A Chair Manufacturer Makes Custom Chairs Using Hand Tools,wood,glue,and Varnish

question 100

Multiple Choice

A chair manufacturer makes custom chairs using hand tools,wood,glue,and varnish.Which of the following statements is

• A) The costs of wood and glue would be treated as direct costs.
• B) Wood,glue,and varnish would all be direct materials.
• C) Wood would be accounted for as a direct cost,and glue and varnish as indirect costs.
• D) The concepts of direct and indirect costs are not applicable here.

---

Definitions:

Discounted Payback

A method in capital budgeting that determines the amount of time needed to recover the initial investment, accounting for the present value.

Payback Method

An approach within capital budgeting that determines how long it takes to regain the initial outlay for an investment.

Mutually Exclusive

This term describes options or decisions that cannot occur simultaneously; choosing one means forgoing the others.

Required Rate

The minimum percentage return that an investment must yield to be considered acceptable. It is essentially another term for the required return on investment, critical for financial planning and analysis.