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Exxon Mobil Corporation refines crude oil using process costing. In November 2025, the refining process incurs costs of $100 million and produces 10 million gallons

Exxon Mobil Corporation refines crude oil using process costing. In November 2025, the refining process incurs costs of $100 million and produces 10 million gallons of gasoline. Due to evaporation and spillage, 1 million gallons were lost during production.

Required:

  • Calculate the cost per gallon of gasoline produced.
  • Determine the equivalent units of production considering normal and abnormal losses.
  • Allocate costs to completed units and units lost using the average cost method.
  • Analyze the impact of losses on unit costs and profitability.
  • Discuss strategies to minimize losses in a process costing environment.

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