Question

22. Variable costing is also called ________. A) functional costing B) indirect costing C) absorption costing...

22. Variable costing is also called ________.

A) functional costing

B) indirect costing

C) absorption costing

D) the contribution approach

Answer:

23. What is gross margin?

A) sales minus operating expenses

B) sales minus other expenses

C) sales minus cost of goods sold

D) sales plus other income

Answer:

24. If the net present value of an investment project is positive, then the project is ________. If the net present value of an investment project is negative, then the project is ________.

A) ignored; accepted

B) desirable; undesirable

C) unacceptable; acceptable

D) rejected; accepted

Answer:

25. An investment of $42,000 is expected to generate the following annual cash flows:

Year 1                     $10,000

Year 2                     $15,000

Year 3                     $15,000

Year 4                     $12,000

Assume straight-line depreciation is used. Ignore income taxes. What is the payback period?

A) 3 years

B) 3.17 years

C) 3.83 years

D) 4 years

Answer:

26. The internal rate of return model determines the ________ at which the net present value of an investment project equals ________.

A) cost of capital; a positive number

B) hurdle rate; a positive number

C) interest rate; zero

D) discount rate; a positive number

Answer:  

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Homework Answers

Answer #1
22
Variable costing is also called the contribution approach
Option D is correct
23
Gross margin is sales minus cost of goods sold
Option C is correct
24
If the net present value of an investment project is positive, then the project is desirable
If the net present value of an investment project is negative, then the project is undesirable
Option B is correct
25
Accumulated cash flows for 3 years = 10000+15000+15000 = $40000
Investment cost not recovered in Year 4 = 42000-40000 = 2000
Payback period = 3+(2000/12000)= 3.17 years
Option B is correct
26
The internal rate of return model determines the interest rate at which the net present value
of an investment project equals zero
Option C is correct
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