When Assessing Three Projects with Profitability Indexes of 1

question 69

True/False

When assessing three projects with profitability indexes of 1.05, 1.7 and 1.2, unless all projects have the same lives it is impossible to rank them accurately.

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Definitions:

Cash Account

A financial account that tracks cash transactions, including both receipts and disbursements.

Direct Labor Costs

Wages and other forms of compensation paid to employees who are directly involved in the production of goods.

Labor Efficiency Variance

The difference between the actual labor hours worked and the standard labor hours expected for the level of production achieved.

Labor Rate Variance

Labor Rate Variance is the difference between the actual cost of labor and the budgeted or standard cost, often highlighting discrepancies in wage rates or work mix.