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The payback period is deficient as a decision criterion for capital projects because it:
I. Disregards relative profitability
II. Ignores income beyond the payback period
III. Does not take into account the time value of money
Direct Labour Hours
The total hours worked by employees directly involved in the manufacturing process, contributing to the transformation of raw materials into finished goods.
Unfavourable Variance
A financial term indicating that actual results are worse than expected or budgeted results, leading to a negative impact on profitability.
Sales Volume Variance
A metric used in budgeting and accounting to measure the difference between the actual quantity sold and the expected sales volume, indicating the impact on profit.
Variable Costing
An accounting method that only includes variable production costs (materials, labor, and variable overhead) in product costs and treats fixed overhead as a period expense.
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