Calculating Landed Cost in Four-Part Oil Transaction
What are the costs involved in a four-part oil transaction?
An oil company has agreed to buy oil from Russia, ship it to Amsterdam, refine it in Rotterdam, and then transport gasoline to Miami. What is the total landed cost in dollars for this transaction?
Answer
The landed cost for this four-part oil transaction is 56.49 dollars per barrel.
Let's break down the costs involved in the transaction:
- Buying Cost of Oil Barrel: 1,800 Rubles, equivalent to 27.50 USD per barrel.
- Shipping Cost to Amsterdam: 20 Kroner, equivalent to 2.35 USD per barrel.
- Refining Cost in Rotterdam: 20 Euros, equivalent to 22.82 USD per barrel.
- Transportation Cost to Miami: 200 Philippine pesos, equivalent to 3.82 USD per barrel.
Therefore, the total landed cost of this transaction is calculated by summing up all the costs: 27.50 + 2.35 + 22.82 + 3.82 = 56.49 USD per barrel.