Axelia Corporation has twodivisions, Refining and Extraction. Thecompany's primary product is Luboil Oil. Eachdivision's costs...
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Accounting
Axelia Corporation has twodivisions, Refining and Extraction. Thecompany's primary product is Luboil Oil. Eachdivision's costs are providedbelow:
Extraction:
Variable costs per barrel of oil $8
Fixed costs per barrel of oil $6
Refining:
Variable costs per barrel of oil $33
Fixed costs per barrel of oil $39
The Refining Division has been operating at a capacity of 40,500 barrels a day and usually purchases 26,000 barrels of oil from the Extraction Division and 15,800 barrels from other suppliers at $72 per barrel.
What is the transfer price per barrel from the Extraction Division to the RefiningDivision, assuming the method used to place a value on each barrel of oil is 175% of variablecosts?
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