Benjamin Company Invested in a 3-Year Project and Expects a 15

question 73

Multiple Choice

Benjamin Company invested in a 3-year project and expects a 15% rate of return. Annual cash inflows from the project are: year 1 $8,000; year 2 $8,500; and year 3 $9,500. The net present value is $4,000. What was the amount of the original investment? Ignore income taxes.

• A) $17,637
• B) $15,637
• C) $19,637
• D) $23,637

---

Definitions:

Manufacturing Overhead

Expenses tied to the production process that do not include direct labor or materials are known as indirect costs.

Variable Costs

Variable costs are expenses that vary directly with the level of production or sales volume, such as materials and labor.

Fixed Costs

Costs that do not vary with the level of production or sales, remaining constant regardless of business activity levels.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products or job orders.