Axelia Corporation has two divisions. Refining and Extraction. The companys product is Luboil Oil. Each divisions costs
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
Introduction to Operations Research
ISBN: 978-1259162985
10th edition
Authors: Frederick S. Hillier, Gerald J. Lieberman