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

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 17E: Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside...

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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 $10.00 Fixed costs per barrel of oil $4.00 Refining: Variable costs per barrel of oil $26.00 Fixed costs per barrel of oil $40.00 The Refining Division has been operating at a capacity of 40,300barrels a day and usually purchases 26,000barrels of oil from the Extraction Division and 15,800barrels from other suppliers at $66.00 per barrel. Assume 220 barrels are transferred from the Extraction Division to the Refining Division for a transfer price of $24.00 per barrel. The Refining Division sells the 220 barrels at a price of $200.00each to customers. What is the operating income of both divisions together? A; $26,400.00 B. $11,880.00 C. $ 10,560.00 D. $38,720.00
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