D. True/ False.. be sure to form your letters so that T does not look like F and vice versa. 2x 15 30 pts 1. If a company sells more of the low contribution margin products than expected in the beginning of year budget, the sales needed to break even will be higher than what was computed in the break even formula based on budgeted data. 2. If the asset turnover increases and margin increases the ROI will decrease 3.An inherent assumption of the high low method is that more costs are fixed than variable 4. An inherent assumption of the high low method is that future cost behavior will be similar to the pattern seen in the past. S. The minimum required return used in the residual income method is a very subjective rate chosen by management. 6. The ROI method is more fair for comparisons between different size divisions than the residual income approach. 7. A company's operating income increases by 10%, the total expenses increase by 5%, and the net income increases by 20%. Therefore, the company has an operating leverage of .5 times. 8. If a company converts $10,000 of variable expenses to fixed expenses it will be easier to break even 9, Company A has a contribution margin percent of 30%; Company B has a contribution margin of 40% both have fixed costs of $50,000. Company B will do better during a general economic slowdown. 10. Earnings per share times ROI less Asset Turnover equals Residual Income 11. ROI and residual income are tools used to evaluate managerial performance in investment centers _12. Residual income should be used to evaluate an investment center rather than a cost or profit center. 13. Under the Residual income method the star performer departments may turn down projects that would have benefited the overall company 19. Residual income is the difference between net operating income and the product of average operating assets and the minimum rate of return. 20. ROI should not be used to measure the performance of a profit center