Which of the Following Statements Is FALSE

question 33

Multiple Choice

Which of the following statements is FALSE?

• A) Only include as incremental expenses in your capital budgeting analysis the additional overhead expenses that arise because of the decision to take on the project.
• B) Many projects use a resource that the company already owns.
• C) As a practical matter, to derive the forecasted cash flows of a project, financial managers often begin by forecasting earnings.
• D) When evaluating a capital budgeting decision, we generally include interest expense.

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Definitions:

Worst-Case Scenario

The most adverse or unfavorable outcome that may happen in a given situation.

Flexible Budget Performance Report

A report comparing actual costs and revenues with budgeted figures adjusted for actual levels of activity, to evaluate performance.

Budgeted Performance

Anticipated financial and operational results over a specific period, based on budgets, used as a benchmark for comparison with the actual performance.

Variable Costs

Costs that vary directly with the level of production or sales volume, such as raw materials and direct labor costs.