Mega Petroleum has two divisions,each operating as a profit center.The transportation division purchases crude oil in Venezuela,and transports it from Venezuela to Chicago,Illinois.The reefing division process crude oil into gasoline.The cost-based transfer price is 106% of full cost.The contract price of $75 per barrel of crude oil is based on market price in Chicago.The market price per barrel of crude oil supplied to the refining division is $90.The managerial accountant reported the following information?

Required
Compute the cost-based transfer prices at 106% of full cost of the crude oil purchased in Venezuela,plus the transportation division's variable and fixed costs.
A)$80.86
B)$82.86
C)$85.86
D)$87.86
E)$90.86

Question

Mega Petroleum has two divisions,each operating as a profit center.The transportation division purchases crude oil in Venezuela,and transports it from Venezuela to Chicago,Illinois.The reefing division process crude oil into gasoline.The cost-based transfer price is 106% of full cost.The contract price of $75 per barrel of crude oil is based on market price in Chicago.The market price per barrel of crude oil supplied to the refining division is $90.The managerial accountant reported the following information?

Required
Compute the cost-based transfer prices at 106% of full cost of the crude oil purchased in Venezuela,plus the transportation division's variable and fixed costs.

Required
Compute the cost-based transfer prices at 106% of full cost of the crude oil purchased in Venezuela,plus the transportation division's variable and fixed costs.
A)$80.86 
B)$82.86 
C)$85.86 
D)$87.86 
E)$90.86

Quizplus · Accepted Answer

C)[1.06 × ($75 + $2 + $4)] = $85.86

Mega Petroleum Has Two Divisions,each Operating as a Profit Center