Petro Chem is planning to buy a new refining plant in Canada. The plant is built with a total production capacity of 100 million barrels of refined products. The variable cost of production per barrel is AED 50 of which fuel costs form 40%. The fixed cost to operate the plant per year is AED 8b.

a. What would be the selling price to achieve a break even assuming the plant is running at 95% utilisation?

b. Assume the product was sold at AED 150 per barrel. Due to a technical glitch in the plant, the utilisation dropped to 85% for a year. What would be the expected impact on the profit?

c. The oil price increased from AED 50 per barrel to AED 55 per barrel which would impact the production costs. What should be the new selling price to achieve a 10% profit margin at 95% utilisation?