Axelia Corporation has two divisions. Refining and Extraction. The companys product is Luboil Oil. Each divisions costs

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Question:

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

Extraction: Variable costs per barrel of oil $9

Fixed costs per barrel of oil $8

Refining: Variable costs per barrel of oil $34

Fixed costs per barrel of oil $40

The Refining Division has been operating at capacity of 40,200 barrels a day and usually purchases 26.000 barrels of oil from the Extraction division and 15,900 barrels from other suppliers at $74 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 155% of full costs?

A. $17.00

B. $102.60

C. $57.00

D. $19.55