what are the goals of linear programming? (4 goals listed) - CORRECT ANSWER - resource allocation
- decisions involving effective use of limited
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- optimization
- prescriptive analytics (what should happen)
what is the objective function? - CORRECT ANSWER seek to maximize of minimize some quantity
What are the properties of LP models? - CORRECT ANSWER 1. objective function
2. constraints
3. decision variables
4. Linear equations with parameters
Steps to formulating a LP problem - CORRECT ANSWER 1. Understand the managerial problem
2. Identify the objective and constraints
3. Define the decision variables
4. Use the decision variables to write mathematical expressions for the objective function and the constraints
What is a product mix problem? - CORRECT ANSWER Maximizing profit by deciding how many of each product to produce using limited resources (constraints)
what is the formula for the objective function? - CORRECT ANSWER max/min P = (profit)*(# produced) + (profit)*(# produced)
what is the non negativity constraint? - CORRECT ANSWER its the constraint that tells the program the decision variables cannot be negative
What is the EXCEL formula for the objective function? - CORRECT ANSWER =sumproduct(range 1, range 2)
What does LP assume? - CORRECT ANSWER all parameters are constant
What is sensitivity analysis? - CORRECT ANSWER Allows for changes in parameters of the objective function or constraints, the changes can be reactions to uncertainties in parameters or new information
What can we conduct sensitivity analysis on? - CORRECT ANSWER - objective function coefficients
- RHS constraint value
- constraint coefficients (not possible in excel)
What happens when you change the coefficients of the objective function? - CORRECT ANSWER - feasible region does not change
- slope of the objective function line changes (isoprofit line)
- at some point the optimal solution will change
what is the sensitivity range? how would you write the range? - CORRECT ANSWER it is the range of values over which the current optimal solution point will remain optimal
x1: lower limit <= c1 <= upper limit
x2: lower limit <= c2 <= upper limit
how do you find the sensitivity range? - CORRECT ANSWER take the coefficient and subtract allowable decrease for lower limit, add the allowable increase for the upper limit
what does the right hand side (RHS) value of a constraint usually represent? - CORRECT ANSWER resources available to the firm
what is the shadow price? what are the other names for it? - CORRECT ANSWER shadow price can also be called dual price or dual value. it indicates the amount of change in objective function value that results from a 1 unit increase in the RHS value of the constraint
ex: Adding 1 hour of labor increases profit by x amount of money
Is the shadow price always relevant? - CORRECT ANSWER No, it is only relevant within limits
List the types of LP problems - CORRECT ANSWER - Product Mix
- Marketing
- Investment
- Scheduling (production planning & employee scheduling)
- Transportation
How do we use LP in Investment problems? - CORRECT ANSWER aims to find the optimal portfolio based on a number of criteria, maximize ROI given constraints
what is format of standard form? - CORRECT ANSWER Variables and parameters on the LHS - (sign in the middle) - Values on the RHS
What is a production planning problem? - CORRECT ANSWER Similar to product mix problems but is for multiple time periods, trying to find the schedule that leads to the lowest cost
What are the 4 important factors in a production planning problem? - CORRECT ANSWER - Labor Capacity
- Inventory and Storage Costs
- Inventory Space limitations
- Product Demand [Show Less]