The Molding Division of White Corporation manufactures plastic molds and

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1. A relevant cost
a. is a sunk cost.
b. is a past cost.
c. costs that differ across alternatives.
d. is an opportunity cost.

2. The Molding Division of White Corporation manufactures plastic molds and then sells them to customers for $40 per unit. Its variable cost is $15 per unit, and its fixed cost per unit is $5. Management would like the Molding Division to transfer 15,000 of these molds to another division within the company at a price of $23. The Molding Division has available capacity to produce the 15,000 units for the other division. What is the minimum transfer price the Molding Division should accept?
a. $20
b. $15
c. $23
d. $40

3. A responsibility report for a profit center shows
a. gross profit and income from operations.
b. contribution margin and controllable margin.
c. contribution margin, controllable margin, and return on investment.
d. gross profit, income from operations, and net income.

4. The initial budget prepared in the master budget is the
a. sales budget.
b. production budget.
c. budgeted balance sheet.
d. budgeted income statement.

5. A static budget is
a. applicable to cost budgets but not to a sales budget.
b. modified or adjusted for changes in activity during the year.
c. appropriate in evaluating a manager's effectiveness in controlling fixed costs.
d. appropriate in evaluating a manager's effectiveness in controlling variable costs.

6. When considering controllable versus noncontrollable costs,
a. costs allocated to, and thus identifiable with, a particular responsibility level are controllable.
b. costs incurred directly by a level of responsibility are controllable at that level.
c. controllable cost and noncontrollable cost, respectively, are synonymous with variable cost and fixed cost.
d. more costs are controllable as one moves down to the lower levels where actual production takes place.

7. The Molding Division of White Corporation manufactures plastic molds and then sells them to customers for $40 per unit. Its variable cost is $15 per unit, and its fixed cost per unit is $5. Management would like the Molding Division to transfer 15,000 of these molds to another division within the company at a price of $23. The Molding Division is operating at full capacity. What is the minimum transfer price the Molding Division should accept?
a. $23
b. $20
c. $40
d. $25

T F 8. A sunk cost is the potential benefit that may be obtained by following an alternative course of action.

T F 9. A company should process further as long as the incremental costs of further production exceed the incremental revenue of further production.

T F 10. Joint costs are all costs incurred prior to the point at which two products are separately identified.

T F 11. Sunk costs are relevant costs that differ across alternatives.