Variable Costing Is

question 92

Multiple Choice

Variable costing is

• A) a good way to value inventories for the balance sheet.
• B) used for external reporting purposes.
• C) not useful for companies with multiple segments.
• D) a useful tool for management decision making.
• E) can only be used by start-up companies.

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Definitions:

Internal Rate of Return

A financial metric used to evaluate the profitability of potential investments by calculating the rate of return at which the net present value of all the cash flows (both positive and negative) from a project or investment equals zero.

Present Value

The today's value of money expected or a sequence of monetary flows in the future, determined by a particular rate of return.

Compound Interest

Interest calculated on the initial principal of a deposit or loan, which also includes all of the accumulated interest from previous periods on a deposit or loan.

Net Present Value

A financial metric that calculates the present value of all future cash flows produced by an investment, minus the initial investment cost, to evaluate its profitability.