5. Suppose company XYZ produces two products, A and B, which share part of the production process until the split-off point. We call the costs incurred by both products before the split-off point:

a) Relevant costs

b) Joint costs

c) Direct costs d) Inventoriable costs

6. An important assumption of cost-volume-profit analysis is that:

a) Indirect costs are equal to 0

b) All indirect costs are fixed costs

c) All companies must have positive gross margin and non-negative

contribution margin

d) Managers can separate the fixed and variable components of costs

7. If managers "produce for inventory"

a) Operating income is typically higher under absorption costing than under variable costing

b) The largest portion of inventoriable cost is fixed and period costs are mostly variable in nature

c) The cost of inventory is expensed in the income statement when incurred

d) None of the above