IE 141: Operations Research 1

Sample Problem
BLENDING PROBLEM
The Philippine Petron Oil Corporation produces unleaded and premium-grade gasoline that is sold to
independent gasoline stations all over the Philippines. The company has a refinery in Bataan that manufactures
the products by blending three petroleum components. Each type of gasoline has a different price. The costs of
petroleum component vary with type. However, with the passage of the Biofuel Act of 2006, Petron and other
oil firms in the country are required by law to mix bioethanol to all types of gasoline that will be distributed in
the local market. With this new development, Petron wants to determine how to blend the three components and
bio-ethanol into the two gasoline-bioethanol fuel products in such a way as to maximize profits.
The regular gasoline-bioethanol blend fuel can be sold for PhP35.00 per liter and the premium gasolinebioethanol blend can be sold for PhP38.00 per liter. For the current product introduction production-planning
period, Petron can obtain four components at the costs and in the quantities shown in Table 1.
The specifications for the new fuel products restrict the amounts of each component that can be used in each
gasoline-bioethanol blend product. The product specifications are shown in Table 2. Initial introduction of the
new products to the market requires Petron to produce at least 300,000 liters of regular gasoline-bioethanol
blend.
Table 1. Petroleum component cost and supply
Petroleum component
Cost (PhP)/li
Component 1 (C1-Bioethanol)
13.00
Component 2 (C2)
15.00
Component 3 (C3)
18.00
Component 4 (C4)
20.00
Table 2. Specifications for gasoline types
Product
Regular-bioethanol blend gasoline

Premium-bioethanol blend gasoline

Specifications
At most 10% component 1
At most 20% component 2
At least 40% component 3
At most 20% component 4
At most 05% component 1
At most 20% component 2
At least 40% component 3
At most 30% component 4

Solution:
Let xij = liters of component i used in gasoline j
wherei = 1, 2, 3, 4 and
j = r if regular-bioethanol blend gasoline
= p if premium-bioethanol blend gasoline
Decision variables (8):
x1r = liters of C1 in regular-bio-ethanol blend gasoline
x2r = liters of C2 in regular-bio-ethanol blend gasoline
x3r = liters of C3 in regular-bio-ethanol blend gasoline
x4r = liters of C4 in regular-bio-ethanol blend gasoline
x1p = liters of C1 in premium-bio-ethanol blend gasoline
x2p = liters of C2 in premium-bio-ethanol blend gasoline
x3p = liters of C1 in premium-bio-ethanol blend gasoline
x4p = liters of C1 in premium-bio-ethanol blend gasoline
Total of each type of gasoline-bioethanol blend produced:
Regular gasoline-bioethanol blend = x1r + x2r + x3r + x4r
Premium gasoline-bioethanol blend = x1p + x2p + x3p + x4p

Amount available (li)

200,000
200,000
400,000
400,000

IE 141: Operations Research 1

Sample Problem
Total of each component used:
C1 = x1r + x1p

C2 = x2r + x2p

C3 = x3r + x3p

C4 = x4r + x4p

Constraints:
Available components:
x1r + x1p 200,000
x2r + x2p 200,000
x3r + x3p 400,000
x4r + x4p 400,000
Product specifications:
Regular gasoline-bioethanol blend:
x1r / (x1r + x2r + x3r + x4r) 0.10

+ 0.90 x1r 0.10x2r 0.10x3r 0.10x4r 0

x2r / (x1r + x2r + x3r + x4r) 0.20

0.20 x1r + 0.80x2r 0.20x3r 0.20x4r 0

x3r / (x1r + x2r + x3r + x4r) 0.40 0.40 x1r 0.40x2r + 0.60x3r 0.40x4r 0
x4r / (x1r + x2r + x3r + x4r) 0.20 0.20 x1r 0.20x2r 0.20x3r + 0.80x4r 0
Premium gasoline-bioethanol blend:
X1p / (x1p + x2p + x3p + x4p) 0.05 +0.95 x1r 0.05x2r 0.05x3r 0.05x4r 0
x2p / (x1p + x2p + x3p + x4p) 0.20

0.20 x1r + 0.80x2r 0.20x3r 0.20x4r 0

x3p / (x1p + x2p + x3p + x4p) 0.40 0.40 x1r 0.40x2r + 0.60x3r 0.40x4r 0
x4p / (x1p + x2p + x3p + x4p) 0.30 0.30 x1r 0.30x2r 0.320x3r+ 0.70x4r 0
Regular-bioethanol production:
x1r + x2r + x3r + x4r 300,000
Objective function:
Maximize profit.
Profit = Total Revenue Total Cost
= (price of regular-bioethanol blend x quantity of regular-bioethanol blend)
+ (price of premium-bioethanol blend x quantity of premium-bioethanol blend)
- {[( cost of C1) x (qty of C1)] + [( cost of C2) x (qty of C2)]
+ {[( cost of C3) x (qty of C3)] + [( cost of C4) x (qty of C4)]}
Maximize Z = [35(x1r + x2r + x3r + x4r) + 38(x1p + x2p + x3p + x4p)]
- [13(x1r + x1p) + 15(x2r + x2p) + 18(x3r + x3p) + 20(x4r + x4p)]
Simplifying
Z = 22 x1r + 20x2r + 17x3r + 15x4r + 25x1p + 23x2p + 20x3p + 18x4p
The linear programming model with 8 decision variables and 14 constraints is:

IE 141: Operations Research 1

Sample Problem
Maximize

Z = 22 x1r + 20x2r + 17x3r + 15x4r + 25x1p + 23x2p + 20x3p + 18x4p

s.t.
x1r + x1p 200,000
x2r + x2p 200,000
x3r + x3p 400,000
x4r + x4p 400,000
+ 0.90 x1r 0.10x2r 0.10x3r 0.10x4r 0
0.20 x1r + 0.80x2r 0.20x3r 0.20x4r 0
0.40 x1r 0.40x2r + 0.60x3r 0.40x4r 0
0.20 x1r 0.20x2r 0.20x3r + 0.80x4r 0
+0.95 x1r 0.05x2r 0.05x3r 0.05x4r 0
0.20 x1r + 0.80x2r 0.20x3r 0.20x4r 0
0.40 x1r 0.40x2r + 0.60x3r 0.40x4r 0
0.30 x1r 0.30x2r 0.320x3r+ 0.70x4r 0
x1r + x2r + x3r + x4r 300,000
x1r, x2r, x3r, x4r, x1p, x2p, x3p, x4p 0