Sunco Oil has refineries in Los Angeles and Chicago. The Los Angeles refinery can refine up to 2 million barrels of oil per year, and the Chicago refinery up to 3 million. Once refined, oil is shipped to two distribution points: Houston and New York City. Sunco estimates that each distribution point can sell up to 5 million barrels per year. Because of differences in shipping and refining costs, the profit earned (in dollars) per million barrels of oil shipped depends on where the oil was refined and on the point of distribution (see Table 51). Sunco is considering expanding the capacity of each refinery. Each million barrels of annual refining capacity that is added will cost $120,000 for the Los Angeles refinery and $150,000 for the Chicago refinery. Use linear programming to determine how Sunco can maximize its profits less expansion costs over a ten-year period.
11 Sunco Oil has refineries in Los Angeles and Chicago.
The Los Angeles refinery can refine up to 2 million barrels
of oil per year, and the Chicago refinery up to 3 million.
Once refined, oil is shipped to two distribution points:
Houston and New York City. Sunco estimates that each
distribution point can sell up to 5 million barrels per year.
Because of differences in shipping and refining costs, the
profit earned (in dollars) per million barrels of oil shipped
depends on where the oil was refined and on the point of
distribution (see Table 51). Sunco is considering expanding
the capacity of each refinery. Each million barrels of annual
refining capacity that is added will cost $120,000 for the Los
Angeles refinery and $150,000 for the Chicago refinery. Use
linear programming to determine how Sunco can maximize
its profits less expansion costs over a ten-year period.
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