Answer the Following Questions Using the Information Below:
Bass Strait

question 54

Multiple Choice

Answer the following questions using the information below:
Bass Strait Oil Corporation has two divisions: Refining and Production.The company's primary product is Enkoil Oil.Each division's costs are provided below:
$$\begin{array} { l l r } \text { Production: } & \text { Variable costs per barrel of oil } & \$ 3 \\& \text { Fixed costs per barrel of oil } & \$ 2 \\\text { Refining: } & \text { Variable costs per barrel of oil } & \$ 10 \\& \quad \text { Fixed costs per barrel of oil } & \$ 12\end{array}$$
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 $20 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)$5.50
• B)$24.20
• C)$29.70
• D)$22.00

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Definitions:

Merchandise Inventory

Merchandise Inventory is the value of a company's goods that are ready for sale to customers at any given time.

Sales Revenue

The income received by a company from its sales of goods or the provision of services, before any expense deduction.

Merchandise Return

The process of a customer returning previously purchased merchandise back to the seller, often for a refund or store credit.

Customer Refunds Payable

Liabilities on a company's balance sheet representing money owed to customers for returned goods or services that did not meet expectations.