Describe the Decision Rules Management Should Use for Accepting and Rejecting

question 108

Essay

Describe the decision rules management should use for accepting and rejecting capital projects under each of the following capital budgeting models: net present value model,internal rate of return model,payback period,and the unadjusted rate of return model.

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Definitions:

Machine-Hours

A measure of the time that a machine is in operation, used in costing and operational analysis.

Departmental Predetermined Rates

Overhead allocation rates set in advance for specific departments to allocate indirect costs more accurately.

Markup

An additional amount included in the cost price of products to account for overheads and gain, thereby establishing the price at which they are sold.

Machine-Hours

The total number of hours machines are operated during the production process.