Two Alternatives, Code-Named X and Y, Are Under Consideration at Brahler

question 77

Multiple Choice

Two alternatives, code-named X and Y, are under consideration at Brahler Corporation.Costs associated with the alternatives are listed below. Are the materials costs and processing costs relevant in the choice between alternatives X and Y? (Ignore the equipment rental and occupancy costs in this question. )

• A)Only processing costs are relevant
• B)Both materials costs and processing costs are relevant
• C)Only materials costs are relevant
• D)Neither materials costs nor processing costs are relevant

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Definitions:

Semiannual Interest

Interest that is calculated and paid twice a year, commonly found in bonds and loans.

Present Value

A financial concept that represents the current value of a future amount of money or stream of cash flows given a specified rate of return.

Compounded Annually

The process of calculating interest on the initial principal, which also includes all the accumulated interest from previous periods on a loan or deposit.

Amortization Schedule

A table detailing each periodic payment on a loan, showing the amount of principal and the amount of interest.