Why Is It Usually Necessary to Use the Time Value

question 9

Multiple Choice

Why is it usually necessary to use the time value of money when performing a cost-benefit analysis?

• A) For an investment project to be considered, costs must have a higher dollar value than benefits.
• B) In most investment projects, costs are incurred up front, but benefits are received in the future.
• C) For practical purposes, a dollar today may be considered to be equal to a dollar at some future time.
• D) Although costs and benefits generally occur concurrently, the benefits will accrue value over time, due to interest.

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Definitions:

Manufacturing Overhead

Indirect factory-related costs incurred when a product is manufactured, including costs like maintenance, electricity, and equipment depreciation.

Indirect Cost

A cost that cannot be easily and conveniently traced to a specified cost object.

Factory Supervisor

An individual responsible for overseeing the production processes and workers within a manufacturing facility.

Direct Cost

A cost that can be easily and conveniently traced to a specified cost object.