If the Time Value of Money Techniques Are Used Correctly

question 53

Multiple Choice

If the time value of money techniques are used correctly, the present value of cash flows far in the future will be

• A)lesser than the present value of the same amount of cash flows in the present.
• B)greater than the present value of the same amount of cash flows in the present.
• C)same as the future value of the same amount of cash flows in the present.
• D)greater than the future value of the same amount of cash flows in the present.

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Definitions:

Absorption Costing

Absorption Costing is an accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the cost of a product.

Unit Product Cost

The total cost (both fixed and variable) associated with a product, divided by the number of units produced.

Year 2

Often refers to the second year of operation, study, or analysis in various contexts, particularly in financial and academic settings.

Absorption Costing

A technique in financial accounting that involves accumulating all costs of production, namely direct materials, direct labor, and overhead (both fixed and variable), into the cost base of a product.