If a Company Employs JIT Inventory Techniques, Which Statement Is

question 102

Multiple Choice

If a company employs JIT inventory techniques, which statement is true?

• A)Variable and full costing income will differ very little since there is almost no inventory on hand.
• B)Variable and full costing income will differ very little since there are almost no fixed costs incurred on production.
• C)Variable and full costing income will differ greatly since actual costs are difficult to determine.
• D)Variable and full costing income will differ greatly since there will be a large difference between gross margin and contribution margin.

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Definitions:

Internal Rate of Return

The discount rate at which the net present value of all cash flows from a project equals zero, used to assess the profitability of potential investments.

Cost of Capital

The rate of return that a company must earn on its investment projects to maintain its market value and attract funds.

Net Present Value

A financial metric that calculates the present value of an investment's expected cash flows minus the initial investment cost.

Internal Rate of Return

The discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.