Question Details

What is the transfer price per barrel from the Production Division 



THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 1 THROUGH 3.
Dakoil Corporation has two divisions, Refining and Production. The company's primary product is Enkoil Oil. Each division's costs are provided below:

		Production:	Variable costs per barrel of oil	$  3
				Fixed costs per barrel of oil	$  2
		Refining:	Variable costs per barrel of oil	$10
				Fixed costs per barrel of oil	$12

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.

1.	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 180% of variable costs?
	a.	$5.40
	b.	$9.00
	c.	$18.00
	d.	$23.40

	
2.	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.	$22.00
	c.	$24.20
	d.	$29.70

3.	Assume 200 barrels are transferred from the Production Division to the Refining Division for a transfer price of $6 per barrel. The Refining Division sells the 200 barrels at a price of $40 each to customers. What is the operating income of both divisions together?
	a.	$2,400
	b.	$2,600
	c.	$3,600
	d.	$6,800





Business Management Assignment Help, Business Management Homework help, Business Management Study Help, Business Management Course Help