no more than 180 beachfront rooms.
d.​
Design considerations require that the number of lagoon view rooms be at least 1.5 times the number of beachfront rooms,and no more than 2.5 times that number.
e.​
Industry trends recommend that the number of smoking rooms be no more than 50% of the number of non-smoking rooms.
​
Develop the linear programming model to maximize revenue.

Question 45

National Wing Company (NWC)is gearing up for the new B-48 contract.Currently,NWC has 100 equally qualified workers.Over the next three months,NWC has made the following commitments for wing production: ​
Each worker can either be placed in production or train new recruits.A new recruit can be trained to be an apprentice in one month.The next month,he,himself,becomes a qualified worker (after two months from the start of training).Each trainer can train two recruits.The production rate and salary per employee are estimated below. ​
At the end of July,NWC wishes to have no recruits or apprentices but at least 140 full-time workers.Formulate and solve a linear program for NWC to accomplish this at minimum total cost.

Question 46

Target Shirt Company makes three varieties of shirts: Collegiate,Traditional,and European.These shirts are made from different combinations of cotton and polyester.​
The cost per yard of unblended cotton is $5 and for unblended polyester is $4.Target can receive up to 4000 yards of raw cotton and 3000 yards of raw polyester fabric weekly.The table below gives pertinent data concerning the manufacture of the shirts.​ ​
Formulate and solve this blending problem as a linear program.​

Question 47

BP Cola must decide how much money to allocate for new soda and traditional soda advertising over the coming year.The advertising budget is $10,000,000.Because BP wants to push its new sodas,at least one-half of the advertising budget is to be devoted to new soda advertising.However,at least $2,000,000 is to be spent on its traditional sodas.BP estimates that each dollar spent on traditional sodas will translate into 100 cans sold,whereas,because of the harder sell needed for new products,each dollar spent on new sodas will translate into 50 cans sold.​
To attract new customers,BP has lowered its profit margin on new sodas to 2 cents per can as compared to 4 cents per can for traditional sodas.How should BP allocate its advertising budget if it wants to maximize its profits while selling at least 750 million cans?

Question 48

Meredith Ribbon Company produces paper and fabric decorative ribbon that it sells to paper products companies and craft stores.The demand for ribbon is seasonal.Information about projected demand and production for a particular type of ribbon is given. ​
An inventory holding cost of $0.005 is levied on every yard of ribbon carried over from one quarter to the next.
a.Define the decision variables needed to model this problem.
b.The objective is to minimize total cost,the sum of production and inventory holding cost.Give the objective function.
c.Write the production capacity constraints.
d.Write the constraints that balance inventory,production,and demand for each quarter.Assume there is no beginning inventory in quarter 1.
e.To attempt to balance the production and avoid large changes in the workforce,production in period 1 must be within 5000 yards of production in period 2.Write this constraint.
​

Question 49

Comfort Plus Inc.(CPI)manufactures a standard dining chair used in restaurants.The demand forecasts for quarter 1 (January-March)and quarter 2 (April-June)are 3700 chairs and 4200 chairs,respectively.CPI has a policy of satisfying all demand in the quarter in which it occurs.The chair contains an upholstered seat that can be produced by CPI or purchased from DAP,a subcontractor.DAP currently charges $12.50 per seat,but has announced a new price of $13.75,effective April 1.CPI can produce the seat at a cost of $10.25.CPI can produce up to 3800 seats per quarter.​
Seats that are produced or purchased in quarter 1 and used to satisfy demand in quarter 2 cost CPI $1.50 each to hold in inventory,but maximum inventory cannot exceed 300 seats.​
Formulate this problem as a linear programming problem.

Question 50

FarmFresh Foods manufactures a snack mix called TrailTime by blending three ingredients: a dried fruit mixture,a nut mixture,and a cereal mixture.Information about the three ingredients (per ounce)is shown below. ​
The company needs to develop a linear programming model whose solution would tell them how many ounces of each mix to put into the TrailTime blend.TrailTime is packaged in boxes that will hold between three and four cups.The blend should contain no more than 1000 calories and no more than 25 grams of fat.Dried fruit must be at least 20% of the volume of the mixture,and nuts must be no more than 15% of the weight of the mixture.Develop a model that meets these restrictions and minimizes the cost of the blend.​

Question 51

Wes Wheeler is the production manager of Wheeler Wheels,Inc.Wes has just received orders for 1,000 standard wheels and 1,250 deluxe wheels next month and for 800 standard and 1,500 deluxe wheels the following month.All orders are to be filled.​
The cost of producing standard wheels is $10 and the cost for deluxe wheels is $16.Overtime rates are 50% higher.There are 1,000 hours of regular time and 500 hours of overtime available each month.It takes 0.5 hour to make a standard wheel and 0.6 hour to make a deluxe wheel.The cost of storing one wheel from one month to the next is $2.​
Wes wants to develop a two-month production schedule for standard and deluxe wheels.Formulate this production planning problem as a linear program.

Question 52

G&P Manufacturing would like to minimize the labor cost of producing dishwasher motors for a major appliance manufacturer.Although two models of motors exist,the finished models are indistinguishable from one another; their cost difference is due to a different production sequence.The time in hours required for each model in each production area,along with the labor cost,is shown in the table below. ​
Currently,labor assignments provide for 10,000 hours in both areas A and B and 18,000 hours in area C.If 2000 hours are available to be transferred from area B to area A and 3000 hours are available to be transferred from area C to either area A or area B,develop the linear programming model whose solution would tell G&P how many of each model to produce and how to allocate the workforce.