PROBLEM SOLVING

1. A small petroleum company owns two refineries. Refinery 1 costs $25,000 per day to
operate, and it can produce 300 barrels of high-grade oil, 200 barrels of medium-grade oil,
and 150 barrels of low-grade oil each day. Refinery 2 is newer and more modern. It costs
$30,000 per day to operate, and it can produce 300 barrels of high-grade oil, 250 barrels of
medium-grade oil, and 400 barrels of low-grade oil each day. The company has orders
totalling 35,000 barrels of high-grade oil, 30,000 barrels of medium-grade oil, and 40,000
barrels of low-grade oil. How many days should the company run each refinery to minimize
its costs and still meet its orders?

Decision variables
X = number of days refinery 1 to be operated
Y = number of days refinery 2 to be operated
Objective Function
C = 25,000x + 30,000x
Set of Constraints
a. 300x + 300y ≥ 35,000
b. 200x + 250y ≥ 30,000
c. 150x + 400y ≥ 40,000

a. 300x + 300y = 35,000  y = 0 ; 200x = 30,000

 x = 0 ; 300y = 35,000 x = 30,000 / 200
y = 35,000 / 300 x = 150
y = 116.6667
 y = 0 ; 300x = 35,000
x = 35,000 / 300 c. 150x + 400y = 40,000
x = 116.6667
 x = 0 ; 400y = 40,000
y = 40,000 / 400
b. 200x + 250y = 30,000
y = 100
 x = 0 ; 250y = 30,000
 y = 0 ; 150x = 40,000
y = 30,000 / 250
x = 40,000 / 150
y = 120
x = 266.6667

COORDINATES
a. ( 0 , 116.6667 ) , ( 116.6667 , 0 )
Feasible region
b. ( 0 , 120 ), ( 150 , 0 )
 Optimum point
c. ( 0 , 100 ), ( 266.6667 , 0 )
(0,120)

(47.06 , 82.35)
C = 25,000x + 30,000x
(0, 120) C = 25,000 (0) + 30,000 (120) = 3,600,000
(47.06, 82.35) C = 25,000 (47.06) + 30,000 (82.35) = 3,647,000
(266.67, 0) C = 25,000 (266.67) + 30,000 (0) = 6,666,750
MICROSOFT EXCEL SOLVER
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