True / False Questions
78.The variable cost per unit increases in direct proportion to the activity base.
True False
79.If managers of a company do not understand the behavior of its costs, they are likely to make poor decisions about the company's operations.
True False
80.For a mixed cost, total cost increases in direct proportion to volume.
True False
81.The total variable cost increases in direct proportion to volume.
True False
82.If a company had a mixed cost structure, every dollar of revenue after covering the fixed costs would be pure profit.
True False
83.As activity increases, the fixed cost per unit increases while the variable cost per unit remains constant.
True False
84.Risk refers to the possibility that sacrifices may exceed benefits.
True False
85.Operating leverage enables a company to convert small changes in fixed costs into dramatic changes in profitability.
True False
86.If a company shifts its cost structure by decreasing fixed costs and increasing variable costs, it will lower both the level of risk and its potential for profits.
True False
87.If revenues are expected to decline, management should attempt to convert its variable costs into fixed costs.
True False