Reference no: EM13961680

You have been put in charge of the Dawson Creek oil refinery. The refinery produces gas and heating oil from crude oil. Gas sells for $11 per barrel and must have an average grade level of at least 9. Healing oil sells for $6 a barrel and must have an average grade level of at least 7. At most 2,000 barrels of gas and 600 barrels of heating oil can be sold

Incoming crude can be processed by one of three methods. The per barrel yield and per barrel cost of each processing method are shown in the following table.

	Grade
Method	6	8	10	Cost ($ /Barrel)
1	0.2	0.2	0.6	3.40
2	0.3	03	0.4	3.00
3	0.4	0.4	02	2.60

For example, if we refine one barrel of incoming crude by method 1, it costs us $3.40 and yields .2 barrels of grade 6, .2 barrels of grade 8 and .6 barrels of grade 10. These costs include the costs of buying the crude oil.

Before being processed into gas and heating oil, grades 6 and 8 may be sent through the catalytic cracker to improve their quality. For $1 per barrel, one barrel of grade 6 can be "cracked' into a barrel of grade 8. For $1.50 per barrel, a barrel of grade 8 can be cracked into a barrel of grade 10. The refinery would like to determine how to maximize the refinery's profit.

a) Draw a graphical representation describing this process.

b) Formulate the linear program (LP) model for this situation. (Define all variables.)

c) Using LINDO OR LINGO find the optimal values of the decision variables.