IIMT 3636

Assignment 05
(Chapter 04; Due March 14 at 12:00 noon)
1. A winner of the Texas Lotto has decided to invest his total award of $50,000 in the stock market.
Under consideration are stocks for a petrochemical firm and a public utility. Being discreet, this person
decides to minimize the risk of the investment as long as a return of 8% is generated. A risk index on a
scale of 1-10 (with 10 being the most risky) is assigned to each of the two stocks. Cash savings will
generate zero return but will have zero risk. The total risk of the portfolio is found by multiplying the risk
of each stock by the dollars invested in that stock and then summing them up. The following table
provides a summary of the return and risk:
Stock Estimated Return Risk Index
Petrochemical 12% 9
Utility 6% 4

(a) Formulate this problem as an LP and solve it using the iso-risk line method. How much should be
invested in each stock?
(b) If the investor want to keep at least $10,000 as cash savings, how will the optimal investments be
changed? Solve this problem using corner-point method.

2. The total annual expenses of a university are related to many factors. Two of these factors are the
number of research (tenure-track) faculty members and the number of lecturers. Data were collected on
20 universities, as shown in the table below:
University Researcher Lecturer Expenses University Researcher Lecturer Expenses
1 515 150 $ 55,619,783 11 510 333 $ 72,996,704
2 402 350 $ 64,682,351 12 660 300 $ 82,035,408
3 355 555 $ 73,809,780 13 210 128 $ 23,703,796
4 722 656 $ 131,587,173 14 295 306 $ 42,954,701
5 477 425 $ 63,283,763 15 122 221 $ 35,478,808
6 381 490 $ 67,490,962 16 350 326 $ 54,625,748
7 590 302 $ 74,648,319 17 209 108 $ 28,421,142
8 253 176 $ 33,371,668 18 460 210 $ 53,607,180
9 330 400 $ 62,105,341 19 175 30 $ 24,372,814
10 660 450 $ 93,036,409 20 263 388 $ 49,652,831

It is required that, as a research-oriented university, the number of research faculty members should be
at least as many as the number of lecturers. A lecturer can teach 6 courses per year and a research
faculty member can teach 3 courses per year. It is required that at least 2,000 courses should be offered
per year. On average, each research faculty member can generate 0.5 high quality publications per year.
To achieve the target of 200 high quality publications per year and satisfy the course requirement, how
many research faculty members and lecturers should a research-oriented university have so that the
expected annual expenses are minimized? Formulate this problem and solve it graphically.
IIMT 3636

3. (Use Solver) Kathy Roniger, campus dietitian for a small Idaho college, is responsible for formulating
a nutritious meal plan for students. For an evening meal, she feels that the following five meal-content
requirements should be met: (1) between 900 and 1,500 calories; (2) at least 4 miligrams of iron; (3) no
more than 50 grams of fat; (4) at least 26 grams of protein; and (5) no more than 50 grams of
carbohydrates. On a particular day, Roniger’s food stock includes seven items that can be prepared and
served for supper to meet these requirements. The cost per pound for each food item and the contribution
to each of the five nutritional requirements are given in the table below.

Table of Food Values and Costs

Calories/ Iron Fat Protein Carbohydrates Cost/
Food item LB (MG/LB) (GM/LB) (GM/LB) (GM/LB) LB ($)
Milk 295 0.2 16 16 22 0.6
Ground meet 1216 0.2 96 81 0 2.35
Chicken 394 4.3 9 74 0 1.15
Fish 358 3.2 0.5 83 0 2.25
Beans 128 3.2 0.8 7 28 0.58
Spinach 118 14.1 1.4 14 19 1.17
Potatoes 279 2.2 0.5 8 63 0.33

What combination and amounts of food items will provide the nutrition Roniger requires at the least total
food cost?
(a) Formulate this as an LP problem.
(b) What is the cost per meal?
(c) Generate the sensitivity report in excel and explain how would an increase in milk price by 10 cents/lb
impact your decision.
(d) How much can you change the milk price before the optimal corner switches?