Reference no: EM131685191

Oilco has oil fields in San Diego and Los Angeles. The San Diego field can produce up to 500,000 barrels per day. The Los Angeles field can produce up to 400,000 barrels per day. Oil is sent from the fields to a refinery, either in Dallas or Houston. The Dallas refinery has a capacity of 450,000 barrels per day where the capacity at the Houston refinery is unlimited. It cost $700 to refine 100,000 barrels of oil in Dallas and $900 at Houston. Refined oil is shipped to customers in Miami and New Orleans and Atlanta. Miami customers require 400,000 barrels per day, New Orleans customers require 300,000 barrels per day and Atlanta customers require 350,000 barrels per day. The cost of shipping 100,000 barrels of oil between the cities is shown below.

                                                                        To       

From                         Dallas            Houston          Miami        New Orleans       Atlanta

Los Angeles                $300                $110                    -                      -                       -           

San Diego                   $420                $100                    -                      -                       -

Dallas                              -                      -                    $450                $400                $550

Houston                          -                      -                    $470                $390                $530           

Determine a shipment allocation of oil that minimizes cost.