If a Project's Profitability Index Is Equal to 1, Then

question 22

Multiple Choice

If a project's profitability index is equal to 1, then

• A) its net present value is zero.
• B) its net present value is positive.
• C) it should be rejected.
• D) its internal rate of return is greater than the discount rate.

Grasp the principles behind the allocation of costs to cost of goods sold and inventory balance.

Understand the importance and calculation of inventory turnover and its impact on business operations.

Recognize the tax implications and advantages of different inventory costing methods.

Acknowledge the rules and applications of internal controls in inventory management.

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Definitions:

Labor Rate Variance

The difference between the actual cost of labor and its expected cost based on standards or budgets.

Direct Labor Employees

Workers who are directly involved in the manufacturing of products, including those who operate machinery, assemble products, or perform manual labor that can be directly attributed to specific goods or services.

Favorable Variances

Differences between actual and budgeted or standard cost figures that are financially beneficial to a company.

Unfavorable Variances

Differences where actual results are worse than expected, often leading to higher costs or lower revenues.