The Capital Budgeting Method That Divides a Project's Annual Incremental

question 88

Multiple Choice

The capital budgeting method that divides a project's annual incremental net income by the initial investment is the:

• A) internal rate of return method.
• B) the simple (or accounting)rate of return method.
• C) the payback method.
• D) the net present value method.

---

Definitions:

Economic Order Quantity

A deterministic inventory model that determines the optimal order quantity minimizing total inventory costs, including holding and ordering costs.

Total Annual Cost

The total amount spent on specific activities or operations, including both fixed and variable costs, over the course of a year.

Holding Costs

The expenses associated with storing inventory, including warehousing, insurance, depreciation, and opportunity costs of keeping stock.

Decoupling Function

describes the practice of separating different parts of a production process so that a delay or failure in one area does not directly impact another, enhancing flexibility and reliability.