Which of the Following Statements Is False

question 11

Multiple Choice

Which of the following statements is false?

• A) Often, the decision to abandon a project entails costs, which may be either positive or negative.
• B) Mortgage interest rates are higher than Treasury rates because mortgages have an abandonment option that Treasuries do not have; you can prepay your mortgage at any time, while the Canadian government can repay its debt only according to the schedule outlined in the bond contract.
• C) A popular option gives holders of the bond the option to convert the bond into equity. These kinds of bonds are termed callable bonds.
• D) More often than not, there is an opportunity cost of abandoning a project: if you shut down the project and later decide to start it up again, you have to pay the costs of restarting the project.

---

Definitions:

Predetermined Overhead Rate

An estimated overhead rate used to assign expected overhead costs to individual units of production, aiding in budgeting and cost control.

Fixed Manufacturing Expenses

Costs that do not vary with the level of production, such as rent, salaries, and equipment depreciation.

Selling and Administrative Expenses

Expenses related to the sale of products or services and the general administration of a business, excluding production costs.

Fixed Manufacturing Overhead

The portion of manufacturing overhead costs that remain constant regardless of the level of production, such as depreciation on factory equipment or salaries of factory supervisors.