17. Which of the following statements regarding fixed costs is incorrect? A.

Expressing fixed costs on a

per unit basis usually is the best approach for decision-making process. B. Fixed costs expressed on a per
unit basis will react inversely with changes in activity. C. Assumptions by accountants regarding the
behavior of fixed costs rest heavily on the concept of the relevant range. Bobadilla D. Fixed costs
frequently represent long-term investments in property, plant, and equipment. 18. Lamang Company
changed its cost structure by increasing fixed costs and decreasing its per-unit variable costs. The
change: A. Increases risk and increases potential profit. B. Increases risk and decreases potential profit.
C. Decreases risk and decreases potential profit. D. Decreases risk and increases potential profit.
Bobadilla 19. A management’s preference for a very low degree of operating leverage might indicate
that: A. an increase in sales volume is expected. B. a decrease in sales volume is expected. C. the firm is
very unprofitable. D. the firm has very high fixed costs. Bobadilla 20. Management is considering
replacing its existing sales commission compensation plan with a fixed salary plan. If the change is
adopted, the company’s A. Breakeven point must increase. C. Operating leverage must increase. B.
Margin of safety must decrease. D. Profit must increase. Bobadilla 21. The indifference point is the level
of volume at which a company A. earns the same profit under different operating scheme. B. earns no
profit. C. earns its target profit. D. any of the above. Bobadilla 22. Operating leverage is the relative mix
of A. revenues earned and manufacturing costs B. fixed and variable costs. C. high-volume and low-
volume products. D. manufacturing costs and period costs. Bobadilla 23. The increased use of
automation and less use of the work force in companies has caused a trend towards an increase in A.
both variable and fixed costs. B. fixed costs and a decrease in variable costs. C. variable costs and a
decrease in fixed costs. D. variable costs and no change in fixed costs. Bobadilla