Potential Problems in Using the IRR as a Capital Budgeting

question 28

Multiple Choice

Potential problems in using the IRR as a capital budgeting technique include:

• A) the timing problem
• B) multiple IRRs
• C) the scale problem
• D) all of the above

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Definitions:

Variable Overhead Efficiency Variance

The difference between the actual variable overhead incurred and the standard cost of variable overhead allotted for the actual production.

Indirect Materials

Materials used in the production process that are not directly part of the final product, such as lubricants for machines.

Unfavourable Variance

A financial term referring to a situation where actual costs are higher than planned or budgeted costs, or actual revenue is lower than forecasted revenue.

Standard Costing

A cost accounting technique that uses predetermined costs for assessing the performance of processes and employees by comparing these standard costs against the actual costs incurred.