Axelia Corporation has two divisions, Refining and Extraction. The company's primary product is Luboil Oil. Each division's costs are provided below: Extraction: Variable costs per barrel of oil $13 Fixed costs per barrel of oil $6 Refining: Variable costs per barrel of oil $26 Fixed costs per barrel of oil $36 The Refining Division has been operating at a capacity of 40,800 barrels a day and usually purchases 25,600 barrels of oil from the Extraction Division and 15,100 barrels from other suppliers at $62 per barrel. What is the transfer price per barrel from the Extraction Division to the Refining Division, assuming the method used to place a value on each barrel of oil is 110% of full costs? A. $99.00 B. $20.90 C. $55.00 D. $19.00
Axelia Corporation has two divisions, Refining and Extraction. The company's primary product is Luboil Oil. Each division's costs are provided below: Extraction: Variable costs per barrel of oil $13 Fixed costs per barrel of oil $6 Refining: Variable costs per barrel of oil $26 Fixed costs per barrel of oil $36 The Refining Division has been operating at a capacity of 40,800 barrels a day and usually purchases 25,600 barrels of oil from the Extraction Division and 15,100 barrels from other suppliers at $62 per barrel. What is the transfer price per barrel from the Extraction Division to the Refining Division, assuming the method used to place a value on each barrel of oil is 110% of full costs? A. $99.00 B. $20.90 C. $55.00 D. $19.00
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Axelia Corporation has two divisions, Refining and Extraction. The company's primary product is Luboil Oil. Each division's costs are provided below:
Extraction: Variable costs per barrel of oil $13
Fixed costs per barrel of oil $6
Refining: Variable costs per barrel of oil $26
Fixed costs per barrel of oil $36
The Refining Division has been operating at a capacity of 40,800 barrels a day and usually purchases 25,600 barrels of oil from the Extraction Division and 15,100 barrels from other suppliers at $62 per barrel.
What is the transfer price per barrel from the Extraction Division to the Refining Division, assuming the method used to place a value on each barrel of oil is 110% of full costs?
$99.00
$20.90
$55.00
$19.00
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