Oriental Corporation Has Gathered the Following Data on a Proposed

question 1

Multiple Choice

Oriental Corporation has gathered the following data on a proposed investment project: The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment.
The simple rate of return on the investment would be:

• A) 10%
• B) 35%
• C) 15%
• D) 25%

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Definitions:

Direct Materials

Materials that become an integral part of a finished product and whose costs can be conveniently traced to it.

Direct Labour

The labor costs directly attributable to the production of goods or services, typically including wages of workers who are physically involved in creation of the product.

Variable Overhead

Expenses that fluctuate with changes in production volume, such as utilities or materials used in the manufacturing process.

Fixed Overhead

Fixed costs that do not vary with the volume of production, such as rent, salaries, and insurance.