1) Based on the following assumptions and financial information, select all the true statements.

	Year 1	Year 2	Year 3	Year 4
Production in units	4,000	6,000	8,000	4,000
Sales in units	4,000	3,000	3,000	11,000

(1) Selling price per unit, variable cost per unit, and total fixed costs do not change during the four years.

(2) There is no beginning inventory at Year 1.

	A.	The combined four year net operating income would be the same under variable and absorption costing.
	B.	Because of the changes in production level, under absorption costing the unit product cost will change each year.
	C.	Under variable costing, net operating income will be less in Year 1 than in Year 2.
	D.	Under absorption costing, net operating income will be the same in Year 2 and Year 3.
	E.	Under variable costing, net operating income will be the same in Year 2 and Year 3.

2)

Sales above the break-even point will result in net profit equal to _______.

	A.	number of units above break-even times fixed cost per unit
	B.	number of units above break-even times variable cost per unit
	C.	number of units above break-even times contribution margin per unit
	D.	number of units above break-even times sales price per unit