Answer the Following Questions Using the Information Below:
Axelia Corporation

question 145

Multiple Choice

Answer the following questions using the information below:
Axelia Corporation has two divisions, Refining and Extraction. The company's primary product is Luboil Oil. Each division's costs are provided below:
$$\begin{array} { l c c } \text { Extraction: } & \text { Variable costs per barrel of oil } & \$ 7 \\& \text { Fixed costs per barrel of oil } & \$ 5 \\\text { Refining: } & \text { Variable costs per barrel of oil } & \$ 28 \\& \text { Fixed costs per barrel of oil } & \$ 32\end{array}$$ 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 Extraction Division and 15,000 barrels from other suppliers at $60 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 180% of variable costs?

• A) $12.60
• B) $21.60
• C) $72.00
• D) $130.00

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