Determine number of barrels of oil-offshore must produce

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Reference no: EM131167327

Offshore Petroleum's fixed costs are $2,500,000 and its debt repayment requirements are $1,000,000. Selling price per barrel of its 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.

Reference no: EM131167327

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