Question 1 The relevant range is important because: a) CVP assumptions are not valid when operations are in the relevant range b) Operations cannot be in any other range c) Fixed and variable costs may change outside the relevant range d) It describes the limits of operations Question 2 Once a firm reaches the breakeven point, the next unit sold will increase profit by an amount equal to the: a) Selling price per unit b) Variable cost per unit c) Contribution margin per unit d) Difference between contribution margin and fixed costs Question 3 In CVP analysis, managers usually assume that the cost function is linear. Which of the following equations best represents a linear function for total cost if the cost is a mixed cost? a) y=$200+$60x b) y=$60x2 c) y=$60x d) y=$200 Question 4 Ciao Company manufactures a single product. The product sells for $10. The variable manufacturing cost per unit is $2 and the variable selling cost is $2 per unit. Ciao incurs monthly fixed costs of $100,000 for manufacturing and $140,000 for administration and selling. Ciao Company is considering changes to its production and distribution procedures. If the changes are made, total variable costs (manufacturing and selling) will be $3 and total fixed costs (manufacturing, administration, and selling) will be $350,000 per month. The selling price will remain at $10. If the changes are made, the number of units required to break even will be: a) Greater than before b) The same as before c) Less than before d) Cannot be determined Question 5 Identifying a cost driver is the first step in allocating overhead in a job costing system. (True/False) Question 6 Potential loss of reputation and market share are opportunity costs of spoilage and rework. (True/False)