Use the Following Two Statements to Answer This Question

question 27

Multiple Choice

Use the following two statements to answer this question:
I.The initial after-tax cash flow refers to the total cash outlay that is required to initiate an investment project and can be depreciated for tax purposes.
II.The capital cost of an investment refers to all costs incurred to make an investment operational, which includes the additional working capital requirements.

• A)I and II are correct.
• B)I and II are incorrect.
• C)I is correct, II is incorrect.
• D)I is incorrect, II is correct.

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Definitions:

Variable Costing

A costing method in which fixed manufacturing overhead is not assigned to the product, but rather treated as an expense of the period.

Absorption Costing

is an accounting method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in the cost of a product.

Unit Product Cost

The total cost incurred to produce, manufacture, or acquire a product, divided by the total number of units produced.

Absorption Costing

A financial recording approach that encompasses all production expenses, such as direct materials, direct labor, and overhead costs, within the price of a product.