Swola Company Reports the Following Annual Cost Data for Its

question 94

Multiple Choice

Swola Company reports the following annual cost data for its single product. This product is normally sold for $25 per unit. If Swola increases its production to 200,000 units, while sales remain at the current 75,000 unit level, by how much would the company's income increase or decrease under variable costing?

• A) $187,500 increase.
• B) $112,500 increase.
• C) There will be no change in income.
• D) $112,500 decrease.
• E) $187,500 decrease.

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Definitions:

Net Present Value (NPV)

A calculation used to assess the profitability of an investment, measuring the difference between the present value of its cash inflows and outflows.

Internal Rate of Return (IRR)

The rate of growth a project is expected to generate, calculated as the discount rate that makes the net present value (NPV) of all cash flows equal to zero.

Payback Method

An investment analysis method that calculates the time required to recoup the cost of an investment, based on the cash flow it generates.

Capital Cost Allowance (CCA)

The Canada Revenue Agency’s term for depreciation when calculating taxes.