Question

1. which of the following utilizes the time value of money?

a. payback

b. benefit cost ratio

c. npv

d. none of the above

2.which of the following methods assumes 0 is the net present value

a. payback

b. discounted payback

c.irr

d. none of the above

3. a company has determined tha the standard for materials is 20ft squared and 4$ per square foot. if a process produces 2000 units and uses 11ft squared per unit at 5$ per square foot, the materials quantity variance is

a. 8000 favorable

b. 8000 unfavorable

c. 18,000 unfavorable

d. none of the above

Answer 1

Question 1

Correct answer----------(c) NPV

NPV or Net present value uses the present value of money to analyses the benefits of an investment. If NPV is positive the investment is worth acceptance otherwise not.

Question 2

Correct answer----------(c) IRR

IRR or internal rate of return is the rate at which the investment will provide zero returns. The investment is accepted only if actual rate of return is more than IRR.

Question 3

Correct answer----------(d) None of the above

The correct variance is $72,000 Favorable

Working

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	40000	-	22000	)	x	$              4.00
	72000
	Variance		$           72,000.00			Favourable-F

Standard DATA for		2000	Items
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 20 ft x 2000 Items)=40000 ft	$              4.00	$          160,000.00

		2000	Items
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	22000	$            5.00	$ 110,000