Gulf Coast Pipelines, Inc. is a liquid petroleum pipeline transportation company. The line running from Corpus Christi to Kansas City is a 30-inch, high pressure line which moves product at an average of 8 miles per hour. A filled line contains 28 million barrels of product which travel an average 192 miles per day. The line speed can be increased safely to about 280 miles per day or slowed to almost a stop. The line can be filled to capacity or be partially empty. Over certain segments, the line moves faster than elsewhere as more product is added and taken out. The line carries various products including crude oil of varying weights, home heating oil, and numerous other petroleum products. 

As a transportation company, Gulf Coast Pipelines does not own the products trans- ported. Instead, it is paid a fee for its services based on moving 10,000 barrels (420,000 gallons) of product one mile. The variable cost of running the line is for the 30 pumping stations along the line: the higher the traffic, the higher the fuel cost for pumping. The other cost of running the line is overhead cost, which relates to line maintenance. One unit is considered to be moving 10,000 barrels of product one mile. On April 1, the Corpus Christi to Kansas City line had 1.44 million units in process (18 million barrels that were to be transported an average of 800 miles), which were 60 percent complete. During the month, the line completed 12 million units of delivered product and had ending units in process of two million units (20 million barrels to be transported 1,000 miles) that were 40 percent complete. The beginning units in transit had accumulated costs of $8,800,000 of which $2,400,000 were variable costs. During the month, the Corpus Christi to Kansas City line had $33,420,800 in variable costs and $81,168,800 in fixed costs. The completed deliveries were billed at $134,400,000 for services.

Required:

1. What is the nature of the costs incurred as to direct materials, direct labor, and variable or fixed overhead? 

2. Why should this application be considered for a modified process cost system? 

3. Compute the equivalent units of production for the Corpus Christi to Kansas City line. (Round to four decimal places, if needed.) 

4. Compute a cost per unit of output for variable and fixed costs.

5. What were the profits before administrative expenses and taxes during April? 

6. What were the costs of the units in transit on April 30?