Answer the Following Questions Using the Information Below

question 112

Multiple Choice

Answer the following questions using the information below:
Penn Oil Corporation has two divisions, Refining and Production. 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 40,000 barrels a day and usually purchases 25,000 barrels of oil from the Production Division and 15,000 barrels from other suppliers at $60 per barrel.
-What is the transfer price per barrel from the Production Division to the Refining Division, assuming the method used to place a value on each barrel of oil is 110% of full costs?

• A)$16.50
• B)$66.00
• C)$72.60
• D)$89.10

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Definitions:

Sales Discount

A reduction from the usual cost of a product or service offered to customers to encourage prompt payment or increase sales.

Customers Pay

refers to the transactions where customers remit payment for goods or services received from a business.

Prepaid Freight

Costs paid by a shipper in advance for shipment of goods, indicating that the sender bears the freight charges.

Cash Discount

A reduction in the invoice price offered to buyers as an incentive for early payment.