Multiple Choice Questions - Chapter 5: 1. Which statement describes a fixed cost? The unit costs stay the same at every activity level. It varies in total at every level of activity. When activity declines, its cost per unit increases. When activity increases, its cost per unit increases. 2. Variable costs are costs that (a) vary in total directly and proportionately with changes in the activity level. (b) remain the same per unit at every activity level. (c) neither of the above. (d) both (a) and (b) above. 3. Which of the following is likely to contain a linear relationship between costs and activities? Small-scale operations. Relevant range. The entire range of possible activity. Full capacity. 4. Simon calculates its contribution margin to be less than zero. Which statement is true? Its profits are greater than its total costs. The company should sell more units. Its selling price is less than its variable costs. Its fixed costs are less than the variable cost per unit. Chantar