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Week 3

Southern Oil Company produces regular and premium gasoline. Regular gasoline contributes $0.30 profit per gallon and premium $0.50. Regular uses 0.3 gallons of crude oil per gallon while premium uses 0.6 gallons. Southern has 18,000 gallons of crude oil and can produce up to 50,000 gallons total. Demand for premium is at most 20,000 gallons. The company wants to determine the production mix to maximize total profit.

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89 views2 pages

Week 3

Southern Oil Company produces regular and premium gasoline. Regular gasoline contributes $0.30 profit per gallon and premium $0.50. Regular uses 0.3 gallons of crude oil per gallon while premium uses 0.6 gallons. Southern has 18,000 gallons of crude oil and can produce up to 50,000 gallons total. Demand for premium is at most 20,000 gallons. The company wants to determine the production mix to maximize total profit.

Uploaded by

JDesconectado18
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Southern Oil Company

• Southern Oil Company produces two grades of gasoline: regular and


premium. The profit contributions are $0.30 per gallon for regular
gasoline and $0.50 per gallon for premium.

• Each gallon of regular gasoline contains 0.3 gallons of crude A oil and
each gallon of premium gasoline contains 0.6 gallons of crude A oil.

• For the next production period, Southern has 18,000 gallons of crude
A oil available. The refinery used to produce the gasolines has a
production capacity of 50,000 gallons for the next production period.
Southern Oil’s distributors have indicated that demand for premium
gasoline for the next production period will be at most 20,000 gallons.

• Determine how much of each grade to produce to maximize profit.


Steps
1. Graph the constraint lines
2. Find the feasible region
3. Find the slope of the objective line
4. Find extreme point
i. Plot objective line through feasible region
ii. Maximize or minimize objective function by shifting line to
extreme point
5. Determine x1 and x2 at this point
i. Obtain equations for the two lines that intersect
ii. Solve equ 1 for x2
iii. Substitute x2 in equ 2 to obtain value for x1
iv. Substitute x1 in ii above to obtain value for x2

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