How Is the Project Profitability Index Computed?
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How Is the Project Profitability Index Computed?
Questions
- Managers often assume a strictly linear relationship between cost and the level of activity. Under what conditions would this be a valid or invalid assumption?
Only variable costs can be differential costs. Do you agree? Explain.
Explain how a shift in the sales mix could result in both a higher break-even point and a lower net operating income.
- Why do companies use predetermined overhead rates rather than actual manufacturing overhead costs to apply overhead to jobs?
- If a company fully allocates all of its overhead costs to jobs, does this guarantee that a profit will be earned for the period?
- Why aren’t common fixed costs allocated to segments under the contribution approach?
- How is it possible for a fixed cost that is traceable to a segment to become a common fixed cost if the segment is divided into further segments?
When activity-based costing is used, why do manufacturing overhead costs often shift from high-volume products to low-volume products?
- Airlines sometimes offer reduced rates during certain times of the week to members of a businessperson’s family if they accompany him or her on trips. How does the concept of relevant costs enter the decision by the airline to offer reduced rates of this type?
- From a decision-making point of view, should joint costs be allocated among joint products? Explain why or why not?
- How is the project profitability index computed, and what does it measure?
- Explain how the cost of capital serves as a screening tool when using (a) the net present value method and (b) the internal rate of return method.
RUBRIC
Excellent Quality
95-100%
Introduction 45-41 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Literature Support
91-84 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Methodology
58-53 points
Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met.
Average Score
50-85%
40-38 points
More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.
83-76 points
Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.
52-49 points
Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met.
Poor Quality
0-45%
37-1 points
The background and/or significance are missing. No search history information is provided.
75-1 points
Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.
48-1 points
There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met
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How Is the Project Profitability Index Computed?