Use the information below to answer the following question(s).Blackoil Corp.has two divisions, Refining and Production.The company's primary product is Clean Oil.Each division's costs are provided below:
The Production Division is able to sell the oil to other areas for $24 per litre.The Refining Division has been operating at a capacity of 80,000 litres a day, using oil from the Production Division and oil purchased from other suppliers.The Refining Division usually purchases 50,000 litres of oil, on average, from the Production Division and 30,000 litres, on average, from other suppliers at $40/litre.
-What is the Production Division's operating income per 200 litres of oil reported under the 175% of variable costs method?
A)$1,500
B)$880
C)$100
D)$(100)
E)$1,200

Question

Use the information below to answer the following question(s).Blackoil Corp.has two divisions, Refining and Production.The company's primary product is Clean Oil.Each division's costs are provided below:
  The Production Division is able to sell the oil to other areas for $24 per litre.The Refining Division has been operating at a capacity of 80,000 litres a day, using oil from the Production Division and oil purchased from other suppliers.The Refining Division usually purchases 50,000 litres of oil, on average, from the Production Division and 30,000 litres, on average, from other suppliers at $40/litre.
-What is the Production Division's operating income per 200 litres of oil reported under the 175% of variable costs method?
A)$1,500 
B)$880 
C)$100 
D)$(100) 
E)$1,200

Quizplus · Accepted Answer

The operating income per 200 litres of oil under the 175% of variable costs method is $100. This is calculated by taking the revenue from selling the oil and subtracting 175% of the variable costs associated with producing 200 litres.

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