If the Interest Rate Is 6%,which of These Investments Would

question 31

Multiple Choice

If the interest rate is 6%,which of these investments would you prefer?

• A) A single payment of $500 in year 3.
• B) A payment of $40 a year for 20 years starting in one year's time.
• C) A perpetuity of $30 a year starting in one year's time.
• D) A payment of $342.17 today

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Definitions:

Variable Overhead Efficiency Variance

The difference between the actual variable overhead costs incurred and the standard variable overhead costs, based on efficient use of resources.

Labor Rate Variance

The difference between the actual hourly wage paid to workers and the expected (or standard) wage rate, multiplied by the total hours worked.

Variable Overhead Rate Variance

Variable overhead rate variance is the difference between the actual variable overhead costs incurred and the expected (standard) costs, influenced by fluctuations in production activity levels.

Materials Price Variance

The difference between the actual cost of materials and the standard (or expected) cost, indicating how much more or less was spent on materials than was planned.