Isaac Has Analyzed Two Mutually Exclusive Projects of Similar Size

question 5

Multiple Choice

Isaac has analyzed two mutually exclusive projects of similar size and has compiled the following information based on his analysis.Both projects have 3- year lives.
Isaac has been asked for his best recommendation given this information.His recommendation should be to accept:

• A) both projects.
• B) project B because it has the shortest payback period.
• C) project B and reject project A based on their net present values.
• D) project A and reject project B based on their average accounting returns.
• E) neither project.

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Definitions:

Cost Per Equivalent Unit

A calculation used in process costing that divides the total cost of production by the number of units produced, adjusted for their stage of completion.

Materials Cost

The expense associated with the raw materials and components required for manufacturing a product.

Processing Department

A division within a factory where a specific stage of production is carried out.

Total Cost Transferred

The entire sum of costs that have been allocated from one department or process to another within an organization.