Question

Which of the following statements is (are) true regarding the sales activity variance?

(A) Sales activity variance is the actual selling price per unit times the difference between the budgeted units and actual units.

(B) If the sales activity variance for sales revenue is unfavorable, then the contribution margin sales activity variance will be unfavorable.

Select one:

a. Only A is true.

b. Only B is true.

c. Neither A and B is true.

d. Both A and B are true.

When the cash flows for a project are estimated, interest payments should be included if debt is to be used to help finance the project.

Select one:

a. True

b. False

When considering two mutually exclusive projects, the firm should always select that project whose internal rate of return is the highest provided the projects have the same initial cost.

Select one:

a. True

b. False

Answer 1

1. Sales activity variance is the actual selling price per unit times the difference between the budgeted sales and the actual sales so the given statement is TRUE.

even if the sales activity variance is unfavourable then,contribution margin sales can be favourable sometimes so the given statement is FALSE.

Correct answer is option (a) Only A is TRUE

2. Interest payments are not included in cash flows because they are believed to be non operating and non cash so it is excluded in cash flows.

Given statement is FALSE.

3. The given statement is TRUE because if internal rate of return is highest, that means that the project will yield highest return to the organisation so the given statement is TRUE.