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LEILL Hart Oil Corp. has two divisions, Refining and Production. The company's primary product is Clean Oil. Each division's costs are provided below: Refining: Variable

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LEILL Hart Oil Corp. has two divisions, Refining and Production. The company's primary product is Clean Oil. Each division's costs are provided below: Refining: Variable costs per litre of oil $30 Refining: Fixed costs per litre of oil $24 Production: Variable costs per litre of oil $6 Production: Fixed costs per litre of oil $4 The Production Division is able to sell the oil to other customers for $24 per litre. The Refining Division has been operating at a capacity of 80,000 litres a day, using oil from the Production Division and oil purchased from other suppliers. The Refining Division usually purchases 50,000 litres of oil, on average, from the Production Division and 30,000 litres, on average, from other suppliers at $40/litre. Required: What is the Refining Division's operating income if 150 litres of oil are sold at $110 /litre and 200 litres are transferred in? Assume the transfer price is based on 175% of variable costs. $16,500

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