10. 5. As production increases, variable costs per unit. a. stay the same b. increase C. decrease d. either increase or decrease, depending on the fixed costs 6. Contribution margin is a. the excess of sales revenue over variable cost b. another term for volume in the "cost-volume-profit" analysis c. profit d. the same as sales revenue 7. A firm operated at 90% of capacity for the past year, during which fixed costs were $420,000, variable costs were 40% of sales, and sales were $1,000,000. Operating profit was a. $180,000 b. $420,000 c. $1,080,000 d. $980,000 8. Variable costs as a percentage of sales for Lemon Inc. are 80%, current sales are $600,000, and fixed costs are $130,000. How much will operating income change if sales increase by $40,000? a. $8,000 increase b. $8,000 decrease c. $30,000 decrease d. $30,000 increase 9. A company's planned borrowings and repayments appear on the: a. production budget. b. operating budget. c. interest income budget. d. cash budget. The sales budget is used directly in the development of the production budget. a. True b. False