True or False

1. Company that has a negative margin of safety necessarily operates at a loss.

2. If the tax rate increases, then the break-even point also increases.

3. Gross profit less fixed costs equals income.

4. When the ending inventory is higher than the beginning inventory, absorption costing gives higher income than variable costing. And, if production is less than sales in units, then variable costing has higher income than absorption costing.

5. Total Fixed costs is treated differently under absorption costing and variable costing.

6. Theoretical capacity is the measure of activity that is likely to give the lowest standard fixed cost per unit.

7. A management letter is a report submitted by CPA to management after the review of the management controls stating coverage of review and deficiencies noted during review.

8. Expertise in MAS is acquired by education, auditing and other experience and actual performance of MAS.

9. The short term report in MS engagement is usually issued when interim reporting was extensively used and there was close and continuous coordination between the consultant and the client.

10. It is possible for a service department to be a final cost center in a merchandising organization.

11. The last service department to allocate its costs using the step method is one that provides the smallest portion of its services to other service departments