The Accounting Rate of Return Differs from the Internal Rate

question 116

True/False

The accounting rate of return differs from the internal rate of return and the payback period in that, the accounting rate of return does not focus on cash flows.

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Definitions:

Variable Overhead Rate

The rate at which variable overhead costs are applied to units of production, based on an activity metric such as labor hours.

Fixed Manufacturing Overhead

Costs associated with manufacturing that do not vary with the level of production, such as salaries of managers and rent for the factory.

Cash Disbursements

The outflow of cash for expenses, investments, and other business activities as recorded in the entity's financial records.

Variable Selling

Costs that vary directly with the volume of sales, including commissions and shipping fees.