1. Which of the following statements is true?

a.	The higher the firm's leverage, the higher the degree of sensitivity of profits to cost changes.
b.	The higher the firm's leverage, the lower the degree of sensitivity of profits to cost changes.
c.	The higher the firm's leverage, the higher the degree of sensitivity of profits to volume changes.
d.	The higher the firm's leverage, the lower the degree of sensitivity of profits to volume changes.

2. A cost that changes as a result of changing activities or levels of activities is called which of the following?

a.	product cost.
b.	department cost.
c.	batch cost.
d.	differential cost.

3. Which of the following terms describes the optimal number of units to order or produce?

a.	economic order quantity.
b.	effective order quantity.
c.	efficient order quantity.
d.	elastic order quantity.