The Statement Concerned with the ARR and the Payback Methods $\bold{not}$

question 60

Multiple Choice

The statement concerned with the ARR and the payback methods that is $\bold{not}$ correct is:

• A)both methods are based on accounting profits
• B)if two projects have the same ARR the one with the lowest payback period would be

---

Definitions:

Variable Costing

A pricing technique that incorporates solely the variable costs of production—such as raw materials, direct labor, and variable overhead expenses—into the per-unit cost of products.

Variable Overhead

Costs that change with the level of production or service activities.

Absorption Costing

A costing method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Absorption Costing

A costing method that includes all manufacturing costs (both fixed and variable) in the cost of a product.