In Making Decisions About Whether to Sell or Further Process

question 83

Multiple Choice

In making decisions about whether to sell or further process joint products, allocation of common or joint costs is:

• A)Essential.
• B)Useful.
• C)Irrelevant.
• D)Is useful depending on the method chosen.
• E)Is the only way to get the true total product cost.

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Definitions:

Present Value Index

An investment appraisal tool that compares the present value of net cash inflows generated by a project to the present value of cash outflows, indicating the profitability.

Net Cash Flow

The difference between a company’s cash inflows and outflows in a given period, indicating the company's ability to generate cash.

Amount to Be Invested

The total sum of money dedicated to a particular investment or project.

Present Value Methods

A set of financial techniques used to calculate the current worth of a future stream of earnings or cash flows, taking into account the time value of money.