Using Slightly Different Notation from That Used in the Text

question 96

Multiple Choice

Using slightly different notation from that used in the text, the present value (PV) of a payment one year in the future (FV) , given interest rate (r) , is given by the equation:

• A)PV = 1 ˜ FV.
• B)PV = FV ˜ 1.
• C)PV = FV ˜ (1 + r).
• D)PV = FV x (1 + r).

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Definitions:

Fixed Costs

Costs that do not vary with the volume of output produced, such as rent, salaries, and insurance premiums.

High-low Method

A technique in cost accounting used to estimate fixed and variable costs given the highest and lowest levels of activity.

Variable Cost Per Unit

The cost that varies with each unit of product produced, directly tied to the production volume, such as materials and labor.

Fixed Costs

Expenses that remain constant regardless of the level of production or sales, including items like rent, salaries, and insurance.