There are in total 8 questions 1Wh en a firm has the opportunity to add a projec

Question

There are in total 8 questions 1Wh en a firm has the opportunity to add a project that will utilize excess factory capacity (that is currently not being used), which costs should be used to help determine if the added project s (o.S pts) A. 8. C. should be undertaken? allocated overhead costs that is expensed no matter you take the project or not sunk costs incremental costs a develops a new engine the incidental effects might include the following: (0.5 pts) 1) demand for replacement parts; II) profits from the sale of repair services ) offer modified or improved versions of the new engine for other uses I only I and Il only I and ill only D. I, Il, and IlI Answer 3. For the case of an electric car project, the following costs should be treated as incremental costs when deciding whether to go ahead with the project EXCEPT: (0.5 pts) A. B. C. D. the consequent reduction in sales of the company's existing gasoline models (L.e, incidental effects) interest payments on debt incurred to finance the project the vailue of tools thr ll be transfere to the project from the company's existing plants instead of being sola. Answer analyzing whether to invest in 4. For the case of an electric car project, which of the following costs r cash flows should be categoriked as incremental when the project? (0.5 pts) A. B. The cost of research and development undertaken for developing the electric car during the past three years The annual depreciation charge Tax savings resulting from the depreciation charges Dividend payments

Explanation / Answer

Dear Student, only one question is allowed at a time. I am answering the first question

1)

Excess factory capacity means that the firm does not need to make additional expenses in Fixed costs or Sunk costs. So, Sunk costs are not relevant as they have already been incurred

Allocated overhead costs would have been allocated irrespective of the project been taken or not. So, these costs are also not relevant

Additional costs in the form of incremental costs are relevant in decision making as these costs are incurred specifically for the project being undertaken

So, as per above discussion, option C is the correct option

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