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 40,900 barrels a day and usually purchases 25,600 barrels of oil from the Extraction Division and 15,400 barrels from other suppliers at $64 per barrel.
Assume 260 barrels are transferred from the Extraction Division to the Refining Division for a transfer price of $26 per barrel. The Refining Division sells the 260 barrels at a price of $220 each to customers. What is the operating income of both divisions together?
A) $13,520
B) $34,060
C) $16,380
D) $50,440

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 40,900 barrels a day and usually purchases 25,600 barrels of oil from the Extraction Division and 15,400 barrels from other suppliers at $64 per barrel.
Assume 260 barrels are transferred from the Extraction Division to the Refining Division for a transfer price of $26 per barrel. The Refining Division sells the 260 barrels at a price of $220 each to customers. What is the operating income of both divisions together?
A) $13,520 
B) $34,060 
C) $16,380 
D) $50,440

Quizplus · Accepted Answer

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Axelia Corporation Has Two Divisions, Refining and Extraction