Accounting Rate of Return Is the Simplest Capital Budgeting Method

question 132

True/False

Accounting rate of return is the simplest capital budgeting method. It gives managers an estimate of how soon they will recover their initial investment.

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Definitions:

Variable Cost

Costs that vary directly with the level of production or output, such as raw materials and direct labor expenses.

Total Cost

The complete cost of production that includes both variable and fixed expenses.

Marginal Cost

The financial outlay required to produce an additional single unit of a product or service.

Variable Cost

Costs that change in proportion to the level of goods or services that a business produces, such as materials and labor.