Module 2 Assignment

1. To solve each problem, you will need to do the following:

a. Use the Generalized Optimization Modeling Procedure (GOMP) template to set
up your problem as follows:
i. Define your model in words
1. Identify the firm’s/manager’s objective function in words
2. Identify the decision variables in words
3. Identify the constraints in words
ii. Formulate your model mathematically
1. Define the decision variables
2. Define the objective function in terms of decision variables
3. Define the constraints in terms of the decision variables.
iii. Set up the problem in Excel and use Solver to find the optimal values of
the decision variables.
b. Answer the questions in each of the problems below.

2. Please submit only one Word or pdf file. Please do not submit your spreadsheet file. The
file should include your GOMP formatted in a way that follows the GOMP template
along with answers to any follow-up questions. A point will be deducted if the GOMP
template is not followed.

3. Grading Rubric:

Criteria Excellent Good Adequate Poor Total

3 pts 2.5 pts 2 pts 0 pts
Part 1 Correct Correct Incorrect Missing __ / 3
formulation formulation formulation
and correct but incorrect and incorrect
solutions solutions or solutions
mistake(s) in
formulation
but correct
solutions
Part 2 Correct Correct Incorrect Missing __ / 3
formulation formulation formulation
and correct but incorrect and incorrect
solutions solutions or solutions
mistake(s) in
formulation
but correct
solutions
__ / 6

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Problem 1: Foundational Skill

Sweet Treats Bakery produces two types of baked goods: brownies and cakes. The bakery aims
to maximize profit from selling these items. Each brownie sold brings in a profit of $2 and each
cake brings in a profit of $8. The bakery has a maximum of 30 pounds of flour available each
week. It takes 0.5 pounds of flour to make one brownie and 2 pounds to make one cake. The
bakery can only use the oven for a maximum of 12 hours per week. It takes 0.25 hours to bake
one brownie and 1 hour to bake one cake.

a) Use the GOMP to determine your objective function, decision variables, constraints, and
optimal decisions.
Define Model in Words:
Objective: Maximize profit from selling brownies and Caked

Decision Variables:
1. # of Brownies produced
2. # of Cakes produced

Constraints:
1. Each brownie provides a profit of $2
2. Each Cake provides a profit of $8
3. Maximum of 30 pounds of flour available each week
4. It takes .5 pounds of flour to produce 1 brownie
5. It takes 2 pounds of flour to produce 1 Cake
6. Bakery can only use oven for a maximum of 12 hours per week
7. It takes .25 hours to bake 1 brownie
8. It takes 1 hour to bake 1 cake

Formulate Model Mathematically:

Decision Variables:
1. # of brownies produced
a. Brownies produced = B
2. # of cakes produced
a. Cakes produced = C

Objective Function: Total profit = B * Brownie profit + C * Cake profit (TP=B*Bp+C*Cp)

Define Constraints in Term of Decision Variables:

1. Each brownie provides a profit of $2
a. Bp = B*2
2. Each Cake provides a profit of $8
a. Cp = C*8
3. Maximum of 30 pounds of flour available each week
a. Bfw + Cfw <30

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 4. It takes .5 pounds of flour to produce 1 brownie
a. Bfpw = B*.5
5. It takes 2 pounds of flour to produce 1 Cake
a. Cfpw =C*2
6. Bakery can only use oven for a maximum of 12 hours per week
a. Bbt + Cbt < 12
7. It takes .25 hours to bake 1 brownie
a. Bbt = B*.25
8. It takes 1 hour to bake 1 cake
a. Cbt = C*1

b) What is the optimal solution? What is the profit under this solution?
a. The optimal solution is 48 brownies and 0 cakes with a total profit of $96.
Because the brownies produce ¼ of the profit by using ¼ of the flour and ¼ of the
oven time it is also the same result and total profit by producing 12 cakes and 0
brownies.

Problem 2: Hyperloop

Your newest venture idea is a Hyperloop service between Washington DC and Baltimore. The
Hyperloop trains will offer customers a choice between coach and first-class tickets. Maximize
profit.

For the venture to comply with federal regulations, it must sell a minimum of 10 first-class
tickets and a minimum of 10 coach tickets per trip. Currently the profit margin is $5 for each
coach ticket and $8 for each first-class ticket. Due to safety reasons, the train total capacity is
50 travelers (excluding the crew).

While first-class tickets are more profitable, first-class seats take up more space relative to
coach seats. The overall length of the seating area of the train is 2400 inches. The seat pitch for
first class is 60 inches. The federally mandated seat pitch for coach class is 30 inches.

Another consideration for deciding on the allocation of the seats is the weight capacity of the
train. The allowed total passenger payload is 10000 lbs. It is also known that first-class
customers are, on average, heavier than coach customers. The typical weight of a first-class
customer is 200lbs, while the typical weight of a coach customer is 150lbs.

a) Use the GOMP to determine your objective function, decision variables, constraints, and
optimal decisions.
GOMP Template

Define Model in Words:

Objective: Maximize Hyperloop profits

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Decision Variables:
1. Number of first-class tickets
2. Number of Coach tickets

Constraints:
1. Must sell a minimum of 10 first-class tickets
a. F > 10
2. Must sell a minimum of 10 coach tickets
a. C > 10
3. Profit for First-class ticket is $8
a. Fp =
4. Profit for coach ticket is $5
a.
5. Total capacity of the train is 50 occupants
6. Total length of seating area is 2400 inches
7. Seat pitch for first-class is 60 inches
8. Seat pitch for coach is 30 inches
9. Total passenger payload is 10,000 pounds
10. Weight of a first-class passenger is 200 pounds
11. Weight of a coach passenger is 150 pounds

Formulate Model Mathematically:

Decision Variables:
1. Number of first-class tickets
b. Number of first-class tickets = F
2. Number of coach tickets
a. Number of coach tickets = C

Objective Function: Maximize Hyperloop profits

1. Total profits = F * First-class ticket profit + C * coach ticket profit
2. Tp=F*Fp+C*Cp

Define Constraints in Term of Decision Variables:

1. Must sell a minimum of 10 first-class tickets
a.
2. Must sell a minimum of 10 coach tickets
a.
3. Profit for First-class ticket is $8
a.
4. Profit for coach ticket is $5
a.
5. Total capacity of the train is 50 occupants
a.
6. Total length of seating area is 2400 inches

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 a.
7. Seat pitch for first-class is 60 inches
a.
8. Seat pitch for coach is 30 inches
a.
9. Total passenger payload is 10,000 pounds
a.
10. Weight of a first-class passenger is 200 pounds
a.
11. Weight of a coach passenger is 150 pounds
a.

b) How many of each ticket should be sold in order to maximize profits? What is the profit
per trip?

c) How much would Hyperloop earn over a 10-year horizon with 365-day service, and 100
trains per day, assuming full utilization and assuming that you implement your solution
in part a)?

d) Now suppose that you could spend capital to upgrade the train in one of two ways:

 Upgrade 1: Spend $4 million dollars to increase the maximum number of

travelers from 50 to 55.
 Upgrade 2: Spend $8 million dollars to increase the seating area of the train from
2400 inches to 2600 inches.

You have three options. 1) Invest in Upgrade 1, 2) Invest in Upgrade 2, 3) Invest in

Neither. Which choice maximizes profit over the 10-year horizon? Justify your answer
with the sensitivity report.

e) Ignore part c. Now suppose that due to an unprecedented outbreak of a novel infectious
disease, the Hyperloop must either redesign all train cars to follow the CDC guidelines
for social distancing or shut down all operations. The full redesign would cost $50
Million and reduce the available seating area, and thus the maximum seating area of
each train by 50% (The maximum number of passengers is not restricted). Given that
you are unwilling to increase prices, how many of each ticket should be sold in order to
maximize profits? Under the assumptions in (b) is the venture still profitable?

GOMP Template

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Define Model in Words:
Objective:

Decision Variables:
3.
4.
5.

Constraints:
9.
10.
11.

Formulate Model Mathematically:

Decision Variables:
3.
a.
4.
a.
5.
a.

Objective Function:

Define Constraints in Term of Decision Variables:

1.
a.
b.
2.
a.
b.