Use the Information Below to Answer the Following Question(s)

question 117

Multiple Choice

Use the information below to answer the following question(s) .Blackoil Corp.has two divisions, Refining and Production.The company's primary product is Clean Oil.Each division's costs are provided below:
The Production Division is able to sell the oil to other areas for $24 per litre.The Refining Division has been operating at a capacity of 80,000 litres a day, using oil from the Production Division and oil purchased from other suppliers.The Refining Division usually purchases 50,000 litres of oil, on average, from the Production Division and 30,000 litres, on average, from other suppliers at $40/litre.
-What is the transfer price per litre assuming the method used is 175% of variable costs?

• A)$10.50
• B)$12.00
• C)$17.50
• D)$24.50
• E)$12.50

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Definitions:

Fair Value

The estimated market value of an asset or liability in an arm's length transaction between informed and willing parties.

Investment Income

Income received from the assets invested in, such as dividends, interest, or rental income.

Common Stock

Shares of ownership in a corporation that grant holders voting rights and a share of the company’s profits through dividends.

Long-Term Investment

Investments a company intends to hold for more than one year, typically including stocks, bonds, or real estate.