Question

TRUE/FALSE Write 'T' if the statement is true and 'F' if the statement is false.

1) The degree of operating leverage in a company is smallest at the break-even point and increases as sales rise. _______

2) The break-even point in units can be obtained by dividing the unit contribution margin by the total fixed expenses. _______

3) An increase in the number of units sold will decrease a company's break-even point. _______

4) The margin of safety is the amount by which sales can decrease before losses are incurred by the company. _______

5) For a capital intensive, automated company the break-even point will tend to be lower and the margin of safety will be higher than for a less capital-intensive company with the same sales. _______

6) The smaller the contribution margin ratio, the smaller the amount of sales required to cover a given amount of fixed expenses. _______

7) If the variable expense per unit decreases, and all other factors remain the same, the contribution margin ratio will decrease. _______

8) A shift in the sales mix from high-margin items to low-margin items can cause total profits to increase even though total sales may decrease. _______

9) When expressed on a per unit basis, fixed costs can mislead decision makers into thinking of them as variable costs. _______

10) To estimate what the profit will be at various levels of activity, divide the number of units to be sold above or below the break-even point by the unit contribution margin. ___

Answer 1

1) F

2) F

3) F

4) T

5) F

6) F

7) F

8) F

9) T

10) T

Since only true / false has been asked in the question, only true / false is answered and no explanation has been provided. If student need explanation on this, same can be given by me.