What Is the Break-Even Probability of Collection When the Present

question 48

Multiple Choice

What is the break-even probability of collection when the present value of revenues from a sale is $100,000 and the present value of cost is $87,000?

• A) 1.00
• B) 0.87
• C) 0.74
• D) 0.13

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Definitions:

Manufacturing Overhead

All manufacturing costs that cannot be directly traced to individual units produced, such as electricity, maintenance, and factory management salaries.

Activity-Based Costing

A method of accounting that assigns costs to products or services based on the activities required to produce them, aimed at providing more accurate costs.

Overhead Cost

The ongoing expenses of operating a business that are not directly attributable to a specific product or service, including rent, utilities, and administrative expenses.

Product Costs

The total costs incurred to produce a product, including direct materials, direct labor, and manufacturing overhead.