Divisional Costs of Capital Are More Appropriate When Evaluating a Project

question 69

Multiple Choice

Divisional costs of capital are more appropriate when evaluating a project for a line of business when the types of business in a firm are ________.

• A) mature businesses
• B) similar
• C) new businesses
• D) different

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Definitions:

Efficiency Variances

Variances that occur when the actual performance deviates from the expected standards, often analyzed in terms of time, cost, and materials.

Budget Variance

The difference between budgeted figures for revenue and expenditure, and the actual amounts realized.

Budgeted Fixed Overhead

The estimated constant costs for a period that do not vary with the level of production or sales, such as rent, salaries, and insurance.

Flexible Budget

A budget that adjusts to changes in the volume of activity, allowing for more accurate budgeting and financial control.