Which of the following statements regarding the use of historical costs and current costs to compute return on investment (ROI)is (are)true? (A)Historical costs are based on the original costs to acquire a long-term asset,while current costs represent the costs to replace the long-term asset.
(B)For a specific multiple-period project,the return on investment (ROI)computed using current costs will generally be less than the ROI computed using historical costs.
A)only (A)is true
B)only (B)is true
C)both (A)and (B)are true
D)neither (A)and (B)is true

Question

Quizplus · Accepted Answer

(A) is true because historical costs are the original costs incurred to acquire a long-term asset, whereas current costs represent the cost to replace that asset at its current value.
(B) is also true because the ROI computed using current costs will typically be less than the ROI computed using historical costs due to inflation and other factors that affect the costs of acquiring or replacing the assets. Therefore, current costs will generally be higher because of these factors, resulting in a lower ROI.

Which of the Following Statements Regarding the Use of Historical