31
QuizMultiple Choice

Break-Even Analysis

Question 31 • FowU - Financial Math - B

It costs a petroleum refinery $0.39 to refine one gallon of gasoline, and $0.39 to refine one gallon of natural gas. The refinery can sell gasoline for $2.11 per gallon, and can sell natural gas for $1.60 per gallon. Due to the refining process, the refinery must produce and sell twice as much natural gas as it does gasoline. If the refinery’s monthly overhead costs, not including production costs, are $180,000, how many gallons of natural gas will the refinery have sold when it breaks even each month? Round to the nearest whole gallon, if necessary.

Answer
A
86,957
B
141,732
C
148,760
D
217,392

Explanation

Each gallon of natural gas contributes $1.60 − $0.39 = $1.21 toward overhead. For every gallon of natural gas sold, the refinery also sells half a gallon of gasoline, which contributes $2.11 − $0.39 = $1.72 per gallon, or $0.86 for that half-gallon. Together, each gallon of natural gas sold contributes $2.07 toward the $180,000 overhead. Dividing $180,000 by $2.07 gives about 86,957 gallons, so the correct choice is 86,957.

AI-written and checked against the verified answer.

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