The managerial accountant at Mega Petroleum reported the following information. Recall that the contract price of $75 per barrel of crude oil is based on market price in Chicago

The market price per barrel of crude oil supplied to the refining division is $90. The managerial accountant reported the following information. The market price per barrel of gasoline sold to external parties is $180.

Transportation Division
Variable cost per barrel of crude oil $2
Fixed cost per barrel of crude oil $4
Full cost per barrel of crude oil $6

Refining Division
Variable cost per barrel of gasoline $9
Fixed cost per barrel of gasoline $7
Full cost per barrel of gasoline $16

Required
Compute Mega Petroleum's total operating income from purchasing, transporting, and refining 100 barrels of crude oil and selling the 50 barrels of gasoline.
A) $50
B) $65
C) $75
D) $95
E) $100

E
Explanation: E) 50 barrels of gasoline [(180 × 50 ) - ($75 × 100 ) - ($6 × 100 ) - ($16 × 50 )]
= [($9,000 - $7,500 - $600 - $800 )]
= $100