5.5 Step 3. sensitivity analysis

steps of the sensitvity analysis

1. Generating the report
2. Decision variables (Variable Cells)


1. Name
2. Final Value
3. Reduced Cost
4. Objective Coefficient


1. Calculating the objective value
5. Allowable Increase/Decrease
3. Constraints


1. Constraint R.H. Side
2. Final value


1. Binding constraints
2. Non-binding constraints, Slack
3. Shadow Price
4. Allowable Increase/Decrease

how to generate the report

click on sensitivity underneath the reports section → click ok

where are the decision variables located in the report?

under name

where are the optimal solutions located at in the report?

under final value

what is the objective coefficient?

the amount of changes in the objective when a decision variable increases by 1 unit

how do you find the value of the objective

SUMPRODUCT between the final value and objective coefficient

what is the reduced cost?

amount of loss when they deviate from the optimal solution by 1 unit

the reduced cost is always zero when?

the optimal solution is not at its limits

the reduced cost is positive when?

the optimal solution is at the upper limit

the reduced cost is negative when?

the optimal solution is at the lower limite

what do allowable increase and allowable decrease values tell?

how much an individual objective coefficient can change before the optimal solutions change

if the allowable ranges are large,

then reasonable errors in estimating the coefficients will have no effect on the optimal policy (although they will affect the value of the objective function)

tight allowable ranges suggest?

that more effort might be spent ensuring that correct data or estimates are used in the model

what is the constraint R.H. side?

values of available amount of each resource

what is the finale value?

amount used for each resource

when all available amount of resource is used, that resource is called

a binding constraint

when a resource is no completely used up, it is called a

non-binding constraint. the unused amount is called a slack

the shadow price is?

amount of contribution to the objective by each additional unit’s in the available amount. it will always be zero for non-zero binding constraints

for binding constraints, the shadow price is

non-zero. any change in the available amount (Constaint R.H. Side) will cause optimal values of the decision variables as well as the objective value to change

allowable increase and decrease togethe form a ange in which?

the current shadow price remains valid