The Difference Between an NPV Break-Even Level of Sales and an Accounting

question 121

Multiple Choice

The difference between an NPV break-even level of sales and an accounting break-even level of sales is:

• A)The consideration of opportunity cost
• B)The consideration of depreciation expense
• C)Allowing the sales level to vary in response to changes in demand
• D)The inclusion of income taxes

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Definitions:

Applied Manufacturing Overhead

The portion of manufacturing overhead costs allocated to each unit of production, based on a predetermined rate.

Applied Manufacturing Overhead

Applied Manufacturing Overhead refers to the estimated overhead costs assigned to individual products based on a predetermined rate and actual activity levels.

Overhead

The indirect costs of running a business that are not directly associated with the production of goods or services, such as administrative expenses and rent.

Underapplied

A situation where the allocated or budgeted costs are less than the actual costs incurred, typically in the context of manufacturing overhead.