Exhibit 8-3 A Firm Is Evaluating Two Investment Proposals. the Following Data

question 33

Multiple Choice

Exhibit 8-3
A firm is evaluating two investment proposals. The following data is provided for the two investment alternatives.

-Refer to Exhibit 8-3.If the two projects are mutually exclusive,which project should the firm choose? What is the problem that the firm should be concerned with in making this decision?

• A) project 1; discount rate
• B) project 2; discount rate
• C) project 1; project scale
• D) project 2; project scale

---

Definitions:

Variable Manufacturing Overhead

Costs that vary with production volume, such as utilities and materials, which are only incurred as a result of manufacturing activities.

Direct Materials

Raw materials that are directly traceable to the production of specific goods or services.

Contribution Margin

The amount by which sales revenue exceeds variable costs, contributing to covering fixed costs and generating profit.

Variable Production Costs

Costs that vary directly with the level of production output, such as raw materials and direct labor.