True/False questions

_____7. Because variable costs are assumed to change in constant proportion with changes in the activity level, the graph of the variable costs when plotted against the activity level appears as a circle.

____ 8. Total fixed costs change as the level of activity changes.

____ 9. A favorable cost variance occurs when actual cost is less than budgeted cost at actual volumes.

____ 10. The budgeted volume of production is based on the sum of (1) the expected sales volume and (2) the desired ending inventory, less (3) the estimated beginning inventory.

____ 11. One reason not to depend solely on historical records to set standards is that there may be inefficiencies contained in past costs.

____ 12. The difference between the standard cost of a product and its actual cost is called a variance.