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Consider the Grand Strand Oil Company, which produces regular grade and premium-grade gasoline

products by blending three petroleum components. The gasolines are sold at different prices, and the

petroleum components have different costs. The firm wants to determine how to blend the three

components into the two products in such a way as to maximize profits. Data available show that the

regular-grade gasoline can be sold for $1.20 per gallon and the premium- grade gasoline for $1.40 per

gallon. For the current production-planning period, Grand Strand can obtain the three components at

the costs and in the quantities shown in Table 1. The product specifications for the regular and premium

gasolines, shown in Exhibit Table 2, restrict the amounts of each component that can be used in each

gasoline product. Current commitments to distributors require Grand Strand to produce at least 10,000

gallons of regular grade gasoline.

Table 1. Petroleum component of cost and supply

Petroleum component Cost / gallon Amount available

Component 1 $0.50 5000 gallons

Component 2 $0.60 10000 gallons

Component 3 $0.82 10000 gallons

Product Specifications

Regular gasoline At most 30% Component 1

At least 40% Component 2

At most 20% Component 3

Premium gasoline At least 25% Component 1

At most 40% Component 2

At least 30% Component 3

Foster Generators

Let us consider the problem faced by Foster Generators, Inc. Currently, Foster has two plants: one in

Cleveland, Ohio and one in Bedford, Indiana. Generators produced at the plants (origins) are shipped to

distribution centers (destinations) in Boston, Chicago, St. Louis, and Lexington, Kentucky. Recently, an

increase in demand has caused Foster to consider adding a new plant to provide expanded production

capacity.

After some study, the location alternatives for the new plant have been narrowed to York, Pennsylvania

and Clarksville, Tennessee. To help them decide between the two locations, managers have asked for a

comparison of the projected operating costs for the two locations. As a start, they want to know the

minimum shipping costs from three origins (Cleveland, Bedford, and York) to the four distribution

centers if the plant is located in York. Then, finding the minimum shipping cost from the three origins

including Clarksville instead of York to the four distribution centers will provide a comparison of

transportation costs; this will help them determine the better location.

Table 1. Foster Generators Production Capacities

Origin Plant Production capacity (units)

1 Cleveland 5000

2 Bedford 6000

3 York 2500

Origin Plant Production capacity (units)

1 Boston 6000

2 Chicago 4000

3 St. Louis 2000

4 Lexington 1500

Destination

Plant

Boston Chicago St. Louis Lexington

Cleveland 3 2 7 6

Bedford 7 5 2 3

York 2 5 4 5

Carson Stapler

The Carson Stapler Manufacturing Company forecasts a 5,000-unit demand for its Sure-Hold model

during the next quarter. This stapler is assembled from three major components: base, staple cartridge,

and handle. Until now Carson has manufactured all three components. However, the forecast of 5,000

units is a new high in sales volume, and the firm doubts that it will have sufficient production capacity to

make all the components. It is considering contracting a local firm to produce at least some of the

components. The production-time requirements per unit are given in Exhibit C.22 at the bottom of the

page. After considering the firm’s overhead, material, and labor costs, the accounting department has

determined the unit manufacturing cost for each component. These data, along with the purchase price

quotations by the contracting firm are given in Exhibit C.23. Formulate a linear programming model for

the make-or-buy decision for Carson that will meet the 5,000-unit demand at a minimum total cost.

Table 1. Production data

Production time (hours) Total department

Department time available

Base Cartridge Handle

(hours)

A 0.03 0.02 0.05 400

B 0.04 0.02 0.04 400

C 0.02 0.03 0.01 400

Component Manufacturing Cost ($) Purchase Cost ($)

Base $0.75 $0.95

Cartridge 0.40 0.55

Handle 1.10 1.40

Logan Manufacturing

Logan Manufacturing wants to mix two fuels (A and B) for its trucks to minimize cost. It needs no fewer

than 3,000 gallons to run its trucks during the next month. It has a maximum fuel storage capacity of

4,000 gallons. There are 2,000 gallons of Fuel A and 4,000 gallons of Fuel B available. The mixed fuel

must have an octane rating of no less than 80.

When fuels are mixed, the amount of fuel obtained is just equal to the sum of the amounts put in. The

octane rating is the weighted average of the individual octanes, weighted in proportion to the respective

volumes.

The following is known: Fuel A has an octane of 90 and costs $1.20 per gallon. Fuel B has an octane of 75

and costs $0.90 per gallon.

a. Write the equations expressing this information.

b. Solve the problem using the Excel Solver, giving the amount of each fuel to be used. State any

assumptions necessary to solve the problem.

University of Arizona

A diet is being prepared for the University of Arizona dorms. The objective is to feed the students at the

least cost, but the diet must have between 1,800 and 3,600 calories. No more than 1,400 calories can be

starch, and no fewer than 400 can be protein. The varied diet is to be made of two foods: A and B. Food

A costs $0.75 per pound and contains 600 calories, 400 of which are protein and 200 starch. No more

than two pounds of Food A can be used per resident. Food B costs $0.15 per pound and contains 900

calories, of which 700 are starch, 100 are protein, and 100 are fat.

a. Write the equations representing this information.

b. Solve the problem for the amounts of each food that should be used.

c. Interpret all the numbers in the excel output

Answer: Grand Strand Oil Company

where

i = 1, 2, or 3 for component 1, 2, or 3

and

j = r if regular or

= p if premium

x1r = gallons of component 1 in regular gasoline

x2r = gallons of component 2 in regular gasoline

x3r = gallons of component 3 in regular gasoline

x1p = gallons of component 1 in premium gasoline

x2p = gallons of component 2 in premium gasoline

x3p = gallons of component 3 in premium gasoline

With the notation for the six decision variables just defined, the total gallons of each type of gasoline

produced can be expressed as the sum of the gallons of the blended components:

Premium gasoline = x1p + x2p + x3p

Similarly, the total gallons of each component used can be expressed as these sums:

Component 2 = x2r + x2p

Component 3 = x3r + x3p

The objective function of maximizing the profit contribution can be developed by identifying

the difference between the total revenue from the two products and the total cost of the three

components. By multiplying the $2.20 per gallon price by the total gallons of regular gasoline,

the $2.40 per gallon price by the total gallons of premium gasoline, and the component cost per

gallon figures in Exhibit C.5 by the total gallons of each component used, we find the objective

function to be

Max 2.20(x1r + x2r + x3r) + 2.40(x1p + x2p + x3p) - 1.00(x1r + x1p) - 1.20(x2r +x2p) - 1.64(x3r + x3p)

By combining terms, we can then write the objective function as

Limitations on the availability of the three components can be expressed by these three constraints:

x2r + x2p ≤ 10,000 (component 2)

x3r + x3p ≤ 10,000 (component 3)

Six constraints are now required to meet the product specifications stated in Exhibit C.5. The

first specification states that component 1 must account for at most 30 percent of the total

gallons of regular gasoline produced. That is,

x1r ≤ 0.30(x1r + x2r + x3r)

When this constraint is rewritten with the variables on the left side of the equation and a

constant on the right side, the first product-specification constraint becomes

and thus

Similarly, the four additional blending specifications shown in Exhibit C.5 can be written as

follows:

0.75x1p - 0.25x2p - 0.25x3p ≤ 0

- 0.40x1p + 0.60x2p - 0.40x3p ≤ 0

- 0.30x1p - 0.30x2p + 0.70x3p ≤ 0

The constraint for at least 10,000 gallons of the regular-grade gasoline is written

Thus, the complete LP model with six decision variables and 10 constraints can be written as

follows:

subject to

x2r + x2p ≤ 10,000 (component 2)

x3r + x3p ≤ 10,000 (component 3)

0.70x1r - 0.30x2r - 0.30x3r ≤ 0

- 0.40x1r + 0.60x2r - 0.40x3r ≤ 0

- 0.20x1r - 0.20x2r + 0.80x3r ≤ 0

0.75x1p - 0.25x2p - 0.25x3p ≤ 0

- 0.40x1p + 0.60x2p - 0.40x3p ≤ 0

- 0.30x1p - 0.30x2p + 0.70x3p ≤ 0

x1r + x2r + x3r ≤ 10,000

x1r, x2r, x3r, x1p, x2p, x3p ≥ 0

Answer: Foster Generators

Destination Origin

Origin Boston Chicago St. Louis Lexington Supply

3 2 7 6

Cleveland 5,000

x11 x12 x13 x14

7 5 2 3

Bedford 6,000

x21 x22 x23 x24

2 5 4 5

York 2,500

x31 x32 x33 x34

Destination

Demand 6,000 4,000 2,000 1,500 13,500

A convenient way of summarizing the transportation-problem data is with a table such as the one for

the Foster Generators problem in Table 1. Note that the 12 cells in the table correspond to the 12

possible shipping routes from the three origins to the four destinations. We denote the amount shipped

from origin i to destination j by the variable xij. The entries in the column at the right of the table

represent the supply available at each plant, and the entries at the bottom represent the demand at

each distribution center. Note that total supply equals total demand. The entry in the upper-right corner

of each cell represents the per-unit cost of shipping over the corresponding route. Looking across the

first row of this table, we see that the amount shipped from Cleveland to all destinations must equal

5,000, or x11 + x12 + x13 + x14 = 5,000. Similarly, the amount shipped from Bedford to all destinations must

be 6,000, or x21 + x22 + x23 + x24 = 6,000. Finally, the amount shipped from York to all destinations must

total 2,500, or x31 + x32 + x33 + x34 = 2,500.

We also must ensure that each destination receives the required demand. Thus, the amount shipped

from all origins to Boston must equal 6,000, or x11 + x21 + x31 = 5 6,000.

St. Louis: x13 + x23 + x33 = 2,000

Lexington: x14 + x24 + x34 = 1,500

If we ship x11 units from Cleveland to Boston, we incur a total shipping cost of 3x11. By summing the costs

associated with each shipping route, we have the total cost expression that we want to minimize:

Total cost = 3x11 + 2x12 + 7x13 + 6x14 + 7x21 + 5x22 + 2x23 + 3x24 + 2x31 + 5x32 + 4x33 + 5x34

By including non-negativity restrictions, xij ≥ 0 for all variables, we have modeled the transportation

problem as a linear program.

Answer: Carson Stapler

Let

x2 = number of units of the cartridge manufactured

x3 = number of units of the handle manufactured

x4 = number of units of the base purchased

x5 = number of units of the cartridge purchased

x6 = number of units of the handle purchased

subject to

0.04x1 + 0.02x2 + 0.04x3 ≤ 400 (Dept. B)

0.02x1 + 0.03x2 + 0.01x3 ≤ 400 (Dept. C)

x1 + x4 = 5,000

x2 + x5 = 5,000

x3 + x6 = 5,000

Answer: Logan Manufacturing

a.

A + B ≥ 3,000

A + B ≤ 4,000

A ≤ 2,000

B ≤ 4,000

90A + 75B ≥ 80 (A + B), or 10A − 5B ≥ 0

b.

Optimum:

A = 1,000:

B = 2,000.

Answer: University of Arizona

a.

600A + 900B ≤ 3,600

600A + 900B ≥ 1,800

200A + 700B ≤ 1,400

400A + 100B ≥ 400

A≤2

Minimize .75A + .15B

b.

A = 0.54, B = 1.85, Obj = 0.68.

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