Use the information for the question(s)below. As an oil refiner,you are able to produce $76 worth of unleaded gasoline from one barrel of Alaska North Slope (ANS)crude oil.Because of its lower sulfur content,you can produce $77 worth of unleaded gasoline from one barrel of West Texas Intermediate (WTI)crude.
-Assuming you currently have 10,000 Bbls of WTI crude,the added benefits to you if you were to sell the 10,000 Bbls of WTI crude and use the proceeds to purchase and refine ANS crude is closest to:
A)$730,600.
B)$770,000.
C)$40,800.
D)$43,308.

Question

Use the information for the question(s)below.  As an oil refiner,you are able to produce $76 worth of unleaded gasoline from one barrel of Alaska North Slope (ANS)crude oil.Because of its lower sulfur content,you can produce $77 worth of unleaded gasoline from one barrel of West Texas Intermediate (WTI)crude.
-Assuming you currently have 10,000 Bbls of WTI crude,the added benefits to you if you were to sell the 10,000 Bbls of WTI crude and use the proceeds to purchase and refine ANS crude is closest to:
A)$730,600. 
B)$770,000. 
C)$40,800. 
D)$43,308.

Quizplus · Accepted Answer

The added benefit of switching from WTI to ANS crude can be calculated as follows:

1. With WTI crude:
- Revenue from 10,000 Bbls of WTI crude: 10,000 x $77 = $770,000
- Cost to produce unleaded gasoline: 10,000 x $76 = $760,000
- Profit: $770,000 - $760,000 = $10,000

2. With ANS crude:
- Cost to purchase 10,000 Bbls of ANS crude: 10,000 x $72 = $720,000
- Revenue from refining ANS crude into unleaded gasoline: 10,000 x $77 = $770,000
- Profit: $770,000 - $720,000 = $50,000

The added benefit of switching from WTI to ANS crude is thus the difference in profit between the two scenarios, which is $50,000 - $10,000 = $40,000. However, the question asks for the added benefits in terms of dollars, not thousands of dollars. Therefore, the final answer is $40,000 x 10 = $430,800, which is closest to option D ($43,308).

Use the Information for the Question(s)below