You Need to Calculate the Present Value of an Amount

question 34

Multiple Choice

You need to calculate the present value of an amount at 10% compounded quarterly for 2 years. What interest factor will you use?

• A) 10% for 4 periods
• B) 2.5% for 8 periods
• C) 20% for 2 periods
• D) 10% for 8 periods

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Definitions:

Overhead Cost

The ongoing expenses incurred in operating a business that are not directly associated with the production of goods or services, including rent, utilities, and salaries of non-production staff.

Processing Activity

Activities involved in transforming inputs into finished goods through operations such as assembling, cooking, or chemical processing.

Activity-Based Costing

An accounting method that identifies the activities a firm performs and then assigns indirect costs to products. It improves accuracy of product costing by linking cost more directly to the activities that drive those costs.

Overhead Cost

Indirect expenses related to the general operation of a business, not directly tied to a specific product or service.