1) 1) Discretionary fixed costs usually arise from annual decisions by management to spend in certain fixed cost areas. 2) Contribution margin is the difference between total variable expenses and total fixed expenses. 2) 3) 3) An advantage of the least-squares regression method is that it provides statistical evidence as to the reliability of the cost estimates generated. 4) 4) The usual starting point in budgeting for a for-profit organization is to make a forecast of cash receipts and cash disbursements. 5) Budgets describe in financial terms the plans to achieve an entity's strategic objectives. 5) 6) 6) A production budget is to a manufacturing firm as a merchandise purchases budget is to a merchandising firm. 7) 7) If fixed expenses increase by $10,000 per year, then the level of sales needed to break even will also increase by $10,000. 8) In an absorption costing income statement, costs are grouped according to cost behaviour. 9) Future costs that do not differ among the alternatives are not relevant in a decision. 10) Opportunity costs are recorded in the accounts of an organization. 11) The internal rate of return for a project is the discount rate that makes the net present value of the project equal to zero. 12) 12) Projects with shorter payback periods are always more profitable than projects with longer payback periods