When You Evaluate a Proposed Project You Should

question 18

Multiple Choice

When you evaluate a proposed project you should:

• A) allocate a percentage of current overhead costs to the project.
• B) include all indirect effects.
• C) include sunk costs.
• D) ignore opportunity costs.

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Definitions:

Factory Overhead

All indirect costs associated with the production process, excluding direct materials and direct labor, such as utilities, maintenance, and managerial salaries.

Direct Labor Dollars

The total amount of money spent on wages for employees who are directly involved in the production of goods.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products, calculated before the accounting period begins based on estimated costs and activity levels.

Factory Overhead

Indirect costs associated with manufacturing, excluding direct materials and direct labor, such as maintenance, utilities, and depreciation.