Assume That Sales Revenues Are Increasing More Rapidly Than Product

question 56

Multiple Choice

Assume that sales revenues are increasing more rapidly than product costs, but that a project's cash flows have been represented as an annuity when calculating NPV.Which of the following problems may occur?

• A)nominal cash flows are possibly being discounted with a real rate.
• B)real cash flows are possibly being discounted with a nominal rate.
• C)nominal cash flows are possibly being discounted with a nominal rate.
• D)real cash flows are possibly being discounted with a real rate.

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Definitions:

Per-unit Standards

Per-unit standards refer to the predetermined costs or metrics applied to individual units of production, aiding in budgeting and performance evaluation.

Pounds

A unit of weight commonly used in the British imperial and United States customary systems.

Materials Quantity Variance

Materials quantity variance is the difference between the actual quantity of materials used in production and the expected amount, multiplied by the standard cost of those materials, indicating efficiency in usage.

Price Standard

A predetermined cost that serves as a benchmark for evaluating the actual cost of goods sold or production costs.