7.

A company has the following budget formula for annual electricity expense in its shop:
Expense = $7,200 + (Units produced x $0.60)
If management expects to produce 20,000 units during February, the appropriate monthly flexible budget
allowance for the purpose of performance evaluation should be
a. $7,200
c. $12,600
b. $12,000
d. $19,200
8. The sum of the costs necessary to effect a one-unit increase in the activity level is a(n)
a. Differential cost
c. Marginal cost
b. Opportunity cost
d. Incremental cost