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 40,300 barrels a day and usually purchases 25,400 barrels of oil from the Extraction Division and 15,100 barrels from other suppliers at $64 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 120% of full costs?
A)$18.00
B)$21.60
C)$56.00
D)$100.80

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 40,300 barrels a day and usually purchases 25,400 barrels of oil from the Extraction Division and 15,100 barrels from other suppliers at $64 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 120% of full costs?
A)$18.00 
B)$21.60 
C)$56.00 
D)$100.80

Quizplus · Accepted Answer

Transfer price = 1.2 × $18 = $21.60

Axelia Corporation Has Two Divisions,Refining and Extraction