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Optimization of Product Profitability

This document describes two optimization problems to maximize profit based on production constraints. For the first problem, the optimal solution is to produce 125 units of Product 1 and 25 units of Product 2 for a maximum profit of $175. For the second problem, the optimal solution is to take on 600 units of Special Risk Insurance and 300 units of Mortgage for a maximum profit of $3600.

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Özlem Yurtsever
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143 views4 pages

Optimization of Product Profitability

This document describes two optimization problems to maximize profit based on production constraints. For the first problem, the optimal solution is to produce 125 units of Product 1 and 25 units of Product 2 for a maximum profit of $175. For the second problem, the optimal solution is to take on 600 units of Special Risk Insurance and 300 units of Mortgage for a maximum profit of $3600.

Uploaded by

Özlem Yurtsever
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

HOMEWORK-1 3.1.

8 Frame Parts (unit) Electrical Components (unit) Profit ($) Max number to be produced 1 2 1 no constraint 3 2 2 60 unit 200 unit 300 unit

Product 1 Product 2 Availability

x1: the number of units of product 1 that will be produced x2: the number of units of product 2 that will be produced Objective Function: Max Z = x1 + 2x2 St: Frame Parts Constraint: x1 + 3x2 200 Electrical Components Constraint: 2x1 + 2x2 300 Production Limit: x2 60 Nonnegativity: x1,x2 0 Graphical Method: 1- x1 + 3x2 = 200 x1=0, x2=200/3 and x1=200, x2=0 2- 2x1 + 2x2 = 300 x1=0, x2=150 and x1=150, x2=0 3- x2 = 60

HOMEWORK-1 From the graph we can see that the optimal point is the intersetion of constraint 1 and constraint 2 So if we solve them together we get: x1 + 3x2 = 200 2x1 + 2x2 = 300 -------------------Optimum number of product 1 that will be produced = x1*=125 Optimum number of product 2 that will be produced x2*= 25 Z= x1 + 2x2The maximum profit: Z*=175

(Excel solver is attached and as below:) Solution 3.1.8 Profit 1 2 availabilty: Frame Parts 1 3 200 Electrical Components 2 2 300 Max. Number to be produced no constraint 60 # that should be produced 125 25

Product 1 Product 2

Constraints: Frame Parts

200

<= <= <=

200 300 60 175

Electrical Components 300 Production limit 25

Profit Generated:

HOMEWORK-1 3.1.9 Work Hours per Unit Special Risk Mortgage 3 2 0 1 2 0 5 2 Work Hours Available 2400 800 1200

Department Underwriting Administration Claims Expected Profit ($)

x1: the number of units on Special Risk Insurance x2: the number of units of Mortgage Objective Function: Max Z = 5x1 + 2x2 St: Underwriting work hours constraint: 3x1 + 2x2 2400 Administration work hours constraint: 3x2 800 Claims work hours constraint: 2x1 1200 Nonnegativity: x1,x2 0 Graphical Method: 1- 3x1 + 2x2 = 2400 x1=0, x2=1200 and x1=800, x2=0 2- 3x2 = 800 x2=800 3- 2x1 = 1200 x1=600

HOMEWORK-1 From the graph we can see that the optimal point is the intersetion of constraint 1 and constraint So if we solve them together we get: 3x1 + 2x2 = 2400 2x1 = 1200 ----------------------Optimum sales quotas on Special Risk Insurance = x1*=600 Optimum sales quotas on Mortgage x2*=300 Z= 5x1 + 2x2The maximum profit: Z*=3600

(Excel solver is attached and as below:) Solution 3.1.9 Profit 5 2 availabilty: Underwriting 3 2 2400 Administrator 0 1 800 Claims 2 0 1200 Sales Quotas 600 300

Special Risk Mortgage

Constraints: Underwriting Administrator Claims

2400 300 1200 Profit Generated:

<= <= <=

2400 800 1200 3600

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