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An oil company has oil fields in San Diego and Los Angeles. The San Diego field can produce up to 500,000 barrels per day,
An oil company 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 400,000 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. The refining cost at Dallas and Houston are the same. All of the refined oil is shipped to customers in Chicago and New York. The refineries do not store any finished products. Chicago customers require 400,000 barrels per day, and New York customers require 300,000 barrels per day. The costs of shipping 100,000 barrels of oil (refined or unrefined) between cities are shown in the table below: Data From L.A. San Diego Dallas Houston Dallas $ 320.00 S 440.00 To Houston S 110.00 $ 100.00 N.Y. $ 1,195.00 $ 1,440.00 Chicago B. What is the total cost of shipment for the entire system? (2 points) $ 1,295.00 $ 1,500.00 A. Solve the formulation in Excel solver. Attach Excel Worksheet on Folio. (10 points) C. What is the optimum flow of materials between the following cities: Dallas to N.Y. and is the NY Demand solution binding? (4 points) D. What are the impact and the magnitude on total cost if the capacity in L.A. is reduced by 50,000 barrels? (4 points) E. What are the impact and the magnitude on total cost if the demand in N.Y. is increased by 250,000 barrels? (4 points) F. The transportation cost on the L.A. - Dallas leg increases to $325 per 100,000 barrels of shipment. Which of the statements given below is true? (2 points) a. There is no impact on the total cost b. There is no impact on the total flow of oil from L.A. - Dallas c. The shadow price will not change d. Cannot be solved G. Dallas wants to start supplying Chicago with oil. What should the Dallas refinery do? (4 points)
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