Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Create a chart exploring what prices to set for all combinations of the following scenarios: The price per barrel of crude oil is $60,$80, and

image text in transcribed
Create a chart exploring what prices to set for all combinations of the following scenarios: The price per barrel of crude oil is $60,$80, and $90 per barrel. The desired margin is 10% and 20%. Additionally, if the desired markup is 10% and 30%. The given information is: Naziha Murad ran the 7 th largest refinery in the Majnoon oil fields of Iraq. The refinery was a division of MesoPetrolia, who removes crude oil from the land through their Extraction Division, and refines and sells products through Murad's Division (Refinery Division), and sells to internal and external buyers. An example of an internal buyer was the Commercial Asphalt Division. Murad's Refinery Division can purchase crude oil from the in-house Extraction Division or third -party sellers in the region, the same way they can sell to internal or external buyers. Refining oil involves heating the crude oil to separate out components based on their boiling points. Then they can sell the petroleum products to various distributors such as gas stations, jet fuel firms, and asphalt producers. In Murad's Division, 50% of crude oil becomes gasoline, 30% becomes jet fuel, and 20% goes into asphalt production. Murad's refining facility typically processes 1 million crude oil barrels per year1. The production process uses little direct labour, but Murad attributes $5 million of direct labour per year to the barrel loaders who empty crude oil barrels into the refinery process and allocates these direct labour costs proportionally to product outcome. The total overhead cost of operating the refinery is $80 million per year which also would be distributed proportionally to product outcomes. Jet Fuel MesoPetrolia sells jet fuel directly to Erbil International Airport's fuel service business. This fuel was to be sold to various airlines and local pilots. Given demand in the market, Murad feels they could price the fuel using total cost + pricing

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions