After Purchasing a Coffee Cup from Your Local Gas Station

question 40

Multiple Choice

After purchasing a coffee cup from your local gas station for $5.00,you can always refill your cup for $0.50.The sunk cost of the coffee purchased at the gas station is:

• A) $0.50.
• B) $5.00.
• C) $10.00.
• D) $5.50.

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Definitions:

Transfer Price

The price at which divisions of a company transact with each other, often used for the sale of goods or services within the company.

Variable Cost

Costs that vary directly with the level of production or sales, such as raw materials and direct labor.

Ample Capacity

A situation where a company has enough or more than enough capacity to meet its current production or operation needs.

Transfer Price

The price at which goods and services are sold between divisions within the same company or between controlled or related entities.