The Cash Flows of a Project Should

question 99

Multiple Choice

The cash flows of a project should:

• A) be computed on a pre-tax basis.
• B) include all sunk costs and opportunity costs.
• C) include all incremental costs, including opportunity costs.
• D) be applied to the year when the related expense or income is recognized by GAAP.
• E) include all financing costs related to new debt acquired to finance the project.

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Definitions:

Job Cost System

An accounting system used to track costs specifically by job or order, collecting material, labor, and overhead costs.

Finished Goods Inventory

The stock of completed products that are ready for sale but have not yet been sold.

Work in Process

A stage in the production process where goods are partially completed and will require further work before they are ready for sale.

Costs Transferred

The expenses that are moved from one department or project to another within the same company.