Which of the Following Is the Numerator in the Mathematical

question 98

Multiple Choice

Which of the following is the numerator in the mathematical expression for accrual accounting rate-of-return (AARR) ?

• A) increase in expected average investment
• B) increase in expected average annual after-tax operating income
• C) increase in expected average cash flow
• D) increase in expected net initial investment

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Definitions:

Average Variable Cost

Variable costs, which fluctuate based on production volume, divided by the total number of units produced.

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the total quantity of output produced, representing the per-unit cost of production.

Average Fixed Cost

The fixed costs of production divided by the quantity of output produced. This decreases as production increases.

Total Variable Costs

Expenses that change in proportion to the activity of a business such as materials, labor, and utilities, which vary with the level of output.