Offshore Petroleum's Fixed Costs Are $2,500,000 and Its Debt Repayment

question 16

Essay

Offshore Petroleum's fixed costs are $2,500,000 and its debt repayment requirements are $1,000,000.Selling price per barrel of oil is $18 and variable costs per barrel are $10.
(a) Determine the breakeven output (in dollars).
(b) Determine the number of barrels of oil that offshore must produce and sell in order to earn a target (operating) profit of $1,500,000.
(c) Determine the degree of operating leverage at an output of 400,000 barrels.
(d) Assuming that sales of oil are normally distributed with a mean of 362,500 barrels and a standard deviation of 100,000 barrels, determine the probability that Offshore will incur an operating loss.

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Definitions:

Industrial and Organizational Psychologists

Psychologists who apply psychological theories and principles to organizations and the workplace to solve problems and improve the quality of work life.

Productivity

A measure of the efficiency of a person, machine, system, etc., in converting inputs into useful outputs.

Working Conditions

The environment in which an individual works, including aspects such as safety, hours, physical conditions, and stress levels.

Gestalt

A psychological approach that looks at the human mind and behavior as a whole, emphasizing that the whole is different from and greater than the sum of its parts.