Using the Risk-Adjusted Discount Rate Approach,the Firm's Cost of Capital

question 45

Multiple Choice

Using the risk-adjusted discount rate approach,the firm's cost of capital is applied to projects with:

• A) normal risk.
• B) high risk.
• C) no risk.
• D) low risk.

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Definitions:

Standard Hours Allowed

The amount of time that should be spent on producing a certain number of units under normal conditions.

Denominator Activity

A term used in cost accounting to refer to the level of activity used to allocate fixed costs to cost units.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead based on hours worked and the standard cost of variable overhead for those hours, indicating efficiency in controlling variable overhead costs.

Variable Manufacturing Overhead Cost

The portion of manufacturing costs that varies with the level of production output, including costs such as indirect materials and utilities.