1. Allocating common fixed expenses to business segments:

a. may cause managers to erroneously keep business segments that should be dropped

b. ensures that all costs are covered

c. may cause managers to erroneously discontinue business segments

d. help managers make good decisions

2. The costs of idle capacity should not be treated as period costs when activity- based costing is used for internal decision making

True

False

3. For a company that uses absorption costing, which of the following is true?

a. Net operating income fluctuates directly with changes in sales volume

b. Fixed production and fixed selling costs are considered to be product costs

c. Unit product costs can change as a result of changes in the number of units manufactured

d. Variable selling expenses are included in product costs

4. Direct material costs are usually excluded from the costs that are allocated to activity cost pools in an activity-based costing system

True

False