COST ACCOUNTING
CAPITAL BUDGETING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Sales of a product will typically accelerate, stabilize, and then decline as the product becomes outdated or faces increased competition.
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A new product typically has its highest sales immediately after release as customers are attracted by the novelty of the product.
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The prices of technology products tend to fall over time as newer, superior technologies emerge and production costs decline.
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Prices and costs tend to rise with the general level of inflation in the economy.
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Detailed explanation-1: -Answer: The correct answer is option B. Explanation: Capital budgeting considers the opportunity cost.
Detailed explanation-2: -As they involve huge costs one wrong decision would have a big effect on the business. They include all the potential expenses/costs. It includes opportunity cost, actual cost, incremental and relevant cash flows. It does not include sunk costs.
Detailed explanation-3: -Which of the following is most likely an assumption of capital budgeting? Any taxes involved need to be ignored. Decisions are based on net income.
Detailed explanation-4: -The answer is: d. to determine the effect of the decision to accept or reject a project on the firm’s cash flows. Capital budgeting is a process used by firms to determine whether or not to accept or reject a project. This decision is made based on the project’s anticipated future cash flows.