Reference no: EM13515595

Match the appropriate letter for the key term or concept to each definition provided (items 1-15). Note that not all key terms and concepts will be used.

a. Differential cost	j. Present value
b. Allocated cost	k. Cost of capital
c. Sunk cost	l. Net present value (NPV)
d. Opportunity cost	m. Internal rate of return (IRR)
e. Relevant cost	n. Payback method
f. Full capacity	o. Accounting rate of return
g. Idle capacity	p. Profitability index
h. Capital budgeting	q. Post audit
i. Cash flow	r. Outsourcing

1. The level of ROI that must be earned to permit the firm to meet its interest obligations and provide the owners their expected return; the discount rate used in the present value calculations of capital budgeting.

2. A cost that has been incurred and that cannot be unincurred, or reversed, by some future action.

3. A capital budgeting analytical technique that calculates the length of time for the cash flows from an investment to equal the investment.

4. The process of comparing the assumptions used in a capital budgeting analysis with the actual results of the investment.

5. The operating condition when some available production resources are not being utilized.

6. The process of analyzing proposed investments in plant and equipment and other long-lived assets.

7. An economic concept relating to income forgone because an alternative to earn income was not pursued.

8. A capital budgeting analytical technique that solves for the time-adjusted rate of return on an investment over its life.

9. The ratio of the present value of cash flows to the investment; used to rank proposed capital expenditures by profitability.

10. The acquisition of resources or services from outside the organization as opposed to producing those resources or services internally.

11. A capital budgeting analytical technique that calculates the rate of return on the investment based on the financial statement impacts of the investment.

12. A cost that has been assigned to a product or activity using some sort of systematic process.

13. A cost that will differ based on the selection of an alternative activity.

14. A capital budgeting analytical technique that relates the present value of the returns (cash inflows) from an investment to the present value of the cost (cash outflows) of the investment, given a cost of capital.

15. A cost classification used in analyzing costs of decision alternatives.