Th e following information is retrieved from Penn Oil Corporation for two divisions (Blending and...
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Th e following information is retrieved from Penn Oil Corporation for two divisions (Blending and Distribution) out of its eight manufacturing divisions; The Company's primary product is Luboil Oil. Each division's costs are provided below: Blending division: Purchase of 50,000 barrels as crude oil from the Secondary Treating division by $35 per barrel. In addition, Blending division paid the following internal costs: Direct Material Variable costs per barrel of oil Total Fixed costs S 6 S 100,000 Assume that the Blending division transfer 40,000 barrel to the Distribution division and the transfer price per barrel is computing by one of the following methods: - Market price of S69.1 -Internal price of 180% of total variable costs Hybrid Price of $70 Distribution division: Distribution division paid the following internal costs: Direct Material Variable costs per barrel of oil Total Fixed costs The distribution division sold 35,000 barrel to external customer by $100 per barrel S10 S120,000 Required: 1. What is the net operating income for each division using the three transfer price methods? 2. What is the net income for both divisions using the three transfer price methods
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