1. Which of the following statements is CORRECT with respect to total fixed costs, within the relevant range?

a. They will remain the same as production levels change.

b. They will increase as production decreases.

c. They will decrease as production decreases.

d. They will decrease as production increases.

2. Porterhouse Company has both fixed and variable production costs. If volume goes up by 20%, how would that affect the total of all costs? (Assume all volumes are within the relevant range.)

a. Would go up 20%

b. Would remain the same

c. Would go up by some amount less than 20%

d. Would go down

3. Chambers Company sells glass vases at a wholesale price of $2.50 per unit. Variable cost is $1.75 per unit. Chambers' fixed costs are $6,500 per month. If Chambers wishes to make operating income of $2,500, how many units must be sold?

a. 11,500

b. 11,750

c. 12,000

d. 12,500

4. Arquebus Company is owned and operated by a craftsman who makes replicas of historic firearms for museums, sportsmen and collectors. He is currently producing 40 flintlock muskets per month. Cost data are as follows:

Price…………………………….$720 per unit

Variable cost……………………$470 per unit

Fixed costs…………………$8,000 per month

How much is his margin of safety expressed in units per month?

a. 8 units

b. 6 units

c. 4 units

d. 2 units

5. Which of the following accurately describes variable costing?

a. Only variable manufacturing costs are assigned to products.

b. Only fixed manufacturing costs are assigned to products.

c. Both variable and fixed manufacturing costs are assigned to products.

d. Both manufacturing and non-manufacturing costs are assigned to products.