1. Explain the differences between irrelevant costs and opportunity costs. (5 points)

2. Explain how break-even units of sale would change when per unit price increases by 5% and variable expenses per unit decrease by more than 5%. (5 points)

3. What is the main difference between absorption costing and variable costing methods when we calculate per unit product cost? (5 points)

4. The degree of operating leverage of company A is higher than company B. If sales decrease by 10% for each company, then which company would have higher net operating income and why? (5 points)

5. Following table shows information of company A and Company B.

	Firm A	Firm B
Sales	Same	Same
Contribution Margin	Lower	Higher
Margin of Safety	Higher	Lower

a. Which company should perform better if sales increase by 10% for both companies and why? (5 points)

b. Which company should perform better if sales decrease by 10% for both companies and why? (5 points)