EZ Storage would like to expand its successful business into a neighboring town. In doing so,...
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EZ Storage would like to expand its successful business into a neighboring town. In doing so, the company must determine how many storage rooms of each size to build. The problem has been formulated as a linear program (LP), as follows: maximize Z 120x1 + 100x2 (monthly earnings) 800 (advertising budget) subject to: 3.5x1 + 6x2 200x1 + 90x2 x1 16000 (square footage required) x & x2 0 50 (rental limit expected) where x is the number of large spaces developed, and x2 is the number of small spaces developed. Solve this linear optimization problem using the Graphical Method (i.e., not using Excel - you need to show the steps). Specifically, you should do the following: a. Graph the constraint boundaries. [8 pts] b. Identify the feasible region for this problem on the graph. [2 pts] c. Identify the optimal corner point. (Hint: There is more than one way to accomplish this.) [2 pts] d. Determine the optimal solution for this problem, i.e., what are the optimal x and x2 values and the corresponding profit level? (Hint: Don't "eyeball" ituse algebra.) [8 pts] e. Briefly explain how you would determine the shadow price of the advertising budget constraint. (Alternatively, calculate the shadow price and show the steps taken.) [4 pts] f. If the rental limit constraint is decreased from 50 to 40, by how much will the monthly earnings change? [4 pts] g. To use linear programming, several assumptions/requirements must be met. Identify at least one LP assumption/requirement which is violated in this context, i.e., which may not be appropriate when the decision variables relate to the number of storage units developed. [2 pts] EZ Storage would like to expand its successful business into a neighboring town. In doing so, the company must determine how many storage rooms of each size to build. The problem has been formulated as a linear program (LP), as follows: maximize Z 120x1 + 100x2 (monthly earnings) 800 (advertising budget) subject to: 3.5x1 + 6x2 200x1 + 90x2 x1 16000 (square footage required) x & x2 0 50 (rental limit expected) where x is the number of large spaces developed, and x2 is the number of small spaces developed. Solve this linear optimization problem using the Graphical Method (i.e., not using Excel - you need to show the steps). Specifically, you should do the following: a. Graph the constraint boundaries. [8 pts] b. Identify the feasible region for this problem on the graph. [2 pts] c. Identify the optimal corner point. (Hint: There is more than one way to accomplish this.) [2 pts] d. Determine the optimal solution for this problem, i.e., what are the optimal x and x2 values and the corresponding profit level? (Hint: Don't "eyeball" ituse algebra.) [8 pts] e. Briefly explain how you would determine the shadow price of the advertising budget constraint. (Alternatively, calculate the shadow price and show the steps taken.) [4 pts] f. If the rental limit constraint is decreased from 50 to 40, by how much will the monthly earnings change? [4 pts] g. To use linear programming, several assumptions/requirements must be met. Identify at least one LP assumption/requirement which is violated in this context, i.e., which may not be appropriate when the decision variables relate to the number of storage units developed. [2 pts]
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Related Book For
Managerial Decision Modeling With Spreadsheets
ISBN: 9780136115830
3rd Edition
Authors: Nagraj Balakrishnan, Barry Render, Jr. Ralph M. Stair
Posted Date:
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