Allen Steel Company Is Considering Whether to Build a New

question 111

Multiple Choice

Allen Steel Company is considering whether to build a new mill.If the interest rate rises,

• A)the present value of the returns from the mill will fall,so Allen will be less likely to build the mill.
• B)the present value of the returns from the mill will fall,so Allen will be more likely to build the mill.
• C)the present value of the returns from the mill will rise,so Allen will be less likely to build the mill.
• D)the present value of the returns from the mill will rise,so Allen will be more likely to build the mill.

---

Definitions:

Direct Labor

The wages and other compensation paid to employees who are directly involved in the production of goods and services.

Special Order

A customer request for a product or service that is not normally offered by the business, often requiring unique production or procurement efforts.

Selling Price

The amount of money charged for a product or service, or the sum of the cost plus profit.

Variable Costs

Expenses that change in proportion to the production output or sales amount.