The Advantages of the Payback Method of Project Analysis Include

question 65

Multiple Choice

The advantages of the payback method of project analysis include the: I. application of a discount rate to each separate cash flow.
II) bias towards liquidity.
III) ease of use.
IV) arbitrary cutoff point.

• A) I and II only
• B) I and III only
• C) II and III only
• D) II and IV only
• E) II, III, and IV only

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Definitions:

Direct Labor-Hours

The aggregate amount of time spent by staff members directly participating in the creation process.

Variable Overhead Rate

The rate at which variable overhead costs are allocated to each unit of production, based on an activity driver.

Fixed Manufacturing Overhead

Costs in the manufacturing process that remain constant regardless of the production volume, including equipment depreciation and building lease expenses.

Direct Labor-Hours

The total hours worked by employees who are directly involved in the production of goods or services.