True/False Question

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____ 16. Companies with large amounts of fixed costs will generally have a high operating leverage.

____ 17. A production supervisor's salary that does not vary with the number of units produced is an example of a fixed cost.

____ 18. The budgeted direct materials purchases is based on the sum of (1) the materials needed for production and (2) the desired ending materials inventory, less (3) the estimated beginning materials inventory.

____ 19. If a business sells two products, it is not possible to estimate the break-even point.

____ 20. Total variable costs change as the level of activity changes.

____ 21. The cash budget presents the expected inflow and outflow of cash for a specified period of time.

____ 22. Standard cost variances are usually not reported in reports intended for stockholders.

____ 23. The ratio that indicates the percentage of each sales dollar available to cover the fixed costs and to provide operating income is termed the contribution margin ratio.

____ 24. The standard cost is how much a product should cost to manufacture.

____ 25. The production budget is the starting point for preparation of the direct labor cost budget.