Axelia Corporation has two divisions,Refining and Extraction.The company's primary product is Luboil Oil.Each division's costs are provided below:

The Refining Division has been operating at a capacity of 40,200 barrels a day and usually purchases 25,100 barrels of oil from the Extraction Division and 15,600 barrels from other suppliers at $58 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 180% of variable costs?
A)$25.20
B)$34.20
C)$77.00
D)$138.60

Question

Axelia Corporation has two divisions,Refining and Extraction.The company's primary product is Luboil Oil.Each division's costs are provided below:

The Refining Division has been operating at a capacity of 40,200 barrels a day and usually purchases 25,100 barrels of oil from the Extraction Division and 15,600 barrels from other suppliers at $58 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 180% of variable costs?
A)$25.20 
B)$34.20 
C)$77.00 
D)$138.60

Quizplus · Accepted Answer

Transfer price = 1.8 × $14 = $25.20

Axelia Corporation Has Two Divisions,Refining and Extraction