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1. True or False. Indicate T if true and F if false.

1. At break-even point, contribution margin is equal to fixed costs.
2. If contribution margin is greater than fixed cost, a loss occurs.
3. Selling price per unit minus variable costs per unit is contribution margin ratio.
4. Fixed costs divided by the contribution margin per unit is the break-even point in units.
5. To compute variable costs, the number of units is multiplied to variable cost per unit.
6. Cost-volume-profit analysis is the process of determining the best or the better choice between alternatives.
7. A special order can be accepted if the firm will get additional income from accepting the order within its capacity.
8. Optimum product mix refers to the product combination to be produced/bought and sold to maximize operating income.
9. Contribution margin is an indicator whether to retain or drop a product line.
10. Sales budget is necessary to prepare production budgets.
11. Factory overhead budget is done to determine the approximate wages to be paid to the workers and at the same time, identify the number of employee it needs.
12. Differential revenue is the amount of increase or decrease in revenue expected from a course of action as compared with an alternative.
13. Fixed costs change in relation to the changes in the volume of production or sales.
14. In cost-benefit analysis, the decision maker should always choose the alternative where the cost exceeds the benefit.
15. Total cost is equivalent to the sum of variable and fixed costs.
16. In cost-benefit analysis, fixed costs are considered sunk costs.
17. When contribution margin exceeds the fixed costs, profit is achieved.
18. In preparing for the direct materials budget, labor rate per hour should be considered.
19. In closing or retaining a division, contribution margin is one major consideration in the decision making.
20. An acceptable selling price is the one which it exceeds the total cost of manufacturing the product.

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