Divisional Costs of Capital Are More Appropriate When Evaluating a Project

question 99

Multiple Choice

Divisional costs of capital are more appropriate when evaluating a project for a line of business when the types of business in a firm are:

• A)mature businesses.
• B)similar.
• C)new businesses.
• D)different.
• E)profitable.

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Definitions:

Activity Base

An activity base is a measure used in managerial accounting to allocate costs, based on activities that drive costs, as part of activity-based costing (ABC).

Service Departments

Departments within a company that support the primary operations but don't directly generate revenue.

Profit Margin

A financial metric used to assess a company's profitability by comparing net income to sales; calculated as (Net Income / Sales) * 100.

Income From Operations

The earnings generated from a company’s core business activities, excluding any gains or losses from investments and other non-operational sources.