The Financial Manager Selecting One of Two Projects of Differing

question 157

Multiple Choice

The financial manager selecting one of two projects of differing risk should

• A) select the project with the larger risk-adjusted net present value.
• B) choose the project with the least relative risk.
• C) choose the project with greater return even if that project has greater risk.
• D) choose the project with less risk even though that project has less return.

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Definitions:

Standard Direct Labor

The predetermined cost of labor that is directly involved in the production of goods.

Standard Rate

A predetermined cost or price that is used for calculating variances, budgeting, or setting product prices.

Variable Overhead

The portion of overhead costs that varies directly with production volume.

Variable Overhead Rate Variance

The variance between the expected variable overhead according to standard cost and the actual variable overhead costs incurred.