Learn: The Quick & easy way on How To Solve Linear Programming Problems Using Excel Solver

In this video, you will learn:
1. How To Solve Linear Programming Problems Using Excel Solver
2. Excel database functions

In my last video tutorial, I talked about another lesser known more advanced type tools that we can use within Microsoft Excel and we take a look at another one there called EXCEL SOLVER in which we discussed How to use Excel Solver Tool and how to activate the excel solver add-in that is built inside of Microsoft excel

In today’s video tutorial, we are going to take a bit further on How To Solve Linear Programming Problems Using Excel Solver which helps to solve more complex decision making problems.

Linear Programming is most important as well as a fascinating aspect of applied mathematics that helps in resource optimization (either minimizing the losses or maximizing the profit with given resources). If we have Constraints and the objective function well defined, we can use the system to predict an optimal solution for a given problem. In Excel, we have Excel Solver, which helps us solving the Linear Programming Problems.
Basically, linear programming is one technique that accountants can often applied to determine the best way of using limited resources to achieve a given objective. The key elements of a linear programming problem include:

• Objective function
• Constraints
• Decision variables
• Variable bounds: i.e. Non negativity Constraints (eg, ≥ 0).

In this video tutorial I want to demonstrate how we can use the Solver tool to perform linear programming to determine an optimal product mix that maximizes profits given a limited set of resources. This technique here can also be used in many other accounting and business settings to help decision-makers to determine an optimal outcomes given limited resources.

I have prepared this Summary of production of Cotton to ease our understanding.
Here is the Scenario:

A company currently sells two Products of Cotton: The Wool and The Silk.

1) Objective functions: To Maximize Profits
2) The following Constraints must be set:
A) It faces key resource constraints. I.e. it has only 6,264 hours of labour, 2,880 units of Yarn, and 400 units of fibre available.
Then,
B) To produce Product Wool, it requires; 2 units of Fibres,36hrs of Labour and 12 units of Yarn
C) To produce Product Silk, it requires; 2 unit of Fibres,24hrs of Labour and 16 units of Silk

3) Decision: How many units can each product of COTTON (i.e. Wool & Silk) produce in the coming production run to maximize profits

To let the Excel Solver know which cells on the worksheet represent the Decision Variables, Constraints and Objective Function, Go to Data Tab, then click Solver button. This Displays the Solver Parameters dialog.

Note: Variables, C3 and D3 are the values of the decision variables which are unknown at the start of the problem

Things to Remember About Linear Programming in Excel

• It is mandatory to solve Linear Programming Problems using Excel Solver. There is no other method we can do this using.
• We should always have constraints and object variable to be set ready with us.
• If Solver is not enabled, you can enable it under Excel Add-in options.

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