Using Simulation Has a Few Drawbacks

question 50

True/False

Using simulation has a few drawbacks. Individual cash flows have to be estimated subjectively which can be difficult.

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Definitions:

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to individual units of production, based on estimated costs.

Direct Materials

These are raw materials that are directly traceable to the manufacturing of a product.

Direct Labour-Hours

The sum of working hours for employees actively participating in the manufacturing procedure.

Direct Materials

Raw materials that are directly traceable and integral to the finished product, and which can be directly allocated to the manufacturing process.