Which of the Following Statements Regarding the Use of Historical

question 63

Multiple Choice

Which of the following statements regarding the use of historical costs and current costs to compute return on investment (ROI) is(are) true?
(A) Historical costs are based on the original costs to acquire a long-term asset, while current costs represent the costs to replace the long-term asset.
(B) For a specific multiple-period project, the return on investment (ROI) computed using current costs will generally be less than the ROI computed using historical costs.

• A) Only (A) is true.
• B) Only (B) is true.
• C) Both of these are true.
• D) Neither of these is true.

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Definitions:

Total Cost Concept

A principle in accounting and economics that considers all costs related to the production of a good or service, both fixed and variable.

Manufacturing Costs

Expenses directly related to the production of goods, including direct labor, direct materials, and manufacturing overhead.

Selling and Administrative Expenses

Costs related to the selling of products and the general administration of a business.

Differential Income

The difference in income between two alternative decisions or scenarios, used in managerial decision-making to determine the better financial option.