Which Amount Is Never Used as Part of the Calculation

question 38

Multiple Choice

Which amount is never used as part of the calculation of the annual operating cash flows in a capital budgeting decision?

• A) Cost savings due to reduced labor with the new asset
• B) The salvage value of the new asset
• C) Additional variable overhead costs expected for the new machine
• D) Additional revenue due to an increased selling price

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Definitions:

Opportunity Cost

Opportunity cost is the cost of forgoing the next best alternative when making a decision to pursue a certain action.

Painting Room

The process of applying paint to the interior walls of a room, often for decorative or maintenance purposes.

Baking Cakes

The process of preparing cakes by mixing ingredients and cooking them, typically in an oven.

Absolute Advantage

The ability of a country or individual to produce a good or service more efficiently than another, using fewer resources.