The Payback Period Rule Is a Convenient and Useful Tool

question 25

Multiple Choice

The payback period rule is a convenient and useful tool because:

• A)it provides a quick estimate of how rapidly the initial investment will be recouped.
• B)results of a short payback rule decision will be quickly seen.
• C)it does not have to take into account time value of money.
• D)All of the above.
• E)None of the above.

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Definitions:

Job Order Cost System

An accounting method that assigns costs to specific production batches or jobs, trackable by individual orders.

General Cost System

An accounting system that is used to track and allocate the general expenses of a company.

Process Cost System

An accounting system used to accumulate costs in industries where a homogeneous product is produced continuously in a mass production environment.

Predetermined Overhead Rate

A rate used to assign manufacturing overhead costs to products or job orders, calculated before the costs are incurred, based on estimated overhead and activity levels.