Variable Costs Are Important for Which Type of Relevant Cost

question 65

Multiple Choice

Variable costs are important for which type of relevant cost decisions?
I. Special order
II. Outsourcing
III. Keep or drop a product

• A) I and II only
• B) II and III only
• C) I and III only
• D) I, II, and III

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Definitions:

IRR

Internal Rate of Return; a financial metric used to estimate the profitability of potential investments, calculating the discount rate that makes the net present value of all cash flows equal to zero.

NPV

Net Present Value is a method used to evaluate the attractiveness of an investment or project by calculating the present value of expected future cash flows using a specific discount rate.

NPV Profiles

NPV profiles are graphical representations that show the relationship between a project’s net present value and the discount rate applied to its cash flows.

Cash Flows

The net amount of cash being transferred into and out of a business, considered essential for assessing its financial health.