BUSINESS MATHEMATICS

CONTENTS

1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Method of Linear Programming
3.2 Step in Linear Programming
3.3 Slack
4.0 Conclusion
5.0 Summary
6.0 Tutor-Marked Assignment
7.0 References/Further Readings

1.0 INTRODUCTION

This is the mathematical techniques for finding the optimum mix of

products with limited resources. The resource limitations are represented
graphically by areas which when combined form a feasibility region.
The point on the feasibility region boundary that optimizes the objective
function (usually maximizing profit or minimizing costs) is found by
plotting an arbitrary value of the objective function on the graph and
moving it away from (for maximization) or towards (for minimization)
the origin until the last point of the feasibility region is obtained.

In order to apply linear programming, there must be as its title suggests

a linear relationship between the factors.

2.0 OBJECTIVES

At the end of this unit, you should be able to:

 examine and identify the field of application of linear programming
such as :

1. Mixing problems.
2. Limited capacity is allocated to products so as to yield maximum
profits.
3. Transportation problem.
4. Purchasing.
6. Production scheduling.
6. Job assignments problem, etc.

3.0 MAIN CONTENT

3.1 Method of Linear Programming

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Linear programming reduces the kind of problems outlined above to

“series of linear expressions” and then uses these expressions to
discover the best solution to achieve a given objective.

3.2 Step in Linear Programming

Step 1: Define the constraints (i.e. the limitations that must be

placed on the variables.
Step 2: Graph the constraints.
Step 3: Define the objective function.
Step 4: Manipulate the objective function to find the optimum
feasible solution.

Linear programming is best illustrated by means of an example:

Example 1 (Graphical Method)

Bolat Properties Nigeria Limited took the construction of chalets and

roads in AJIBOLA ESTATE, LEKKI. Each chalets and road
constructed passes through material-purchases process and constructing
or assembling process. One chalet which makes a contribution of N50T,
takes six hours material purchasing time, and four hours construction or
assemblage time.

While one road makes a contribution of N40T, takes three hours

material purchasing time and eight hours construction time. There is a
maximum of thirty-six purchasing of materials hours available each
week and forty-eight construction hours respectively.

Let x be the number of chalets constructed each week.

y be the number of roads constructed each week.

If 1 chalet requires 6 hours for material purchase,

Then, x chalets requires 8x hours for material purchase.
If a road requires 3 hours for material purchase,
Then y roads require 3y hours for material purchase.
Hence, total time to purchase materials is (6x + 3y) hours.

Similarly, the total time required to construct x chalets and y roads is (4x
+ 8y) hours.

Step 1: Define the Constraints.

The constraints are the amount of time available for material purchases
and construction.

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The best way of setting out the constraints is to place the units available
on the left and those utilized on the right; the inequality sign is the link.

Constraints Available Utilized

Material purchased 36 ≥ (6x + 3y)

Construction time 48  (4x + 8y)

In addition, the logic constraints must be stated i.e 0  x and 0  y.

These simply states that there cannot be negative amounts of chalets and
roads. Hence, the constraints are:

i. 6x + 3y  36.
ii. 4x + 8y  48.

Step 2: Graphical Constraints.

Thus, x and y are each set to zero in turn and value of y and x computed
in those circumstances.

For the equation: 6x + 3y = 36.

36
When x  0, y   12.
3
36
When y  0, x   6.
6

For the equation: 4x + 8y = 48.

48
When x  0, y   6.
8
48
When y  0, x   12.
4
It is then necessary to decide which side of the equality represents the
feasible solution space. Where the constraint is of the form ax  by  c ,
as in both of the above cases, the values of x and y can lie anywhere on
the line or below it.

If the constraints is of the form ax  by  c , x and y can only lie on the

line or above it.

This is the above example, x and y must be on or below the line

6x  3y  36 and on or above the line 4x  8 y  48 ; they must also be  0 .

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i.e. Not below the x-axis and not to the left of the y-axis. The
constraints can now be represented graphically:

12
11
10
6x + 3y = 36
9
8
7
6 P
5
Q
4
4x + 8y = 48
3
2
1 R

0 x
1 2 3 4 5 6 7 8 9 10 11 12

The area OPQR which is shaded represents the feasible solutions i.e.
Combinations of the two products which are achievable given the
constraints. The problem is to find the optimum solution.

Step 3: Define the Objective Function

The objective is to maximize contribution C, given by: c  50x  40 y

Step 4: Manipulate the Objective (Function)

There are two approaches to this final step:

a) By inspection, it is cleat that the maximum contribution will lie

on one of the corners; P, Q, R-! be optimal solution can be
leached simply by calculating the Contribution at each; or
b) By drawing an Iso-contribution fine, which is a line where a point
represents an equal contribution. This is the recommended
approach particularly for more complex problems.

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3.3 Slack

Slack is the amount by which a resource is under utilized. It will occur

when the “optimum point does not full the given resource line. In the
above example, the optimum point Q lies on both the material purchase
and construction time lines; therefore, both resources are fully utilized.

This can be checked from the constraint inequalities by solving the two
simultaneous equations for the two constraints boundaries.

Point Q is the intersection of the lines.

6x + 3y =36 …………………………………………… (1)

4x + 8y = 48 ……………………………………………….. (2)
x (2) – 2 x (1) gives:
18y = 72
72
y  4.
18

Substituting y into (1) gives:

 6x + 3(4) =36.
 6x = 36 – 12=24.
x = 24/6 = 4
x = y = 4.

Thus, the maximum contribution is obtained when four chalets and four
roads per week are constructed.

The maximum contribution is:

C = 50x + 40y,
 C = 50(4) + 40(4),
 C = 200 + 160.
 C = N360T.

From the constraint inequalities, x = y =4,

Material purchasing time available: = 36.
Utilized = 6x + 3y = 6(4) + 3(4) = 24 + 12 = 36.

Construction time available: equals 48,

(Utilized = 4x + 8y = 4(4) + 8(4) = 16 + 32 = 48.
Hence, all available time in both department is Utilized.

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If, however, the optimum had been at P(x = 0, y = 6), then because P
does not lie on the material purchase time line, there would be slack
material purchasing time.

Material purchasing time utilized = 6x  3y  (6 x 0 )  (3 x 6) 18;

Slack = 36 – 18 = 18 hours
Slack is important because unused resources can be put to another use
e.g. hired out to another construction company?

Example 2

U. A. C Nigeria Limited manufactures and sells Gala and Nourish bread

represented as G and N. Each product is processed in two departments;
Food & beverages and packaging. Each unit of product G requires 30
minutes in the Food & be department and 10 minutes in the packaging
department. The corresponding times for product N are 10 minutes and
20 minutes respectively. Each day, 900 minutes are available in the
food/beverages department and 700 minutes are available in the
packaging department.

The sales manager wishes to have a daily output of at least 40 products

irrespectively of whether they are Gala and Nourish bread are N32 and
N40 respectively.

U. A. C Nigeria Limited wishes to know the output levels in each of the

following situations:

i. To maximize sales revenue;

ii. To minimize manufacturing cost;
iii. To maximize profit.
a) Formulates a linear programming problem.
b) Represent graphically and shade the feasible region.
c) Obtain the output levels in each of the situations (i), (ii) and (iii)
above.

Solution

a) Let the recommended output levels of Gala and Nourish by g and

n respectively.

The constraints equations are:

1. 30g + 10n  900 minutes (Food and beverages department).

2. 10g + 20n  700 minutes (Packaging department).
3. g + n ≥ 40 units (Minimum daily output).
4. g , n ≥ 0 (Non-negatively).

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The objectives functions are:

i. Maximize 40g + 60n.

ii. Minimize 32g + 40n.
iii. Maximize 8g + 20n.

b) To plot the graph of the feasible region.

100

90 30g + 10n = 100

80
70
60
50 Feasible region
40
30 B
10g + 20n = 700
20 A
10 C g + n = 40

0 x
10 20 30 40 50 60 70

Corner points Revenue Cost Contribution

(g, n) (N) (N)
A(10,30) 2,200 1,520 680
B(22, 24) 2,320 1,696 624
C(25, 15) 1,900 1,400 500

All these are generated from the graph above.

Revenue contribution = (Selling – cost) price per unit of the product.

c) The optimal output levels are:

i. To maximize sales revenue: 22 units of Gala and 24 units of

Nourish bread (Maximize revenue = N2,320).
ii. To minimize manufacturing sot: 25 units Gala and 15 units
Nourish bread (minimize cost = N1,400).

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iii. To maximize contribution (profit): 10 units of Gala and 30 units

of Nourish bread (Maximize contribution = N680).

4.0 CONCLUSION

In conclusion, the basic rule of linear programming have been

discussed .

5.0 SUMMARY

From the conclusion, it is important that the student is able to apply

the formulae to a practical problem as we have shown in examples
1 and 2 in this section.

6.0 TUTOR-MARKED ASSIGNMENT

In each of the following linear inequalities, describe and graph the

feasible region.

1. 3x  7 y   28
x y 6
9x  2 y  36
x  6 y  48

2. 3x  4 y  5
x y  8

3. Minimize f  x y subject to x  0, y  0 and

x  2 y  0,2x  y  10, y  4.

4. A company manufacturers and sells two models of lamps; L1 and

L2, the profit being N15 and N10 respectively. The process
involves two workers w1 and w who are available for this kind of
work 100 and 80 hours per month respectively. W1 assembles L1
in 20 minutes and L2 in 30 minutes. W2 assembles L1 in 20
minutes and L2 in 10 minutes. Assuming that all lamps made can
be sold without difficulty, determine production figures that
maximize the profit.

5. Maximize the daily profit in manufacturing two alloys A1, A2 that

are: different mixtures of two metals m1, m2 as shown below:

Proportion of Metal
Metal Alloy Alloy Daily supply

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A1 A2 (tons)
m1 0.5 0.25 10
m2 0.5 0.75 15
Net profit 30 25 -
(N per ton)

7.0 REFERENCES/FURTHER READINGS

1) Pure Mathematics for Advanced Level By B.D Bunday H

Mulholland 1970.
2)Introduction to Mathematical Economics By Edward T.
Dowling.
3)Mathematics and Quantitative Methods for Business and
Economics.By Stephen P. Shao. 1976.
4) Mathematics for Commerce & Economics By Qazi
Zameeruddin & V.K. Khanne 1995.
5) Engineering Mathematics By K. A Stroad.
6)Business Mathematics and Information Technology. ACCA STUDY
MANUAL By. Foulks Lynch.

7) Introduction to Mathematical Economics SCHAUM‟S Out lines

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