Southern Oil Company produces two grades of gasoline: regular and premium. The profit contributions are $0.30 per gallon for regular gasoline and $0.50 per gallon for premium gasoline. Each gallon of regular gasoline contains 0.3 gallons of grade A crude oil and each gallon of premium gasoline contains 0.6 gallons of grade A crude oil. For the next production period, Southern has 18,000 gallons of grade A crude oil available. The refinery used to produce the gasolines has a production capacity of 50,000 gallons for the next production period. Southern Oil's distributors have indicated that demand for the premium gasoline for the next production period will be at most 20,000 gallons. a. Formulate a linear programming model that can be used to determine the number of gallons of regular gasoline and the number of gallons of premium gasoline that should be produced in order to maximize total profit contribution. b. What is the optimal solution? c. What are the values and interpretations of the slack variables? d. What are the binding constraints?

Answer:a) MAX--> PC (R,P) = 0,3R+ 0,5P b) Optimal solution: 40.000 units of R and 10.000 of PC = $17.000c) Slack variables: S3=1000, is the unattended demand of P, the others are 0, that means the restrictions are at the limit.d) Binding Constaints:1. 0.3 R+0.6 P ≤ 18.0002. R+P ≤ 50.0003. P ≤ 20.0004. R ≥ 05. P ≥ 0Step-by-step explanation:I will solve it using the graphic method:First, we have to define the variables:R : Regular GasolineP: Premium GasolineWe also call:PC: Profit contributionsA: Grade A crude oil• R--> PC: $0,3 --> 0,3 A• P--> PC: $0,5 --> 0,6 ASo the ecuation to maximize is:MAX--> PC (R,P) = 0,3R+ 0,5P The restrictions would be:1. 18.000 A availabe (R=0,3 A ; P 0,6 A)2. 50.000 capacity3. Demand of P: No more than 20.0004. Both P and R 0 or more.Translated to formulas:Answer d)1. 0.3 R+0.6 P ≤ 18.0002. R+P ≤ 50.0003. P ≤ 20.0004. R ≥ 05. P ≥ 0To know the optimal solution it is better to graph all the restrictions, once you have the graphic, the theory says that the solution is on one of the vertices.So we define the vertices: (you can see on the graphic, or calculate them with the intersection of the ecuations)V:(R;P)• V1: (0;0)• V2: (0; 20.000)• V3: (20.000;20.000)• V4: (40.000; 10.000)• V5:(50.000;0)We check each one in the profit ecuation:MAX--> PC (R,P) = 0,3R+ 0,5P• V1: 0• V2: 10.000• V3: 16.000• V4: 17.000• V5: 15.000As we can see, the optimal solution is  V4: 40.000 units of regular and 10.000 of premium.To have the slack variables you have to check in each restriction how much you have to add (or substract) to get to de exact (=) result.