For the Case of an Electric Car Project, Which of the Following

question 38

Multiple Choice

For the case of an electric car project, which of the following costs or cash flows should be categorized as incremental when analyzing whether to invest in the project?

• A)The cost of research and development undertaken for developing the electric car during the past three years
• B)The annual depreciation charge
• C)Tax savings resulting from the depreciation charges
• D)Dividend payments

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Definitions:

Comparative Balance Sheet

A financial statement that presents the financial position of a company at two or more different points in time, side-by-side, to facilitate comparison.

Direct Method

An accounting approach where costs are directly traced to objects, such as products or services, without using cost drivers or allocation bases.

Cost of Goods Sold

The direct expenses tied to the production of goods sold by a company, including the cost of the materials and labor directly used to create the good.

Direct Method

A way of preparing the cash flow statement where actual cash flow information from the company's operations is used, instead of being derived from the income statement.