Patron Bhd. is a company operating in an upstream exploration and production, focusing onthe acquisition, exploration and development of properties for the production of crude oil andnatural gas from underground reservoirs. The company has two divisions: Transportation andRefining. Transportation division purchases crude oil in shallow waters offshore of PeninsularMalaysia and sends it to Melaka oil refinery. Refining division processes crude oil into gasoline.The following data is available for both divisions:Transportation Division:Variable cost per barrel of crude oilRM350.00Fixed cost per barrel of crude oil150.00Total500.00Refining Division:RMVariable cost per barrel of gasoline700.00Fixed cost per barrel of gasolineTotal500.001,200.00Additional information:* The company pipeline can carry 55,000 barrels per day. The external market price forsupplying crude oil per barrel is RM750.00.* The Refining Division of Patron Bhd. is currently purchasing crude oil locally forRM1,500.00 per barel. The Refining Division is buying 30,000 barrels per day.* The Refining Division is operating at 50,000 barrels capacity per day.* The external market price to outside parties is RM3,500.00 per barrel REQUIRED:a. Determine the market-based transfer price from Transportation to Refining Division.b. Compute the cost-based transfer price at 120% of full costs.c. Determine the negotiated price between divisiond. Assume that the Refining Division buys 5,000 barrels of crude oil from the TransportationDivision. The Refining Division converts 5,000 barrels of crude oil into 500 gallons ofgasoline and sells them to the external market. * Based on market-based price, compute:i. the Transportation Division's operating income ii the Refining Division's operatingincome ii. the operating income of both divisions together* Based on full cost price (120% of full cost), compute:į the Transportation Division's operating income ii. theRefining Division's operating income ii the operatingincome of both divisions togethere. The Refining Division has located an independent producer in Peninsular Malaysia that iswilling to sell 30,000 barrels of crude oil per day at RM1,200.00 per barrel delivered to thepipeline (Transportation Division).The Transportation Division has excess capacity and can transport the crude oil at itsvariable costs of RM350.00 per barrel.* Based on this information:i. Should Patron Bhd. purchase from the independent supplier? Why?ii. Suppose the Transportation Division's transfer price to the Refining Division is 120%of full cost. What is the cost to the Refining Division?

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Patron Bhd. is a company operating in an upstream exploration and production, focusing on the acquisition, exploration and development of properties for the production of crude oil and natural gas from underground reservoirs. The company has two divisions: Transportation and Refining. Transportation division purchases crude oil in shallow waters offshore of Peninsular Malaysia and sends it to Melaka oil refinery. Refining division processes crude oil into gasoline. The following data is available for both divisions: Transportation Division: Variable cost per barrel of crude oil Fixed cost per barrel of crude oil Total RM 350.00 150.00 500.00 Refining Division: Variable cost per barrel of gasoline Fixed cost per barrel of gasoline RM 700.00 500.00 1,200.00 Total Additional information: • The company pipeline can carry 55,000 barrels per day. The external market price for supplying crude oil per barrel is RM750.00. * The Refining Division of Patron Bhd. is currently purchasing crude oil locally for RM1,500.00 per barel. The Refining Division is buying 30,000 barrels per day. • The Refining Division is operating at 50,000 barrels capacity per day. * The external market price to outside parties is RM3,500.00 per barrel

Patron Bhd. is a company operating in an upstream exploration and production, focusing on the acquisition, exploration and development of properties for the production of crude oil and natural gas from underground reservoirs. The company has two divisions: Transportation and Refining. Transportation division purchases crude oil in shallow waters offshore of Peninsular Malaysia and sends it to Melaka oil refinery. Refining division processes crude oil into gasoline. The following data is available for both divisions: Transportation Division: Variable cost per barrel of crude oil Fixed cost per barrel of crude oil Total RM 350.00 150.00 500.00 Refining Division: Variable cost per barrel of gasoline Fixed cost per barrel of gasoline RM 700.00 500.00 1,200.00 Total Additional information: • The company pipeline can carry 55,000 barrels per day. The external market price for supplying crude oil per barrel is RM750.00. * The Refining Division of Patron Bhd. is currently purchasing crude oil locally for RM1,500.00 per barel. The Refining Division is buying 30,000 barrels per day. • The Refining Division is operating at 50,000 barrels capacity per day. * The external market price to outside parties is RM3,500.00 per barrel

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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