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Capital Budgeting Refers to the Evaluation of Prospective Investment Alternatives

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Capital budgeting refers to the evaluation of prospective investment alternatives and the commitment of funds to preferred projects.


Definitions:

Production Process

The series of steps involved in transforming raw materials into finished goods or services.

Overhead Account

An account used to record the indirect costs of a business, which are not directly attributable to a specific product or service.

Overabsorbed Overhead

The amount of overhead applied is greater than actual overhead cost incurred.

Prospective Overhead Rate

An estimated rate used to allocate overhead costs to products or services based on future expected activities and expenditures.

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