Choose the correct answer for each of the following FOUR subjective questions/statements (numbered 7 through 10).

7. The costs of carrying inventory include all of the following except:

a)Ordering costs.

b)Cost of warehouse space.

c)Insurance and handling costs.

d)Interest on funds tied up in inventory.

e)None of the above.

8. Once the break-even point is reached:

a)The contribution margin ratio begins to decrease.

b)The variable expenses will remain constant in total.

c)The total contribution margin changes from negative to positive.

d)The net operating income will increase by the unit contribution margin for each additional item sold.

e)None of the above.

9. Allocated common fixed costs:

a)Are always incremental costs.

b)Can make a product line appear to be unprofitable.

c)Are always relevant in decisions involving dropping a product line.

d)All of the above.

e)None of the above.

10. If Company C has a higher degree of operating leverage than Company D, then:

a)Company C is less risky.

b)Company C is more profitable.

c)Company C has higher variable expenses.

d)Company Cs profits are more sensitive to percentage changes in sales.

e)None of the above.