Indicate whether each of the following is true (T) or false (F) in space provided.

Indicate whether each of the following is true (T) or false (F) in the space provided.

The activity level is represented by an activity index such as direct labor hours, units of output, or sales dollars.

Variable cost per unit changes as the level of activity changes.

Fixed costs remain the same in total regardless of changes in the activity index.

The trend in most companies is to have more variable costs and fewer fixed costs.

Within the relevant range, it is assumed costs are curvilinear.

Most companies operate at 100 percent capacity.

For purposes of CVP analysis, mixed costs must be classified into their fixed and variable elements.

The high-low method is a mathematical method that uses total costs incurred at the high and low levels of activity.

Under the high-low method, the variable cost per unit is computed by dividing the change in total costs by the high minus low activity level.

One assumption of CVP analysis is that changes in activity are not the only factors that affect costs.

One assumption of CVP analysis is that all costs can be classified as either variable or fixed with reasonable accuracy.

The contribution margin per unit is the unit selling price less the fixed costs per unit.

The contribution margin ratio of 30% means that 70 cents of each sales dollar is available to cover fixed costs and to produce a profit.

Break-even occurs where total sales equal variable costs plus fixed costs.

If the contribution margin ratio is 60% and the amount of fixed costs are $400,000, then the sales dollars at the break-even point are $666,667.

At the break-even point, contribution margin must equal total fixed costs.

A cost-volume-profit graph shows the amount of net income or loss at each level of sales.

If variable costs per unit are 70% of sales, fixed costs are $290,000, and target net income is $70,000, required sales are $1,200,000.

The margin of safety is the difference between fixed costs and variable costs.

The margin of safety ratio is equal to the margin of safety in dollars divided by the actual or (expected) sales.

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