1. T F 2. T True/False (Circle the correct choice) A fixed cost remains constant in total and on a per unit basis at various levels of activity. F If the activity index decreases, total variable costs will decrease proportionately. 3. T F 4. T F 5. T F An assumption of CVP analysis is that all costs can be classified as either variable or fixed. Contribution margin is the amount of revenue remaining after deducting cost of goods sold. The contribution margin ratio is calculated by multiplying the unit contribution margin by the unit sales price. The break-even point is equal to the fixed costs plus net income. 6. TF 7. T F 8. T F A CVP income statement shows contribution margin instead of gross profit. 9. TF 10. T F A target net income is calculated by taking actual sales minus the margin of safety. When applying the high-low method, the variable cost element of a mixed cost is calculated before the fixed cost element. The contribution margin ratio of 40% means that 60 cents of each sales dollar is available to cover fixed costs and to produce a profit.