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It adjusts the relevant cash flows of a project to reflect the time value of money. The discount rate used is always the company's weighted average cost of capital.

It adjusts the relevant cash flows of a project to reflect the time value of money. The discount rate used reflects the risk of the project.

It adjusts the relevant profits of a project to reflect the time value of money. The discount rate used reflects the risk of the project.

It adjusts the relevant cash flows of a project after the deduction of depreciation charges to reflect the time value of money. The discount rate used is always the company's weighted average cost of capital.

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Question 2

LL produces an item, the Z, for which the demand curve is estimated to be:

P = 10 - 0.0001Q

where, P is the unit price in $ and Q is the annual sales volume in units;

Marginal revenue (MR) = 10 - 0.0002Q

The variable cost of producing the Z is $2 per unit. The annual fixed costs of production are $110,000.

What is the profit maximizing output level?

Options:

50,000 units

45,000 units

40,000 units

35,000 units

Question 3

In order to remain competitive an organization wishes to achieve cost savings for one of its existing products.

Which of the following correctly describes methods which the organization can use to achieve these cost savings?

Select ALL that apply.

Options:

Functional analysis is carried out only on existing products and is concerned only with minimizing the cost of the originally defined functions of a product.

Value engineering is a fundamental rethinking and radical redesign of an organization's existing processes.

Target costing is continuously setting new stretch targets while the product is in production.

Value analysis is examining a product's costs in order to achieve its purpose at a reduced cost while maintaining its reliability and quality.

Kaizen costing is seeking to make cost savings by continuously making small incremental cost reductions while the product is in production.

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