In an Activity Flexible Budget, the Variable Cost Component Typically

question 118

Multiple Choice

In an activity flexible budget, the variable cost component typically corresponds to

• A) those resources that vary with direct labor hours.
• B) resources acquired as needed.
• C) resources acquired in advance of usage.
• D) resources that do not change as the activity output changes.
• E) None of these.

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Definitions:

Payback Cutoff

The maximum acceptable period within which an investment should recover its initial costs, used as a criterion for investment decisions.

Net Present Values

The calculation of the present value of an investment's expected cash flows minus the initial investment cost.

Positive NPV

Refers to a net present value calculation indicating that the projected earnings (discounted back to their present value) exceed the initial investment.

Firm Owners

Individuals or entities that hold an ownership interest in a company, representing their claim on the company's assets and earnings.