AMARCO, Inc.

William D. Whisler
California State University, Hayward

1. (a) There are two groups of variables: the amount of the four feedstocks (alkylate, catalytic
cracked gasoline, straight run gasoline, and isopentane) used in producing the three types of
gasoline (A, B, and C) and the amounts of the four feedstocks left over after production. Twelve
variables are in the first group and four in the second, making a total of 16 variables.
Xi,j = amount of feedstock i used in gasoline j, in gallons
Xi = amount of feedstock i left over after production, in gallons
for i = feedstock A (Alkylate), CC (Catalytic Cracked gasoline), SR (Straight Run gasoline), I
(Isopentane), and j = gasoline A, B, C. All of these variables must be nonnegative.
With the feedstocks available, the objective function maximizes the revenue from the
gasoline produced and the feedstocks left over after production.
I
P( max ) = 15 X
i, A
iA

+ 16

X i, B

iA

iA

iA

+ 16.5

X i, C + v i X i

where vi is the value of feedstock i, Xi.

There are five groups of conditions: (i) Reid Vapor Pressure, (ii) feedstock availability,
(iii) minimum demand, (iv) octane level, and (v) the marketing condition. The first, third, and
fourth groups have three restrictions each, the second has four, and there is one marketing
condition. Thus, the total number of constraints is 14.
(i) Reid Vapor Pressure
I

r X
i A
I

X
i A

i, j

i, j

for j = gasoline A, B, C, where ri is the Reid Vapor Pressure of feedstock i and 7 is the maximum
Reid Vapor Pressure. This gives three constraints
-2XA,j + XCC,j - 3XSR,j + 13XI,j < 0
for j = gasoline A, B, C.
(ii) The feedstock availability conditions are
C

X
j= A

i, j

X A
i
i

for i = A, CC, SR, I where Ai are the input stream availabilities from the case.

2
(iii) The minimum demand requirements are
I

i, j

Dj

i A

where Dj is the demand for gasoline j = gasoline A, B, C.

(iv) The octane number constraints are
I

on X
i A
I

X
i A

i, j

ON j

i, j

for j = gasoline A, B, C, where oni is the octane number of feedstock i and ONj is the minimum
octane number for gasoline j. This gives three constraints
14XA,A + 3XCC,A 6XSR,A + 15XI,A > 0
16.5XA,B + 2XCC,B 4XSR,B + 17XI,B > 0
7.5XA,C 7XCC,C 13XSR,C + 8XI,C > 0
(v) The marketing condition that the amount of avaiation gas A produced must be at least
as great as the amount of gas B is
I

X i ,B

i,A

i A

i A

(b) The spreadsheet summarizing the formulation is given below.

A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

Objective Function
Av Gas A
Reid Vapor Pressure Av Gas B
Av Gas C
Alkylate
Stock Availability
Cat Cracked
St. Run
Isopentane
Av Gas A
Minimum Demand Av Gas B
Av Gas C
Av Gas A
Octane Level
Av Gas B
Av Gas C
Marketing
A>B

Row
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14

J
K
L
AMARCO, INC.
Question 1(b)

XA,A XA,B XA,C XCC,A XCC,B XCC,C XSR,A XSRB XSRC XI,A
15 16 16.5 15
16 16.5 15
16 16.5 15
-2
1
-3
13
-2
1
-3
-2
1
-3
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
14
3
-6
15
16.5
2
-4
7.5
-7
-13
1
-1
1
-1
1
-1
1

XI,B XI,C XA XCC XSR XI Sign RHS

16 16.5 17 14.5 13.5 14 = P(max)
<
0
13
<
0
13
<
0
1
= 14,000
1
= 13,000
1
= 14,000
1
1
1 = 11,000
> 12,000
1
> 13,000
1
> 12,000
>
0
17
>
0
8
>
0
-1
>
0

3
2. The solution summary table that follows gives the solutions, obtained by Excels Solver, to all
parts of the case. All answers have been rounded off to the nearest whole number.
AMARCO, Inc
Solution Summary

Original
Variables
Case
XAA
XAB
XAC
XCCA
XCCB
XCCC
XSRA
XSRB
XSRC
XIA
XIB
XIC
XA
XCC
XSR
XI

2,175
0
5,425
0
6,781
6,219
8,523
5,477
0
2,302
742
356
6,400
0
0
7,600
P(max) $816,200

3
a
b
Gas Prices Gas Prices & Stock
Double
Values Double
5,237
2,175
0
0
8,763
5,425
0
0
2,954
6,781
10,046
6,219
5,653
8,523
8,347
5,477
0
0
2,110
2,302
1,700
742
575
356
0
6,400
0
0
0
0
6,615
7,600
$1,538,308
$1,632,400

Supplies
Decrease

Prices
Drop
2,175
0
5,425
0
6,781
6,219
8,523
5,477
0
2,302
742
356
6,400
0
0
7,600
$626,200

I
N
F
E
A
S
I
B
L
E

8
9
10
Octane
New
Constraint New EPA Marketing
Dropped Regulation Constraint
2,175
3,133
2,175
0
684
0
5,425
6,316
5,425
0
2,250
0
6,781
6,329
6,781
6,219
4,421
6,219
8,523
6,750
8,523
5,477
5,987
5,477
0
1,263
0
2,302
867
2,302
742
0
742
356
0
356
6,400
3,867
6,400
0
0
0
0
0
0
7,600
10,133
7,600
$816,200 $808,600 $816,200

Below is the Excel spreadsheet used to find the solution for Question 2. The formula
=SUMPRODUCT(E5:T5,$E$22:$T$22) is entered in cell Z5 and copied down to cells Z6:Z19.
The Solver dialog boxes are shown immediately after the spreadsheet. Cell Z5 contains the value
of the objective function for the solution, $692,645 and the values of the variables are in cells
E22:T22.
A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22

Objective Function
Av Gas A
Reid Vapor Pressure Av Gas B
Av Gas C
Alkylate
Stock Availability
Cat Cracked
St. Run
Isopentane
Av Gas A
Minimum Demand Av Gas B
Av Gas C
Av Gas A
Octane Level
Av Gas B
Av Gas C
Marketing
A>B

J
K
L
AMARCO, INC.
Question 2

Row XA,A XA,B XA,C XCC,A XCC,B XCC,C XSR,A XSRB XSRC XI,A
0
15 16 16.5 15
16
16.5 15
16 16.5 15
1
-2
1
-3
13
2
-2
1
-3
3
-2
1
-3
4
1
1
1
5
1
1
1
6
1
1
1
7
1
8
1
1
1
1
9
1
1
1
10
1
1
1
11 14
3
-6
15
12
16.5
2
-4
13
7.5
-7
-13
14
1
-1
1
-1
1
-1
1

XI,B XI,C XA XCC XSR XI Sign RHS

16 16.5 17 14.5 13.5 14
= P(max)
<
0
13
<
0
13
<
0
1
= 14,000
1
= 13,000
1
= 14,000
1
1
1
= 11,000
> 12,000
1
> 13,000
1
> 12,000
>
0
17
>
0
8
>
0
-1
>
0

XA,A XA,B XA,C XCC,A XCC,B XCC,C XSR,A XSRB XSRC XI,A XI,B XI,C XA XCC XSR XI
2175 0 5425 0
6781 6219 8523 5477 0 2302 742 356 6400 0
0 7600

816200
3.638E-12
-1.82E-12
9.095E-13
14000
13000
14000
11000
13000
13000
12000
13839.212
4273.1164
-9.09E-13
-6.82E-13

3. (a) If the price of aviation gas doubles the coefficients in the objective function in cells E5:P5
double as shown below. This leads to a new solution and an increase in the objective function to
$1,538,308 as shown in the solution summary table.
D
E
F
G
H
I
J
K
L
M
N
4 Row XA,A XA,B XA,C XCC,A XCC,B XCC,C XSR,A XSR,B XSR,C XI,A
5
0
30 32 33 30 32 33 30 32 33 30

O
XI,B

P
XI,C

Q
XA

R
XCC

S
XSR

T
XI

32

33

17 14.5 13.5 14

U
V
Sign RHS
= P(max)

(b) Doubling all the coefficients in the objective function, as shown below in cells E5:T5, yields
the identical solution as for the original case, except that the revenue doubles to $1,632,400.
D
E
F
G
H
I
J
K
L
M
N
4 Row XA,A XA,B XA,C XCC,A XCC,B XCC,C XSR,A XSR,B XSR,C XI,A
5
0
30 32 33 30 32 33 30 32 33 30

O
XI,B

P
XI,C

Q
XA

R
XCC

S
XSR

32

33

34

29

27

T
XI

U
V
Sign RHS
28
= P(max)

4. If supplies decrease, the right-hand sides of constraints 4, 5, and 6 in cells V9:V11 change to
the values shown below. The solution summary table shows that the solution is infeasible.
Consequently AMARCO will not be able to meet the minimum demands.
9
10
11

D
4
5
6

E
1

F
1

G
1

Q
1

U
=
=
=

1
1

V
12,200
11,000
9,000

5. The solution to Question 2 has 6,400 barrels per day of alkylate, zero catalytic cracked
gasoline, zero straight run gasoline, and 7,600 barrels per day of isopentane left over. Thus,
additional quantities of alkylate and isopentane will increase revenues only by their values, 17,
and 14, respectively. This can be seen also from the shadow prices in Excels sensitivity report
below, in cells E32 and E35. The other two feedstocks increase revenues by more that their value
because the shadow prices are 16.4 for catalytic cracked gasoline (cell E33) and 17.2 for straight
run gasoline (cell E34). The allowable increase column gives the largest increase in the feedstock
amounts for which the above answers remain valid: 925.7 barrels for catalytic cracked gasoline
(cell G33) and 694.3 barrels for straight run gasoline (cell G34). There are no upper limits for the
other two feedstocks.
A
B
C
D
E
F
25
A Portion of Excel's Sensitivity Report
26 Constraints
Final
Shadow Constraint
27
Cell
Name
Value
Price
R.H. Side
28
29
$Z$6 Av Gas A
3.63798E-12
0.2
0
30
$Z$7 Av Gas B
-1.81899E-12
0.2
0
31
$Z$8 Av Gas C
9.09495E-13
0.2
0
32
$Z$9 Alkylate
14000
17
14000
33
$Z$10 Cat Cracked
13000
16.4
13000
34
$Z$11 St. Run
14000
17.2
14000
35
$Z$12 Isopentane
11000
14
11000
36
$Z$13 Av Gas A
13000
0
12000
37
$Z$14 Av Gas B
13000
-2.2
13000
38
$Z$15 Av Gas C
12000
-0.1
12000
39
$Z$16 Av Gas A
13839.21233
0
0
40
$Z$17 Av Gas B
4273.116438
0
0
41
$Z$18 Av Gas C
-9.09495E-13
0
0
42
$Z$19 A >B
-6.82121E-13
-1.6
0

Allowable
Increase
32630.13699
11108.39786
79200
1E+30
925.6998213
694.274866
1E+30
1000
3692.307692
7384.615385
13839.21233
4273.116438
13515.21739
7384.615385

Allowable
Decrease
34523.11644
3255.707763
5379.310345
6400
5697.488584
6000
7600
1E+30
456.3004477
1786.152078
1E+30
1E+30
26000
979.1895516

6
6. From the above portion of Excels Sensitivity Report, 1,000 more barrels than the minimum
demand for gasoline A are produced (cell D36 minus cell F36) and gasoline B and C production
is equal to their minimum demand (cells D37:D38 are equal to cells F37:F38). Thus, with the
economy weakening, a decrease in the minimum demand for gasoline A does not affect the
solution, whereas, decreases in the minimum demands for gasoline B or C do affect the solution.
The decreases in revenues are given by the shadow prices in cells E37:E38. The shadow price for
aviation gasoline B is $2.20 per barrel and is valid until demand decreases by 456.3 barrels (cell
H37) and the shadow price for gasoline C is $0.10 and it is valid until demand decreases by
1,786.2 barrels (cell H38). That is, each barrel per day decrease in the minimum demand for B
and C increase revenue by $2.20 and $0.10, respectively.
7. If aviation gasoline prices drop then the coefficients in cells E5:P5 of the objective function
change as shown below. From the solution summary table the revenue drops to $626,200.
4
5

D
E
F
Row XA,A XA,B
0
10 11

G
XA,C
11.5

H
I
J
K
L
M
XCC,A XCC,B XCC,C XSR,A XSR,B XSR,C
10

11

11.5

10

11

11.5

N
XI,A

O
XI,B

P
XI,C

Q
XA

R
XCC

S
XSR

T
XI

10

11

11.5

17 14.5 13.5 14

U
V
Sign RHS
= P(max)

8
. If the octane constraints are dropped the last three constraints (11, 12, and 13 in rows 16, 17,
and 18) are deleted. The optimal solution does not change.
9. The new Environmental Protection Agency regulation that decreases RVP to 6 changes the
coefficients in the first three constraints as shown below. This has no effect on the optimal
solution.
4
5
6
7
8

D
E
Row XA,A
0
15
1
-1
2
3

F
XA,B

G
XA,C

16

16.5

-1

H
I
J
K
L
M
XCC,A XCC,B XCC,C XSR,A XSR,B XSR,C
15
2

16

16.5

2
-1

15
-2

16

16.5

-2
2

N
XI,A

O
XI,B

P
XI,C

Q
XA

R
XCC

S
XSR

T
XI

15
14

16

16.5

17

14.5

13.5

14

14
-2

14

U
V
Sign RHS
= P(max)
<
0
<
0
<
0

10. Adding the new marketing constraint, that the production of aviation gasoline A plus B must
be at least as great as that of C will not change the solution. This can be seen by noting that the
solution from Question 2 produces 13,000 barrels per day of A, 13,000 barrels per day of B, and
12,000 barrels per day of C. Consequently, the new marketing condition already is satisfied by
the current solution. Adding a new constraint and re-solving yields the same result.