When the IRR Rule Is Used for Mutually Exclusive Projects,we

question 32

Multiple Choice

When the IRR rule is used for mutually exclusive projects,we should mainly rely on

• A) the rule of the Modified Internal Rate of Return (MIRR).
• B) the rule of the Incremental Internal Rate of Return (IIRR).
• C) the rule of the Net Present Value (NPV).
• D) the rule of the normal Internal Rate of Return (IRR).

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Definitions:

Variable Overhead

Costs incurred during production that fluctuate with production volume, such as utilities or materials.

Total Variable Overhead Variance

The difference between actual variable overhead costs and the expected (standard) costs for the same period.

Direct Labor Efficiency Variance

The difference between the actual hours worked and the standard hours expected, multiplied by the standard labor rate, indicating the efficiency of labor used in production.

Direct Labor Costs

Direct labor costs are the wages and benefits paid to employees who are directly involved in the production of goods or services, constituting part of the total manufacturing costs.