In Capital Budgeting Decisions, Depreciation Shields Part of Operating Profit

question 15

True/False

In capital budgeting decisions, depreciation shields part of operating profit from the effect of income taxes.

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Definitions:

Standard Costs

Standard costs are estimated expenses related to the production of goods or services under normal conditions.

Cost System

A method for accumulating and allocating costs to products or services.

Direct Materials

Raw materials directly used in the manufacture of a product and can be easily traced to the finished product.

Variances

Differences between planned or expected financial performance and the actual outcome.