Isaac Has Analyzed Two Mutually Exclusive Projects of Similar Size

question 102

Multiple Choice

Isaac has analyzed two mutually exclusive projects of similar size and has compiled the following information based on his analysis. Both projects have 3- year lives. Isaac has been asked for his best recommendation given this information. His recommendation should be to accept:

• A)both projects.
• B)project B because it has the shortest payback period.
• C)project B and reject project A based on their net present values.
• D)project A and reject project B based on their average accounting returns.
• E)neither project.

---

Definitions:

Total Fixed Costs

The combined sum of all costs that do not change with the level of production or sales over a certain period.

Purchase Price Variances

The difference between the actual cost of purchased materials and the expected (or standard) cost, which can indicate efficiency or market condition changes.

Standard Cost

Predetermined cost calculated for the production of a product or performance of a service under normal conditions.

Operator Training

The process of teaching operators to run machinery or systems efficiently and safely.