The Following Relates to a Proposed Equipment Purchase: Assuming

question 141

Multiple Choice

The following relates to a proposed equipment purchase: Assuming that net cash flows are received evenly throughout the year, the accounting rate of return is (ignore income taxes) :

• A) 62.3%.
• B) 32.0%.
• C) 15.0%.
• D) 7.7%.
• E) 5.0%.

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Definitions:

Product Costs

The costs directly associated with the production of goods, including raw materials, labor, and manufacturing overhead.

Work in Process Inventory

Refers to the value of items that are in the production process but have not yet been completed.

Merchandising Companies

Businesses that purchase goods in finished form for resale to consumers or other buyers without further processing.

Finished Goods Inventory

Inventory that is completed and ready for sale.