Question：Which of the following would be appropriate cost units for a passenger coach company?
A. (i) Vehicle cost per passenger-kilometre
B. (ii) Fuel cost for each vehicle per kilometre
C. (iii) Fixed cost per kilometre
The correct answer is: (i) and (ii)
The vehicle cost per passenger-kilometre (i) is appropriate for cost control purposes because it combines the distance travelled and the number of passengers carried, both of which affect cost.
The fuel cost for each vehicle per kilometre (ii) can be useful for control purposes because it focuses on a particular aspect of the cost of operating each vehicle.
The fixed cost per kilometre (iii) is not particularly useful for control purposes because it varies with the number of kilometres travelled.
Question：Which of the following is a disadvantage of the payback method of investment appraisal?
A. It tends to maximise financial and business risk.
B. Its use will hinder liquidity.
C. It is a fairly complex technique and not easy to understand.
D. It may lead to excessive investment in short-term projects.
The correct answer is: It may lead to excessive investment in short-term projects.
Focusing on payback will lead to choosing short-term projects.
It tends to emphasise those projects which make a quick return.
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