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Match each term below with the correct definition from the dropdown list:

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Match each term below with the correct definition from the dropdown list:

Match each term below with the correct definition from the dropdown list:

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LexiExpert · Tutor for 3 years

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1. Investment Appraisal - A method for measuring whether the returns generated by the business exceed the required returns of investors.<br />2. Activity-Based Costing (ABC) - A costing technique that relates overheads to specific production or provision of a service.<br />3. Customer Profitability Analysis (CPA) - An analysis of the business profitability through the assessment of its individual customers or types of customers.

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## Step 1: <br />Firstly identify all the terms dealing with finance, costing techniques, and businesses. Then observe their definitions closely in order to map the correct definition with its corresponding term.<br /><br />## Step 2: <br />The first description given is talking about the process of comparing the returns created by a business with the returns investors were anticipating. This looks like an Investment Appraisal, a business method that assesses if an investment will be profitable or not by calculating the present value of cash inflow and outflows.<br /><br />### The formula for this is: \(NPV (net present value) = R_t / (1 + i)^t\), where \(R_t\) is the net cash inflow-outflows during a period t, \(i\) is the discount rate, and \(t\) is the number of time periods.<br /><br />## Step 3: <br />The second definition given dealing with overheads related to the production and services points towards a costing technique known as Activity-Based Costing (ABC). ABC enables a business to lay pieces of overhead costs thereafter production, such that each product or service gets a share of these Costs driven by their own personal consumption of activities.<br /><br />### The formula for ABC costing: \(Total Cost = Direct labor cost + Direct Material Cost + Overhead cost\)<br /><br />## Step 4:<br />The final description talks about the analysis of profitability based on individual customers or customer segments, which is the definition of Customer Profitability Analysis (CPA). CPA is a method of recognizing which customers are producing the most profit for an organization.
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