Below Are Two Potential Investment Alternatives

question 58

Multiple Choice

Below are two potential investment alternatives:
Assume straight-line amortization in all computations, and ignore income taxes.
-The payback period in case X is

• A) 3.0 years.
• B) 0.4 years.
• C) 2.5 years.
• D) 2.4 years.

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Definitions:

Manufacturing Margin

Similar to contribution margin but specifically related to manufacturing, it evaluates the difference between manufacturing costs and the sales price of goods.

Contribution Margin

The amount by which a product's selling price exceeds its total variable costs, indicating the contribution towards covering fixed costs.

Operating Income

Earnings from a company's primary business activities, excluding costs and expenses, interest, and taxes.

Absorption Costing

An approach to accounting that integrates all costs associated with manufacturing - including direct materials, direct labor, and overhead costs, no matter if they are variable or fixed, into the final cost of a product.