Objectives of business firms frequently include maximizing profit or minimizing costs.
Linear programming is an analysis technique in which linear algebraic relationships represent a firm’s decisions given a business objective and resource constraints.
Steps in application:
Identify problem as solvable by linear programming.
Formulate a mathematical model of the unstructured problem.
Solve the model.
Standard form requires that all constraints be in the form of equations.
A slack variable is added to a £ constraint to convert it to an equation (=).
A slack variable represents unused resources.
A slack variable contributes nothing to the objective function value.
Product mix problem - Beaver Creek Pottery Company. How many bowls and mugs should be produced to maximize profits given labor and materials constraints? Product resource requirements and unit profit: