______Chapter-08-1

Chapter 8—Nonlinear Programming and Evolutionary Optimization
MULTIPLE CHOICE
1. The main difference between LP and NLP problems is that NLPs will have a
a. linear objective function and nonlinear or linear constraints.
b. minimum of one nonlinear constraint or a nonlinear objective function.
c. multilevel objective functions.
d. multilevel objective function and nonlinear constraints.
ANS: B PTS: 1
2. The optimal solution to a NLP problem can occur at a(n)
I. corner point.
II. interior point.
a. I is true
b. II is true
c. I and II are true
d. neither I or II is true
ANS: C PTS: 1
3. The optimal solution to a LP problem is always at
I. a corner point.
II. an interior point
III. the origin.
a. I is true
b. II is true
c. III is true
d. I and III are true
ANS: A PTS: 1
4. The GRG and Simplex algorithms are similar in that

a. each algorithm process continues until there is no further improvement in the objective
function.
b. both algorithms take their starting solution from the spreadsheet.
c. both return the globally optimal solution.
d. both algorithms return a solution that satisfies at least one constraint at equality.
ANS: A PTS: 1
5. The Risk Solver Platform (RSP) solution strategy for NLP problems is the GRG method. What does
GRG stand for?
a. Graphical Residual Gradient
b. Generalized Reduced Gradient
c. Goal Restricted Gradient
d. Gradually Reduced Gradient
ANS: B PTS: 1
6. In the GRG algorithm the initial solution is called the
a. originating point.
b. insertion point.
c. zero point.
d. starting point.
ANS: D PTS: 1
7. The GRG algorithm operates by

a. moving in the direction of most rapid improvement in the objective function.
b. choosing a search direction at random.
c. searching directly for the optimum solution.
d. moving in a clockwise direction.
ANS: A PTS: 1
8. What is the search path for the following feasible solution space? The dashed line represents the
objective function and the objective is to maximize the value of the objective function.
a. A, D
b. A, F, E, D
c. A, B, C, D
d. A, F, E
ANS: C PTS: 1
9. In a maximization problem, the GRG algorithm's search for a feasible direction of improvement
equates to ____ in the simplex algorithm for LP problems.
a. an adjacent corner point
b. a zero reduced cost
c. a positive shadow price
d. a positive reduced cost
ANS: D PTS: 1
10. The GRG algorithm terminates when it

a. has completed 100 iterations.
b. has reached the global optimal solution.
c. when it detects no feasible direction for improvement.
d. when it reaches the steepest gradient.
ANS: C PTS: 1
11. In NLP a local optimum is best described as

a. an interior point.
b. a corner point.
c. a point yielding no improving direction.
d. a good starting point for subsequent searches.
ANS: C PTS: 1
12. Which point or points are local optima in this diagram? The dashed line represents the objective
function and the objective is to maximize the value of the objective function.
a. D
b. E
c. F
d. D, F
ANS: D PTS: 1
13. Which point or points are global optima in this diagram? The dashed line represents the objective
function and the objective is to maximize the value of the objective function.
a. B
b. D
c. E
d. F
ANS: B PTS: 1
14. When using the GRG algorithm to solve NLPs one should try multiple starting points because
a. If two different starting points return the same solution, that solution is optimal.
b. the solution returned depends upon the starting point.
c. the solution returned is always near the starting point.
d. a random element of GRG requires multiple starting points.
ANS: B PTS: 1
15. NLP problems which have slack in all the constraints
a. are infeasible.
b. are only at local optimal solutions.
c. have zeros for all shadow prices.
d. are at an interior point of the feasible region.
ANS: D PTS: 1
16. If the "Standard LP/Quadratic Engine" option is chosen in the Risk Solver Platform (RSP) task pane,
RSP
a. will test for non-linearity in the model and apply GRG.
b. will test for non-linearity in the model and apply Simplex.
c. uses the B & B algorithm to solve the problem.
d. will apply Simplex if the linearity test passes.
ANS: D PTS: 1
17. The optimal trade-off between risk and return for a given portfolio problem can be summarized by the
a. efficient frontier.
b. investment frontier.
c. portfolio boundary.
d. variance boundary.
ANS: A PTS: 1
18. The straight line (Euclidean) distance between two points (X1, Y1) and (X2, Y2) is calculated as
a. X1  Y1 + X2  Y2
b. (X1  X2)2 + (Y1  Y2)2
c.
d.
ANS: D PTS: 1
19. What is the straight line (Euclidean) distance between the points (5,7) and (1, 11)?
a. 2.83
b. 5.65
c. 8
d. 16
ANS: B PTS: 1
20. The total annual cost for the economic order quantity model is
a. purchase cost + ordering cost + holding cost.
b. fixed ordering cost + holding cost.
c. purchase cost + fixed ordering cost.
d. unit cost + variable ordering cost + holding cost.
ANS: A PTS: 1
21. Which of the following is not an assumption of an EOQ problem.

a. Demand for a product is fairly constant.
b. Inventory depletion rates vary non-linearly.
c. Each new order is delivered in full when the inventory level reaches 0.
d. All are valid assumptions.
ANS: B PTS: 1
22. A company has collected the following inventory data for an item. What is the total annual cost for this
item?
Annual demand for the item D = 500

Unit purchase cost for the item C = 10
Fixed cost of placing an order S = 20
Cost of holding one unit in inventory for a year i = 30%
Order quantity Q = 50
a. 275
b. 450
c. 5,275
d. 5,450
ANS: C PTS: 1
23. The Reduced Gradient is similar to which of these terms from linear programming?
a. Shadow Price
b. Allowable Decrease
c. Allowable Increase
d. Reduced Cost
ANS: D PTS: 1
24. The Lagrange Multiplier is similar to which of these terms from linear programming?
a. Shadow Price
b. Allowable Increase
c. Allowable Decrease
d. Reduced Cost
ANS: A PTS: 1
25. Why does the GRG algorithm not provide allowable increase or allowable decrease information with
the Reduced Gradient and Lagrange multiplier information?
a. Because all constraints have slack.
b. Because the constraints may not be linear.
c. Because the solution is not necessarily a global optimum.
d. Because the solutions are not necessarily corner points.
ANS: B PTS: 1
26. A company makes products A and B from 2 resources, labor and material. The company wants to
determine the selling price which will maximize profits. A unit of product A costs 25 to make and
demand is estimated to be 20  .10 * Price of A. A unit of product B costs 18 to make and demand is
estimated to be 30  .07 * Price of B. The utilization of labor and materials and the available quantity
of resources is shown in the table. A reasonable price for the products is between 100 and 200.
Product A B Available resources

Labor (hr/unit) 3 2 150
Material (ounces/unit) 1 2 200
Manufacturing cost($/unit) 25 18
Demand (units) 20  0.10*P1 30  0.07*P2
Let X1 = demand for As and X2 = demand for Bs.

Let P1 = price for As and P2 = price for Bs.
The objective function for this problem is?

a. MAX 25 X1 + 18 X2
b. MAX (20  0.10*P1) X1 + (30  0.07*P2) X2
c. MAX 20 P1  0.1 P12 + 30 P2  0.07 P22  1040
d. MAX 22.5 P1  0.1 P12 + 31.26 P2  0.07 P22  1040
ANS: D PTS: 1
Exhibit 8.1
The following questions pertain to the problem and spreadsheet below.
A company makes products A and B from 2 resources, labor and material. The company wants to
determine the selling price which will maximize profits. A unit of A costs 25 to make and demand is
estimated to be 20  .10 * Price of A. A unit of B costs 18 to make and demand is estimated to be 30 
.07 * Price of B. The utilization of labor and materials and the available quantity of resources is shown
in the table. A reasonable price for the products is between 100 and 200.

Demand (units) 20  .10*P1 30  .07*P2

Let P1 = price for As and P2 = price for Bs
A B C D E
1
2 A B
3 Price 112.50 223.29
4 Marginal Cost 25.00 18.00
5 Profit Margin 87.50 205.29
6
7 Demand 8.75 14.37
8
9 Total Profit 3715.58
10
11 Constraints: Used Available
12 Labor 3.00 2.00 54.99 150.00
13 Material 1.00 2.00 37.49 200.00
27. Refer to Exhibit 8.1. What formula is used in cell B7 of the spreadsheet for this problem?
a. = 30  .07 * C3
b. = 20  .1 * B3
c. = B3  B4
d. = B5 * B7 + C5 * C7
ANS: B PTS: 1
28. Refer to Exhibit 8.1. What formula is used in cell B9 of the spreadsheet for this problem?
a. =B3*B7+C3*C7
b. =B5*B7+C5*C7
c. =(B5-B4)*B7+(C5-C4)*B7
d. =B3*B7+C3*B7+B4*B7+C4*B7
ANS: B PTS: 1
29. Refer to Exhibit 8.1. What formula is used in cell D12 of the spreadsheet for this problem?
a. =SUMPRODUCT(B3:C3, B12:C12)
b. =SUMPRODUCT(B4:C4, B12:C12)
c. =SUMPRODUCT(B5:C5, B12:C12)
d. =SUMPRODUCT(B7:C7, B12:C12)
ANS: D PTS: 1
30. An investor is developing a portfolio of stocks. She has identified 3 stocks in which to invest. She
wants to earn at least 5% return but with minimum risk.
Let: Pi = proportion of total funds invested in stock i

i2 = variance of stock i
ij = covariance between stocks i and j.
Ri = average return on stock i
What is the objective function for the NLP formulation of this problem?
a.
b.
c.
d.
and
ANS: B PTS: 1
31. An investor is developing a portfolio of stocks. She has identified 3 stocks to invest in. She wants to
earn at least 5% return but with minimum risk. The problem data is given in the following Excel
spreadsheet. What formula should be entered in cell G4 of the Excel spreadsheet?
A B C D E >
1 >
2 Annual Return >
3 Year A B C >
4 1 3.98% 7.38% 8.76% >
5 2 1.51% 10.45% 6.66% >
6 3 5.36% 5.15% 6.55% >
7 4 4.98% 5.51% 1.58% >
8 5 3.12% 6.93% 8.43% >
9 6 5.58% 4.32% 9.07% >
10 7 3.49% 9.78% 9.65% >
11 8 2.37% 5.62% 8.96% >
12 9 5.92% 6.28% 7.10% >
13 10 5.69% 5.75% 10.96% >
14 >
15 Average 3.42% 5.85% 6.03% >
< F G H I J
< 1
< 2 Covariance Matrix
< 3 A B C
< 4 A 0.00080 0.00044 0.00045
< 5 B 0.00044 0.00144 0.00012
< 6 C 0.00045 0.00012 0.00300
< 7
< 8 A B C Total
< 9 Portfolio 36.8% 40.6% 22.6% 100.0%
< 10
< 11 Expected Return 5.00%
< 12 Required Return 5.00%
< 13
< 14 Portfolio Variance 0.000274
< 15
a. =COVAR(B4:B13)
b. =VARP(B4:B13)
c. =COVAR(B4:D13,$D$4:$B$13)
d. =COVAR(B4:B13,$B$4:$B$13)
ANS: D PTS: 1
32. An investor is developing a portfolio of stocks. She has identified 3 stocks to invest in. She wants to
earn at least 5% return but with minimum risk. The problem data is given in the following Excel
spreadsheet. What formula should be entered in cell H11 of the Excel spreadsheet?
A B C D E >
1 >
2 Annual Return >
3 Year A B C >
4 1 3.98% 7.38% 8.76% >
5 2 1.51% 10.45% 6.66% >
6 3 5.36% 5.15% 6.55% >
7 4 4.98% 5.51% 1.58% >
8 5 3.12% 6.93% 8.43% >
9 6 5.58% 4.32% 9.07% >
10 7 3.49% 9.78% 9.65% >
11 8 2.37% 5.62% 8.96% >
12 9 5.92% 6.28% 7.10% >
13 10 5.69% 5.75% 10.96% >
14 >
15 Average 3.42% 5.85% 6.03% >
< F G H I J
< 1
< 3 A B C
< 4 A 0.00080 0.00044 0.00045
< 5 B 0.00044 0.00144 0.00012
< 6 C 0.00045 0.00012 0.00300
< 7
< 8 A B C Total
< 9 Portfolio 36.8% 40.6% 22.6% 100.0%
< 10
< 13
< 14 Portfolio Variance 0.000274
< 15
a. =SUMPRODUCT(B15:D15,G9:I9)
b. =SUMPRODUCT(B15:D15,B4:D13)
c. =SUMPRODUCT(B15:D15,I9)
d. =SUMPRODUCT(B15:D15,G4:I6)
ANS: A PTS: 1
33. A company wants to locate a new warehouse to minimize the distance traveled by its delivery trucks.
It has four stores and their coordinates are listed in the accompanying spreadsheet. Which cell(s) in the
spreadsheet represent the decision variables in the problem?
A B C D
1
2 X-Coordinate Y-Coordinate
3 Warehouse 163.800 101.000 Distance:
4 Store 1 100 130 70.082
5 Store 2 90 60 84.424
6 Store 3 210 80 50.749
7 Store 4 180 110 18.532
8
9 Total Distance: 223.787
a. B3
b. B3:C3
c. B4:C7
d. D9
ANS: B PTS: 1
It has four stores and their coordinates are listed in the accompanying spreadsheet. What formula goes
in cell D4 of the spreadsheet?
A B C D
1
4 Store 1 100 130 70.082
5 Store 2 90 60 84.424
6 Store 3 210 80 50.749
7 Store 4 180 110 18.532
8
a. =(B4-$B$3)^2+(C4-$C$3)^2
b. =SQRT((B4-$B$3)+(C4-$C$3))
c. =SQRT((B4-$B$3)^2+(C4-$C$3)^2)
d. =(B4-$B$3)+(C4-$C$3)
ANS: C PTS: 1
It has four stores and their coordinates are listed in the accompanying spreadsheet. What formula goes
in cell D9 of the spreadsheet?
A B C D
1
4 Store 1 100 130 70.082
5 Store 2 90 60 84.424
6 Store 3 210 80 50.749
7 Store 4 180 110 18.532
8
a. =MIN(D4:D7)^2
b. =SUM(D4:D7)
c. =SQRT(D4^2+D5^2+D6^2+D7^2)
d. =SQRT(MMULT(B3:C3,D4:D7))
ANS: B PTS: 1
36. An office supply company is attempting to determine the order quantity for laser printer toner
cartridges which are sold to local businesses. Annual demand is 20,000 units and each cartridge costs
the store $25. It costs $30 to place an order and the inventory carrying cost rate is 25% of the value of
the item. The following spreadsheet has been set up to solve the problem. What cell is the variable cell
in this problem?
A B
1
2
3 Annual Demand: 20,000
4
5 Cost per Unit: $25
6 Ordering Cost: $30
7 Carrying Cost: 25%
8
9 Order Quantity: 483.73
10
11 Total Cost: $502,738.61
a. B3
b. B7
c. B9
d. B11
ANS: C PTS: 1
the item. The following spreadsheet has been set up to solve the problem. What cell is the objective
cell in this problem?
A B
1
2
4
8
10
11 Total Cost: $502,738.61
a. B3
b. B7
c. B9
d. B11
ANS: D PTS: 1
the item. The following spreadsheet has been set up to solve the problem. What formula goes in cell
B11 in this problem?
A B
1
2
4
8
10
11 Total Cost: $502,738.61
a. =B3*B7+B9/B3*B6+B9*2+B5*B7
b. =B3*B5+B3/B9*B6+B9/2*B5*B7
c. =SQRT(B3*B5+B3/B9*B6+B9/2*B5*B7)
d. =B3*B3+B3/B9+B6*B9/2*B5*B7
ANS: B PTS: 1
the item. The following spreadsheet has been set up to solve the problem. What constraint would you
impose on this problem to ensure that at least one order is placed per year?
A B
1
2
4
8
10
11 Total Cost: $502,738.61
a. MAX B9
b. B9 = 1
c. B9  1
d. MIN B11
ANS: C PTS: 1
40. An investor wants to determine how much interest he must earn to be able to make the payments on a
10-year mortgage which has increasing annual payments. The problem is summarized in the
accompanying spreadsheet. The investor has enough money to make an initial investment of $9,000
and hopes he can earn 12%, compounded quarterly, on his investments. He would like to know how
low his annual return can be and still allow him to make his payments from interest income. What
formula goes in cell C7 of the spreadsheet?
A B C D E F
1
2 Amount Invested: $9,000
3 Annual Return: 10%
4
5 Beginning Investment Earnings Premium Ending
6 Year Balance Earnings After Taxes Due Balance
7 1 $9,000 $971 $699 $500 $9,199
8 2 $9,199 $993 $715 $534 $9,380
9 3 $9,380 $1,012 $729 $566 $9,543
10 4 $9,543 $1,030 $741 $593 $9,691
11 5 $9,691 $1,046 $753 $607 $9,837
12 6 $9,837 $1,061 $764 $635 $9,966
13 7 $9,966 $1,075 $774 $672 $10,068
14 8 $10,068 $1,086 $782 $695 $10,155
15 9 $10,155 $1,096 $789 $737 $10,207
16 10 $10,207 $1,101 $793 $793 $10,207
a. =B7*(1+$C$3/4)^4-B7
b. =B7*(1+$C$3)-B7
c. =B7*($C$3/4)^4-B7
d. =B7*(1+$C$3/4)^4
ANS: A PTS: 1
and hopes he can earn 12%, compounded quarterly, on his investments. He would like to know how
low his annual return can be and still allow him to make his payments from interest income. What
constraint must be entered in the Risk Solver Platform (RSP) task pane?
A B C D E F
1
4
7 1 $9,000 $971 $699 $500 $9,199
8 2 $9,199 $993 $715 $534 $9,380
9 3 $9,380 $1,012 $729 $566 $9,543
10 4 $9,543 $1,030 $741 $593 $9,691
11 5 $9,691 $1,046 $753 $607 $9,837
12 6 $9,837 $1,061 $764 $635 $9,966
13 7 $9,966 $1,075 $774 $672 $10,068
14 8 $10,068 $1,086 $782 $695 $10,155
15 9 $10,155 $1,096 $789 $737 $10,207
16 10 $10,207 $1,101 $793 $793 $10,207
a. $D$7:$D$16  $E$7:$E$16
b. $C$7:$D$16  $E$7:$E$16
c. $C$7:$C$16  $E$7:$E$16
d. $D$7:$D$16  $E$7:$E$16
ANS: D PTS: 1
42. How much must the objective function coefficient of the variable Pumpkin change before any
Pumpkins are produced based on the following sensitivity report?
Changing Cells
Final Reduced
Cell Name Value Gradient
$B$4 Corn 9.52 0
$C$4 Pumpkin 0 499.99
$D$4 Beans 10.79 0
Constraints
Final Lagrange
Cell Name Value Multiplier
$E$8 Corn 200000 0.016
$E$9 Pumpkin 99 12
$E$10 Beans 37777.78 0
$E$11 Water 29.84 0
$E$12 Fertilizer 8000 3.49
a. increase by 12
b. decrease by 12
c. increase by 499.99
d. decrease by 499.99
ANS: C PTS: 1
43. How much are additional units of Labor worth based on the following sensitivity report?
Changing Cells
Final Reduced
$B$4 Number to make: X1 9.42 0
$C$4 Number to make: X2 1.71 0
Constraints
Final Lagrange
$D$8 Wood 42 0
$D$9 Labor 132 1.21
$D$10 Plywood 24 2.57
a. 0
b. 1.21
c. 2.57
d. 9.42
ANS: B PTS: 1
PROBLEM
44. How many local maximum solutions are there on this graph of a function? Mark their locations on the
graph.
ANS:
There two local maximums, one at X = 13 and a second at X = 25.
PTS: 1
45. How many local minimum solutions are there on this graph of a function Mark their locations on the
graph.
ANS:
There are three local minima, X = 0, X = 20, and X = 30.
PTS: 1
46. Find the maximum solution on this graph of a function starting from X = 12. Mark its location on the
graph.
ANS:
The maximum solution is at X = 10.
PTS: 1
47. The Sweet Water beverage company is designing a new soft drink can. The designers wish to
minimize the manufacturing cost of the can, a cost that is directly related to the amount of aluminum
used in the can. The can must hold at least 350 ml (or cm3) of beverage, have a diameter between 3
and 7 cm, and have a height between 7 and 19 cm.
Formulate the NLP for Sweet Water.
ANS:
Let D be the diameter of the can,
H be the height of the can.
MIN DH + (/2)D2

Subject to: (/4)D2H  350
3D7
7  H  19
Note: DH is the cylindrical surface area while each of the two ends has area (/4)D2
PTS: 1
estimated to be 50  .09 * Price of A. A unit of B costs 20 to make and demand is estimated to be 30 
.14 * Price of B. The utilization of labor and materials and the available quantity of resources is shown
in the table. A reasonable price for the products is between 90 and 140.

Demand (units) 50  0.09*P1 30  0.14*P2

Formulate the NLP for this company
ANS:
MAX: 52.70 P1  0.09 P12 + 32.80 P2  0.14 P22  2100
Subject to: X1  50 + 0.09P1 = 0
X2  30 + 0.14P2 = 0
2 X1 + 4 X2  150
2 X1 + 8 X2  220
90  P1, P2  140
X1, X2  0
PTS: 1
estimated to be 50  0.09 * Price of A. A unit of B costs 20 to make and demand is estimated to be 30
 0.14 * Price of B. The utilization of labor and materials and the available quantity of resources is
shown in the table. A reasonable price for the products is between 90 and 140.

Demand (units) 50  0.09*P1 30 14*P2

The NLP for the problem is:
MAX: 52.70 P1  0.09 P12 + 32.80 P2  0.14 P22  2100

Subject to: X1  50 + 0.09P 1 = 0
X2  30 + 0.14P2 = 0
2 X1 + 4 X2  150
2 X1 + 8 X2  220
90  P1, P2  140
X1, X2  0
and the solution (P1, P2) = (140.0, 117.14)
What values should go in cells B3:E18 of the spreadsheet for this problem?
A B C D E
1
2 A B
3 Price
4 Min Price
5 Max Price
6 Marginal Cost
7 Profit Margin
8
9 Demand
10
11 Total Profit
12
14 Labor
15 Material
ANS:
A B C D E
1
2 A B
3 Price 140.00 117.14
4 Min Price 90 90
5 Max Price 140 140
6 Marginal Cost 30.00 20.00
7 Profit Margin 110.00 97.14
8
9 Demand 37.40 13.60
10
11 Total Profit 5435.14
12
14 Labor 2.00 4.00 129.20 150.00
15 Material 2.00 8.00 183.60 220.00
PTS: 1
The average return for the stocks is:
Annual Return
A B C
Average 10.72% 10.68% 11.87%
The covariance matrix for the stocks is:
A B C
A 0.00009 0.00009 0.00011
B 0.00009 0.00032 0.00007
C 0.00011 0.00007 0.00122
Let: Pi = proportion of total funds invested in i, i = A, B, C
Formulate the NLP for this problem.
ANS:
MIN: 0.00009 P12 + 0.00032 P22 + 0.00122 P32
+ 2 (0.00009 P1P2  0.00011 P1P3  0.00007 P2 P3)
Subject to: P1 + P2 + P3 = 1
0.1072 P1 + 0.1068 P2 + 0.1187 P3  0.11
P1, P2, P3  0
P1, P2, P3  1
PTS: 1
Let: Pi = proportion of total funds invested in i, i = A, B, C
The NLP for this problem is:
MIN: 0.00009 P12 + 0.00032 P22 + 0.00122 P32

+ 2 (0.00009 P1P2  0.00011 P1P3  0.00007 P2P3)
Subject to: P1 + P2 + P3 = 1
0.1072 P1 + 0.1068 P2 + 0.1187 P3  0.11
P1, P2, P3  0
P1, P2, P3  1
What formulas should go in cells G4:J14 of the spreadsheet for this problem? NOTE: Formulas are not
required in all of these cells.
A B C D E >
1 >
2 Annual Return >
3 Year A B C >
4 1 9.73% 12.54% 10.23% >
5 2 10.83% 9.52% 16.10% >
6 3 12.14% 11.47% 4.07% >
7 4 9.14% 13.72% 12.93% >
8 5 11.16% 8.89% 11.97% >
9 6 11.60% 10.72% 12.03% >
10 7 11.06% 12.21% 14.00% >
11 8 11.22% 8.56% 16.28% >
12 9 9.25% 11.09% 12.99% >
13 10 11.11% 8.10% 8.06% >
14 >
15 Average 10.72% 10.68% 11.87% >
< F G H I J
< 1
< 3 A B C
< 4 A 0.00009 0.00009 0.00011
< 5 B 0.00009 0.00032 0.00007
< 6 C 0.00011 0.00007 0.00122
< 7
< 8 A B C Total
< 9 Portfolio 63.7% 27.2% 9.1% 100.0%
< 10
< 13
< 14 Portfolio Variance 2.5312E-05
< 15
ANS:
Cell Formula Copied to
B15 =AVERAGE(B4:B13) C15:D15
G4 =COVAR(B4:B13,$B$4:$B$13) H4:I4
G5 =COVAR(B4:B13,$C$4:$C$13) H5:I5
G6 =COVAR(B4:B13,$D$4:$D$13) H6:I6
H11 =SUMPRODUCT(B15:D15,G9:I9)
H14 =SUMPRODUCT(MMULT(G9:I9,G4:I6),G9:I9)
J9 =SUM(G9:I9)
PTS: 1
52. A company wants to locate a new warehouse to minimize the distance travelled by its delivery trucks.
It has four stores and their coordinates are listed in the below.
X-Coordinate Y-Coordinate
Store 1 70 160
Store 2 60 90
Store 3 180 90
Store 4 150 120
Formulate the objective function for this problem. Let X and Y represent the X, Y coordinates of the
new warehouse.
ANS:
MIN:
PTS: 1
53. A company wants to locate a new warehouse to minimize the distance travelled by its delivery trucks.
It has four stores and their coordinates are listed in the accompanying spreadsheet. What formulas
should go in cells D4:D9 of the spreadsheet for this problem?
A B C D
1
4 Store 1 70 160 81.314
5 Store 2 60 90 82.790
6 Store 3 180 90 49.071
7 Store 4 150 120 12.079
8
ANS:
D4 =SQRT((B4-$B$3)^2+(C4-$C$3)^2) D5:D7
D9 =SUM(D4:D7)
PTS: 1
54. A company wants to locate a new warehouse to minimize the longest distance travelled by any of its
delivery trucks. It has four stores and their coordinates are listed in the below.
Store 1 70 160
Store 2 60 90
Store 3 180 90
Store 4 150 120
Formulate the NLP for this problem. Let X and Y represent the X, Y coordinates of the new
warehouse.
ANS:
MIN: Q
Subject to:
PTS: 1
55. A company wants to locate a new warehouse to minimize the longest distance travelled by any of its
delivery trucks. It has four stores and their coordinates are listed in the below.
Store 1 70 160
Store 2 60 90
Store 3 180 90
Store 4 150 120
Let X and Y represent the X, Y coordinates of the new warehouse. The NLP for this problem and
solution is the following.
MIN: Q
Subject to:
Solution is (X, Y) = (120.0, 117.4).
What values should go in cells B2:D9 of the spreadsheet for this problem?
A B C D
1
2 Warehouse
3 X Y Distance
4 Store 1
5 Store 2
6 Store 3
7 Store 4
8 Total
9 Max
10
ANS:
A B C D
1
2 Warehouse 120.0 117.4
3 X Y Distance
4 Store 1 70 160 65.85
5 Store 2 60 90 65.85
6 Store 3 180 90 65.85
7 Store 4 150 120 30.14
8 Total 227.698
9 Max 65.854
10
PTS: 1
56. An office supply company is attempting to determine the order quantity for Mt. White fountain pens
which are sold to local executives. Annual demand is 5,000 units and each pen costs the store $50. It
costs $75 to place an order and the inventory carrying cost rate is 30% of the value of the item.
Formulate the objective function for this problem. Let Q indicate the order quantity.
ANS:
MIN: 5000 (50) + 5000/Q (75) + Q/2 (50)(.30)
PTS: 1
57. An office supply company is attempting to determine the order quantity for Mt. White fountain pens
which are sold to local executives. Annual demand is 5,000 units and each pen costs the store $50. It
costs $75 to place an order and the inventory carrying cost rate is 30% of the value of the item.
What values should go in cells B3:B11 of the spreadsheet for this problem if Q = 223.61?
A B
1
2
3 Annual Demand:
4
5 Cost per Unit:
6 Ordering Cost:
7 Carrying Cost:
8
9 Order Quantity:
10
11 Total Cost:
ANS:
A B
1
2
4
8
10
11 Total Cost: $253,354
PTS: 1
58. Calculate the annual inventory costs for the following data.
Order quantity = 400 units

Annual demand = 12,500 units
Unit purchase cost = 50
Fixed cost of placing an order = 75
Percentage cost of holding one unit in inventory for a year = 20%
ANS:
$629,343.75
PTS: 1
and hopes he can earn 18% on his investments. He would like to know how low his annual return can
be and still allow him to make his payments from interest income.
What formulas should go in cells B7:F7 of the spreadsheet for this problem?
A B C D E F
1
4
7 1 $12,000 $2,346 $1,689 $1,536 $12,153
8 2 $12,153 $2,376 $1,711 $1,570 $12,294
9 3 $12,294 $2,403 $1,730 $1,602 $12,422
10 4 $12,422 $2,428 $1,748 $1,629 $12,541
11 5 $12,541 $2,452 $1,765 $1,643 $12,664
12 6 $12,664 $2,476 $1,782 $1,671 $12,775
13 7 $12,775 $2,497 $1,798 $1,708 $12,865
14 8 $12,865 $2,515 $1,811 $1,731 $12,945
15 9 $12,945 $2,531 $1,822 $1,773 $12,994
16 10 $12,994 $2,540 $1,829 $1,829 $12,994
ANS:
B7 =C2
B8 =F7 B9:B16
C7 =B7*(1+$C$3/4)^4-B7 C8:C16
D7 =(1-.28)*C7 D8:D16
F7 =B7+D7-E7 F8:F16
PTS: 1
and hopes he can earn 18% on his investments. He would like to know how low his annual return can
be and still allow him to make his payments from interest income.
If the Risk Solver Platform (RSP) is used, which are the Objective, Variables and Constraint cells in
the spreadsheet for this problem?
A B C D E F
1
4
7 1 $12,000 $2,346 $1,689 $1,536 $12,153
8 2 $12,153 $2,376 $1,711 $1,570 $12,294
9 3 $12,294 $2,403 $1,730 $1,602 $12,422
10 4 $12,422 $2,428 $1,748 $1,629 $12,541
11 5 $12,541 $2,452 $1,765 $1,643 $12,664
12 6 $12,664 $2,476 $1,782 $1,671 $12,775
13 7 $12,775 $2,497 $1,798 $1,708 $12,865
14 8 $12,865 $2,515 $1,811 $1,731 $12,945
15 9 $12,945 $2,531 $1,822 $1,773 $12,994
16 10 $12,994 $2,540 $1,829 $1,829 $12,994
ANS:
Objective: C3
Variables: C3
Constraint: D7:D16E7:E16
PTS: 1
61. How much must the objective function coefficient of the variable X2 increase before any X2s are
produced based on the following sensitivity report?
Changing Cells
Final Reduced
$B$4 Number to make: X1 9.428 0
$C$4 Number to make: X2 0 1.96
Constraints
Final Lagrange
$D$8 Used 42 0
$D$9 Used 132 0.214
$D$10 Used 24 1.214
ANS:
1.96
PTS: 1
62. How much are additional units of labor worth based on the following sensitivity report?
Changing Cells
Final Reduced
$B$4 Number to make: X1 4 0
$C$4 Number to make: X2 8.571 0
Constraints
Final Lagrange
$D$8 Wood 84 0.714
$D$9 Labor 4 3.714
$D$10 Hinges 8.571 0
ANS:
3.714
PTS: 1
63. A construction company just purchased a 300  300 foot lot upon which they plan to build an office
building. They need at least 60,000 ft2 of office floor space. Zoning regulations require each floor be
10 feet high and the building not exceed 65 ft in height. Further, parking space must equal at least 30%
of the total floor space available. The company's cost accountant uses a 60% factor of the building
height and a 1% factor of any story's floor area to calculate the total building cost (in millions of
dollars).
Formulate the NLP for the problem.
ANS:
Let L = building length
W = building width
S = number of stories
P = total parking area
MIN 0.60*10*X + 0.01*L*W

Subject to: S * L * W  60,000 {total floor area}
L * W + P = 90,000 {total lot area}
P  0.30 * S * L * W {min. parking area}
S * 10  65 {max. building height}
0  L, W  300
0S6
P0
PTS: 1
Exhibit 8.2
The following questions pertain to the problem and spreadsheet below.
A construction company just purchased a 300  300 foot lot upon which they plan to build an office
building. They need at least 60,000 ft2 of office floor space. Zoning regulations require each floor be
10 feet high and the building not exceed 65 ft in height. Further, parking space must equal at least 30%
of the total floor space available. The company's cost accountant uses a 60% factor of the building
height and a 1% factor of any story's floor area to calculate the total building cost (in millions of
dollars).
The following is the NLP formulation for the problem.
Let L = building length

W = building width
S = number of stories
P = total parking area
MIN 0.60*10*X + 0.01*L*W

Subject to: S * L * W  60,000 {total floor area}
L * W + P = 90,000 {total lot area}
P  0.30 * S * L * W {min. parking area}
S * 10  65 {max. building height}
0  L, W  300
0S6
P0
The spreadsheet implementation of this formulation applies to the following questions.
A B C D E
1 Length Width Stories Parking
2 108.39492 92.255243 6 80,000
3 Max Values 300 300 6
4
5 Total Floor Area 60,000  60,000
6 Total Lot Area 90,000 = 90,000
7 Min. Parking Area 65,000  0
8 Max. Bld Height 60  65
9
10 Cost
11 Height Factor 0.6 Total Height 60
12 Area Factor 0.01 Floor Area 10,000
13 Cost $136.0 millions $
64. Refer to Exhibit 8.2. What values would you enter in the Risk Solver Platform (RSP) task pane for the
above Excel spreadsheet?
Objective Cell:
Variables Cells:
Constraints Cells:
ANS:
Objective Cell:
D13
Variables Cells:
B2:E2
Constraints Cells:
B5  D5
B6 = D6
B7  D7
B8  D8
PTS: 1
65. Refer to Exhibit 8.2. What formula would you place into cell B5 to calculate Total Floor Area?
ANS:
=B2*C2*D2
PTS: 1
66. Refer to Exhibit 8.2. What formula would you place in cell B6 to calculate Total Lot Area?
ANS:
=B2*C2+E2
PTS: 1
67. Refer to Exhibit 8.2. What formula would you place in cell D13 to calculate total cost?
ANS:
=SUMPRODUCT(B11:B12,D11:D12)
PTS: 1
68. Refer to Exhibit 8.2. The company wishes to have a relatively square building. Thus, they wish neither
the building length nor the building width exceed the other by more than 25%. Add constraint(s) to
enforce this design constraint.
ANS:
L + 0.75W  0
L  1.25W  0
PTS: 1
PROJECT
69. Project 8.1  Truck Company Expansion
Kornfield Trucking handles private and commercial moves. They currently own 500 moving vans and
employ 2000 full-time workers. Their trucks are used to pick-up and deliver office and household
goods throughout the Eastern and Southeastern states. Kornfield mans each truck with three workers.
This allows driver swaps providing increased miles-covered-per-hour ratio while staying within safety
requirements for individual driving time. A 3-person crew also reduces company reliance on local
help. Local distributors and warehouses provide a pool of laborers for loading and unloading the
moving trucks. While in the past this arrangement has worked well, the arrangement has soured
recently as the temporary workers have demanded higher wages while produced less work. Despite
their pay and benefits package, Kornfield still finds that the nature of the work (lifting and time on the
road) makes for a high rate of turnover. Thus, Kornfield maintains an excess of workers/drivers, but no
more than 3.75 workers per truck at any time.
The following information is available on the trucks in the Kornfield inventory and their options for
new purchases.
Purchase Salvage Yearly Miles Per Miles per

Price Value Maintenance Year Gallon*
New Truck $55,000 --- $ 750 100,000 12.5 mpg
Old Truck --- $25,000 $1500 100,000 10 mpg
*assume $1.50/gal
The following information applies to Kornfield personnel actions.
Hiring Cost Firing Cost Salary

New Worker $1000 --- $28,000
Old Worker --- $1500 $35,000
Kornfield has an operating budget of $ 75M next year and wants to expand their operations. As a part
of this expansion, they are considering options for their truck fleet and may purchase new trucks, sell
old trucks to salvage or some combination of the two. Any salvage money received is rolled into the
operating budget. Kornfield is also considering possible changes to their work force. Their current
force has a fairly high average salary and their operating budget is not greatly affected by releasing
current employees. On the other hand, newer employees carry a much lower average salary and do not
tax the operating budget heavily in hiring and training costs.
The Cobb-Douglas production function is used to model the number of vehicle miles driven per year.
This function represents the quantity Kornfield management would like to maximize as they expand
their operations. The general form of the Cobb-Douglas production function is the following:
where y is the output, each Xi represents an input and the letters represent constants. This function
generalizes to fewer or a greater number of parameters than the three depicted above. The constants for
the Kornfield Trucking production function are (a, b, c, d) = (9.1, 0.05, 0.40, 0.50).
Formulate the Kornfield Trucking problem as a non-linear programming problem. Implement the
problem in Excel and use Risk Solver Platform (RSP) generalized reduced gradient (GRG) routing to
obtain a solution to the problem. What is a recommended solution for Kornfield Trucking?
ANS:
Define the following decision variables:
X1 be the number of new trucks purchased;

X2 be the number of old trucks salvaged;
X3 be the number of new workers hired;
X4 be the number of old workers fired;
Y1 be the total trucks in expanded inventory;
Y2 be the total workers in company; and
Y3 be the total fuel consumed during the year (thousands of gallons).
Maximize:
Subject to:
Y1  X1 + X2 = 500 Trucks
Y2  X3 + X4 = 2000 Workers
Y3  8X1 + 10X2 = 5000 Fuel consumed (1000s of gals)
WC  $35000*(2000  X4)  $1500X4  $29000X3 = 0 Worker cost

MC  $750X1  $1500(500  X2) = 0 Maintenance cost
TC  $55000X1 + $25000X2 = 0 Truck costs
FC  $1500(500  X2)  $1200X1 = 0 Fuel costs per 10K miles
WC + MC + TC + 10*FC  $80,000,000 Budget constraint

Y2  3.75Y3  0 Worker/Truck ratio
Xi, Yj  0
The suggested solution is to purchase 647 new trucks while retaining all the old trucks. This requires
2299 new workers along with the current work force of 2000. This yields a total vehicle miles value of
37,081.31 vehicle miles with costs of $20,585,000 in truck costs, $37,915,000 in worker costs,
$1,235,520 in maintenance costs, and $15,264,000 in fuel costs.
PTS: 1

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Chapter 8—Nonlinear Programming and Evolutionary Optimization

2. The optimal solution to a NLP problem can occur at a(n)

3. The optimal solution to a LP problem is always at

4. The GRG and Simplex algorithms are similar in that

7. The GRG algorithm operates by

10. The GRG algorithm terminates when it

11. In NLP a local optimum is best described as

21. Which of the following is not an assumption of an EOQ problem.

Annual demand for the item D = 500

Product A B Available resources

Let X1 = demand for As and X2 = demand for Bs.

The objective function for this problem is?

The following questions pertain to the problem and spreadsheet below.

Product A B Available resources

Let X1 = demand for As and X2 = demand for Bs.

Let: Pi = proportion of total funds invested in stock i

MIN DH + (/2)D2

Product A B Available resources

Let X1 = demand for As and X2 = demand for Bs.

Formulate the NLP for this company

Product A B Available resources

Let X1 = demand for As and X2 = demand for Bs.

The NLP for the problem is:

MAX: 52.70 P1  0.09 P12 + 32.80 P2  0.14 P22  2100

The average return for the stocks is:

The covariance matrix for the stocks is:

Let: Pi = proportion of total funds invested in i, i = A, B, C

Formulate the NLP for this problem.

Let: Pi = proportion of total funds invested in i, i = A, B, C

The NLP for this problem is:

MIN: 0.00009 P12 + 0.00032 P22 + 0.00122 P32

Solution is (X, Y) = (120.0, 117.4).

Order quantity = 400 units

Formulate the NLP for the problem.

MIN 0.60*10*X + 0.01*L*W

The following questions pertain to the problem and spreadsheet below.

The following is the NLP formulation for the problem.

Let L = building length

MIN 0.60*10*X + 0.01*L*W

The spreadsheet implementation of this formulation applies to the following questions.

69. Project 8.1  Truck Company Expansion

Purchase Salvage Yearly Miles Per Miles per

Hiring Cost Firing Cost Salary

X1 be the number of new trucks purchased;

WC  $35000*(2000  X4)  $1500X4  $29000X3 = 0 Worker cost

WC + MC + TC + 10*FC  $80,000,000 Budget constraint

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