Determine the optimal product mix for the refinery

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An oil company distills two types of crude oil, A and B, to produce regular and premium gasoline and jet fuel. There are limits on the daily availability of crude oil and the minimum demand for the final products. If the production is not sufficient to cover demand, the short- age must be made up from outside sources at a penalty. Surplus production will not be sold immediately and will incur storage cost. The following table provides the data of the situation:

Fraction yield per bbl

Crude Regular Premium Jet Price/bbl ($) bbl/day

Crude A .20 .1 .25 30 2500

Crude B .25 .3 .10 40 3000

Demand (bbllday) 500 700 400

Revenue ($/bbl) 50 70 120

Storage cost for surplus

production ($ibbl) 2 3 4

Penalty for unfilled

demand ($/bbl) 10 15 20

Determine the optimal product mix for the refinery.

Reference no: EM131439546

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