Axelia Corporation Has Two Divisions, Refining and Extraction

question 4

Multiple Choice

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

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