Amarco Inc.

Company Case Study

Group 3 Assignment
Problem Statement:
AMARCO’s planners want to determine how the three grades of aviation gasoline should be blended from
the available input streams so that the specifications are met and the income is maximized. Develop a LP
spreadsheet model of the
company’s problem.
Given Data:
Solution:
Decision variable: Xij = jth Type of Gas made from ith Type of Feedstock
Where i = {1, 2, 3, 4} & j = {1, 2, 3}
X1 = Alkylate Feedstock; X2 = Catalytic Cracked Gasoline; X3 = Straight Run Gasoline; X4 = Isopentane
X11 = Gas A produced by using Alkylate Feedstock;
X12 = Gas B produced by using Alkylate Feedstock
X13 = Gas C produced by using Alkylate Feedstock
X21 = Gas A produced by using Catalytic Cracked Gasoline
X22 = Gas B produced by using Catalytic Cracked Gasoline
X23 = Gas C produced by using Catalytic Cracked Gasoline
X31 = Gas A produced by using Straight Run Gasoline
X32 = Gas B produced by using Straight Run Gasoline
X33 = Gas C produced by using Straight Run Gasoline
X41 = Gas A produced by using Isopentane
X42 = Gas B produced by using Isopentane
X43 = Gas C produced by using Isopentane

Objective Function:

ZMax = (15X11+16X12+16.5X13) + (15X21+16X22+16.5X23) + (15X31+16X32+16.5X33) + (15X41+16X42+16.5X43)

+ (17 X1+ 14.50 X2+ 13.50 X3+ 14 X4)

Subjected to:-
 Reid Vapor Pressure
Gas A

 (5-7) X11 + (8-7) X21 + (4-7) X31 + (20-7) X41 <= 0

 -2 X11 + X21 + -3 X31 + 13 X41 <= 0

Gas B

 (5-7) X12 + (8-7) X22 + (4-7) X32 + (20-7) X42 <= 0

 -2 X12 + X22 + -3 X32 + 13 X42 <= 0

Gas C

 (5-7) X13 + (8-7) X23 + (4-7) X33 + (20-7) X43 <= 0

 -2 X13 + X23 + -3 X33 + 13 X43 <= 0

 Availability
 Alkaline = X11 + X12 + X13 + X1= 14000

Catalytic = X21 + X22 + X23 +X2 = 13000

Straight Run = X31 + X32 + X33 + X3= 14000

Isopentane = X41 + X42 + X43 +X4= 11000

 Demand
Gas A = X11 + X21 + X31 + X41 >= 12000

Gas B = X12 + X22 + X32 + X42 >= 13000

Gas C = X13 + X23 + X33 + X43 >= 12000

 Marketing
 (X11 – X12) + (X21 – X22) + (X31 – X32) + (X41 – X42) >= 0

 Octane

Gas A

 (94-80) X11 + (83-80) X21 + (74-80) X31 + (95-80) X41 >= 0

 14 X11 + 3 X21 + (-6) X31 + 15 X41 >= 0

Gas B

 (107.5-91) X12 + (93-91) X22 + (87-91) X32 + (108-91) X42 >= 0

 16.5 X12 + 2 X22 + (-4) X32 + 17 X42 >= 0

Gas C

 (107.5-100) X13 + (93-100) X23 + (87-100) X33 + (108-100) X43 >= 0

 7.5 X13 + (-7) X23 + (-13) X33 + 8 X43 >= 0

 Now since we have formulated the objective function and all the constraints that it is subjected to,

we will develop the LP spreadsheet by the following steps:

1. Included a row to update values of the decision variables and update the price of each type of gasoline and the
feedstock in another row:

2. Now, calculate the total profit based on the given price and the values of the decision variables using the SUMPRODUCT
() function in the cell R5 as shown in the above screenshot.

3. Now Reid Vapor Pressure for each stock is given and the maximum Reid Vapor Pressure for Gasoline is mentioned as
seven. To convert the constraint into an equation, we will take (Reid Vapor Pressure – Limit of Reid Vapor Pressure = 0).
Since we have less than or equal to condition, we are subtracting it.
4. In Availability constraint, the cells corresponding to Alkylate in both the rows and columns should be marked as 1. Also,
in Demand constraint, the cell corresponding to the Gasoline A in both rows and columns should be marked as 1.
Similarly do it for rest:

5. It is given that Marketing Condition of Gasoline A should be greater than B. For this we will do
(Gasoline A – Gasoline B = 0). Since there is less than equal to condition, we are subtracting it. Hence, update one in the
Gasoline A cell and minus one in Gasoline B cell.

6. Last constraint is Octane. For Gasoline A the value will be equal to the difference between the maximum octane number
given in the table when the TEL value is 0.5 and the minimum octane number for Gasoline A (i.e. 80). For the other two
the value will be the difference between the maximum octane number given in the table when the TEL value is 4.0 and
the minimum octane number for Gasoline B & C (i.e. 91 & 100 resp.)
7. Finally, to calculate all the final values for each constraints based on the values of the decision variables, copy the
formula from cell R5 to the cell range R9 to R11, R14 to R17, R20 to R22, R24 and R27 to R29.

8. Below is the final LP spreadsheet:

If we run the solver we get the Total Maximum Income Based on the Product Mix is $816,200.