4. Which of the following is correct concerning reactions to INCREASES in activity?

A) B) C) D)

Total Variable Cost

Increases Constant Decreases Increases

Variable Cost Per Unit

Decreases Decreases Constant Constant

5. Conversion costs consist of:

A) direct and indirect labor.

B) direct labor and direct materials.

C) direct labor and manufacturing overhead.

D) prime costs and manufacturing overhead.

6. The potential benefit that is given up when one alternative is selected over another is called:

A) A sunk cost.

B) An opportunity cost.

C) Both a sunk cost and an opportunity cost.

D) Neither a sunk cost nor an opportunity cost.