Question 1 1 pts Give two rules of thumb to use when analyzing cost behavior. Two rules of thumb to use are (a) that the analysis is only as well as managers understand the cost behavior and how well managers can control the costs, and (b) the analysis examines how decisions about the volume of production and sales affect costs to ensure the company remains profitable. Two rules of thumb to use are (a) fixed costs per unit remain constant as the cost driver activity increases but total fixed costs decrease, and (b) variable costs do not vary with changes in the cost driver but do vary in direct proportion to the change in the cost driver. Two rules of thumb to use are (a) total fixed costs remain unchanged regardless of changes in cost-driver activity level, and (b) the per-unit variable cost remains unchanged regardless of changes in cost-driver activity level. Two rules of thumb to use are (a) how useful the analysis is to managers who want an estimate of the general relationship between production volume and costs, and (b) variable costs per unit increase as the cost driver increases but total variable costs remain constant. Question 2 1 pts Identify the major simplifying assumption that underlies CVP analysis. The major simplifying assumption is that all costs are variable based upon the level of output, so a short-term horizon is predicable for the analysis. The major simplifying assumption is that costs can be adjusted to be either fixed or variable in the different scenarios to determine profitability. The major simplifying assumption is there is a single cost driver used and the others are disregarded as irrelevant for the analysis. The major simplifying assumption is that we can classify costs as either variable or fixed with respect to a single measure of the volume of output activity. Question 3 1 pts "Contribution margin is the excess of sales over fixed costs." Do you agree? Explain. No. Contribution margin is the excess of sales over fixed costs and variable costs combined. Yes. Contribution margin is the excess of sales over fixed costs. O No. Contribution margin is the excess of sales over all variable costs, not fixed costs. No. Contribution margin is the excess of sales over operating costs. Question 4 1 pts "Companies in the same industry generally have about the same break-even point." Do you agree? Explain. It depends. The break-even point for companies in the same industry are only similar if supplies are purchased from the same supplier. O Yes. Company costs in the same industry are highly competitive making break-even points close for each company. O No. Break-even points can vary greatly within an industry. Yes. Break-even points are usually similar because operations have the same fixed and variable costs