Allocating common fixed expenses to business segments:

• helps managers make good decisions.

• ensures that all costs are covered.

• may cause managers to erroneously discontinue business segments.

• may cause managers to erroneously keep business segments that should be dropped.

8. When unit sales are constant, but the number of units produced fluctuates and everything else remains the same, net operating income under variable costing will:

• fluctuate inversely with changes in production.

• fluctuate in direct proportion to changes in production.

• be greater than net operating income under absorption costing.

• remain constant.