Textbook Problem

Ewing Oil has oil fields in San Diego and Los Angeles. The San Diego field can produce up to 500,000 barrels per day, and the Los Angeles field can produce up to 600,000 barrels per day. Oil is sent from the fields to a refinery, either in Dallas or in Houston. (Assume that each refinery has unlimited capacity.) To refine 1000 barrels costs $6300 at Dallas and $5700 at Houston. Refined oil is shipped to customers in Chicago and New York. Chicago customers require 400,000 barrels per day, and New York customers require 600,000 barrels per day. The costs of shipping 100,000 barrels of oil (refined or unrefined) between cities are shown in the file P05_74.xlsx.

1. a. Determine how to minimize the total cost of meeting all demands.
2. b. If each refinery had a capacity of 500,000 barrels per day, how would you modify the model in part a?