TEST 1: True or False 10 points

1. The formula for break-even point in units is, fixed costs divided by variable cost per unit. Answer: False
2. Sales minus variable costs is equal to operating income.

Answer: True

1. Break-even point in pesos can be arrived at by dividing fixed costs by contribution margin ratio.
2. If contribution margin is equal to fixed costs it will result in an operating income.
3. In a sales mix break-even problem, total fixed costs divided by the package contribution margin per unit is to arrive at the composite break-even point in units.
4. When you decided to stop working and instead take a full time review for the CPALE, the salary you will be sacrificing is called opportunity cost.
5. Sunk costs are considered to be relevant costs.
6. Relevant costs are expected future costs that will differ among alternatives.
7. Avoidable costs are costs that will be incurred if an activity is suspended.
8. All costs are relevant.