For each of the following statements, select the item which gives the best answer.

If production increases to a point at which current facilities are inadequate and additional facilities must be rented, (1) total variable costs will increase; (2) total fixed costs will decrease; (3) total fixed costs will increase; (4) mixed costs will decrease.

Factory overhead should be allocated on the basis of (1) direct materials costs; (2) units of production; (3) direct labor cost; (4) an activity related to cost incurrence.