1. Current trends in manufacturing include less direct labor and more overhead. A) True B) False 2. Activity-based costing allocates overhead to multiple cost pools and assigns the cost pools to products using cost drivers. A) True B) False 3. ABC usually results in less appropriate management decisions. A) True B) False 4. ABC is generally more costly to implement than traditional costing. A) True B) False 5. ABC is particularly useful when overhead costs are an insignificant portion of total costs. A) True B) False 6. A variable cost remains constant per unit at various levels of activity. A) True B) False The break-even point is where total sales equal total variable costs. A) True B) False 8. The margin of safety is the difference between sales at breakeven and sales at a determined activity level. A) True B) False 9. For CVP analysis, both variable and fixed costs are assumed to have a linear relationship within the relevant range of activity. A) True B) False 10. The high-low method is used in classifying a mixed cost into its variable and fixed elements. A) True B) False 11. The CVP income statement classifies costs as variable or fixed and computes a contribution margin. A) True B) False 12. The margin of safety tells a company how far sales can drop before it will be operating at a loss. A) True B) False 13. Operating leverage refers to the extent to which a company's net income reacts to a given change in fixed costs. A) True B) False 14. Sales mix is a measure of the percentage increase in sales from period to period. A) True B) False 15. When a company is in its early stages of operation, its primary goal is to generate a target net income A) True B) False 16. In making decisions, management ordinarily considers both financial and nonfinancial information A) True B) False 17. In incremental analysis, total variable costs will always change under alternative courses of action, and total fixed costs will always remain constant. A) True B) False 18. A company should never accept an order for its product at less than its regular sales price. A) True B) False 19. An opportunity cost is the potential benefit obtained by using resources in an alternative course of action. A) True B) False 20. In a decision concerning replacing old equipment with new equipment, the book value of the old equipment can be considered an opportunity cost. A) True B) False