You are using a capital budgeting method to assess the worth of your company's new information system. Which of the following costs would you include in measuring the cash outflow?
A) increased sales of products
B) hardware and software expenditures
C) labor expenditures
D) reduced costs in production and operation
E) both A and D
F) both B and C
G) A, B, C and D

Question

You are using a capital budgeting method to assess the worth of your company's new information system. Which of the following costs would you include in measuring the cash outflow?
A) increased sales of products
B) hardware and software expenditures
C) labor expenditures
D) reduced costs in production and operation
E) both A and D 
F) both B and C
G) A, B, C and D

Quizplus · Accepted Answer

The cash outflow includes only the costs associated with the new information system, which would be the hardware and software expenditures and the labor expenditures required for its implementation and maintenance. Increased sales and reduced costs in production and operation are not costs but rather expected benefits, which should be included in the cash inflow calculation. Therefore, the best choice is F, which includes only hardware and software expenditures (B) and labor expenditures (C) in measuring the cash outflow.

You Are Using a Capital Budgeting Method to Assess the Worth