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First: Indicate whether each of the following statements is true (T) or false (F) [9 points] 1. Fixed costs are sunk costs and are therefore irrelevant in decisions. 2. Future costs that do not differ between the alternatives in a decision are avoidable costs. 3. In a decision to drop a product, the product should be charged for reat in proportion to the space it occupies even if the space has no alternative use and the rental payment is unavoidable. 4. In a special-order situation that involves using existing idle capacity, opportunity costs are zero. 5. A cost that will be incurred regardless of which alternative is selected is not relevant when choosing between the alternatives. 6. The book value of an old machine is always considered a sunk cost in a decision. Second: Choose the best answer for each of the following questions [21 points] 1. In a make-or-buy decision, relevant costs include: A) unavoidable fixed costs B) avoidable fixed costs C) fixed factory overhead costs applied to products D) fixed selling and administrative expenses 2. Accepting a special order will improve overall net operating income revenue from the special order exceeds: A) the contribution margin on the order. B) the incremental costs associated with the order. C) the variable costs associated with the order. D) the sunk costs associated with the order

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