The Accounting Rate of Return Shows the Effect of the Investment

question 136

True/False

The accounting rate of return shows the effect of the investment on the company's accrual-based income.

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Definitions:

Prime Cost

The total cost of direct materials and direct labor incurred in producing goods.

Conversion Cost

The combined cost of direct labor and manufacturing overheads incurred to convert raw materials into finished goods.

Direct Labor

The wages or salaries paid to workers directly involved in the production of goods or services.

Indirect Material Cost

Costs of materials that are part of the production process but are not directly traceable to a finished product.