An Investment of $6000 at the Start of the Year

question 98

Multiple Choice

An investment of $6000 at the start of the year will pay $1000 at the end of the year for a set number of years.What is the minimum number of years these payments must be made for if the investment is to be worthwhile,given that the interest rate is 6%?

• A)6 years
• B)7 years
• C)8 years
• D)9 years
• E)10 years

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Definitions:

Activity-Based Costing

An accounting method that assigns costs to products or services based on the activities required to produce them, emphasizing cost drivers.

Direct Labor-Hours

Direct labor-hours refer to the total number of hours worked by employees that are directly involved in the manufacturing process of a company's products.

Traditional Costing

A costing method that applies indirect costs to products based on a predetermined overhead rate, often not considering the actual activities that incur costs.

Overhead Assigned

The process of allocating manufacturing overhead costs to specific units of product based on a predetermined rate or method.