true or false for each question: 1. The total overhead variance is the differenc

Question

true or false for each question:

1. The total overhead variance is the difference between actual overhead costs and overhead costs applied to work done.

2. The cash payback method is frequently used as a screening tool but it does not take into consideration the profitability of a project.

3. The profitability index allows comparison of the relative desirability of projects that require differing initial investments.

4. Sensitivity analysis uses a number of outcome estimates to get a sense of the variability among potential returns.

Explanation / Answer

1. Statement that total overhead variance is the difference between actual overhead costs and overhead costs applied to work done is false since total overhead variance is a difference between actual overhead ang standard overhead.

2. The payback method does not takes into account the realizable value or scrap value, thus if the realiazable value is considerable, pay back method will not reflect the correct profitability. Thus statement that  cash payback method is frequently used as a screening tool but it does not take into consideration the profitability of a project is True.

3. Statement that profitability index allows comparison of the relative desirability of projects that require differing initial investments is false since it does not allows comparison of the relative desirability of projects that requires differing initial investments.

4. Statement that Sensitivity analysis uses a number of outcome estimates to get a sense of the variability among potential returns is True.

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