5. (b) A negotiated transfer price: (a) Could never be used in an agreement based on standard costs and a profit margin Would not be based on a product market price that has been reduced through bargaining by division managers. Is one that is bargained for between the managers of the buying and selling divisions. (d) is usually developed by lawyers following defined legal procedures. 6. Assume Vandalia Co. produces and sells the following four products at the given dollar amounts per unit. Production is limited by machine hours available. D VANDALIA CO. INFORMATION FOR SELLING PRICE, COSTS, AND LIMITED RESOURCE FOR PRODUCTION Products Per Unit Amounts For A B C Selling Price $ 21 $ 30 $ 24 $ Variable Manufacturing Costs 1 15 18 16 Variable Selling Costs Fixed Manufacturing Costs Machine Hours Required 26 In what order should Vandalia produce and sell these products? (a) B, C, A, D. (b) A, B, C, D. B, A, D, C. B, D, A or C. Estimated future costs that differ between alternative courses of action are referred to as: Absorption costs. (b) Replacement costs. (c) Variable costs (d) Differential costs. The primary difference between a fixed (static) budget and a flexible budget is that a fixed budget: (a) Is concerned with expenses that vary with sales. (b) Cannot be changed after the period begins, whereas a flexible budget can be changed after the period begins. (c) Is a plan for a single level of production, whereas a flexible budget is several plans, one for each of several levels of production. (d) Includes only fixed costs, whereas a flexible budget includes only variable costs