Steps to maximize profits:

From the information, observe that the Sunco Oil has refineries in Los Angeles and Chicago.

The Los Angeles refinery can reflect up to 2 million barrels of oil per year, and the Chicago refinery up to 3 million.

Consider x_ij joint variable be the barrels of oil shipped from refinery “i” to the distribution point “j” for (i=1,2 and j=1,2).

The objective is to maximize Sunco’s profit over a 10-year period.

z= {10[(profit per million barrels) (oil shipped from LA to Houston) + (Profit/million barrels) (Oil shipped from LA to NY) + (Profit/million barrels) (Oil shipped from Chicago to Houston) + (Profit/million barrels) (Oil shipped from Chicago to NY)] – (cost of annual refining capacity for LA) – (cost of annual refining capacity for chicago)

z= 10(20000x11+15000x12+12000x21+17000x22)−12000(x11+x12)−15000(x21+x22)

Constraint 1: At most, 2 million barrels of oil can be refined at Los Angeles refinery.

((Barrels of oil shipped from LA to Houston)+(Barrels of oil shipped from LA to NY))≤2

x11+x12≤2

Constraint 2: At most, 3 million barrels of oil can be refined at Chicago refinery.

((Barrels of oil shipped from Chicago to Houston)+(Barrels of oil shipped from Chicago to NY))≤3

x21+x22≤3

Constraint 3: At most, 5 million barrels of oil can be shipped to Houston from Los Angeles and Chicago

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Solution Summary: The author explains how to maximize Sunco's profit over a 10-year period.

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