You Have Gathered Data About Three Possible Investments

question 2

Multiple Choice

You have gathered data about three possible investments.The data are as follows
The earnings and operating cash flows can be estimated to be as follows:
Firm A Firm B Firm C
Earnings Cash flow Earnings Cash flow Earnings Cash flow

• A) 4 14 2 14 20 14
• B) 7 8 11 4 10 4
• C) 10 -15 4 14 10 12
• D) 4 8 4 11 4 10

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Definitions:

Absorption Costing

Absorption Costing is an accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the cost of a product.

Unit Product Cost

The total cost (both fixed and variable) associated with a product, divided by the number of units produced.

Year 2

Often refers to the second year of operation, study, or analysis in various contexts, particularly in financial and academic settings.

Absorption Costing

A technique in financial accounting that involves accumulating all costs of production, namely direct materials, direct labor, and overhead (both fixed and variable), into the cost base of a product.