During 2017, Erie Inc

question 74

Multiple Choice

During 2017, Erie Inc. developed a new process for packaging products. Erie paid its employees $450,000 over the past five years in developing this process. On January 1, 2017, Erie paid $12,000 to register the packaging patent. The company believes the patent will produce profits for 10 years. The patent has a 17-year legal life. How much amortization expense should be recognized during 2017?

• A)$27,118
• B)$46,200
• C)$1,200
• D)$647

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Definitions:

Variable Cost

Expenses that change in proportion to the amount of goods or services produced.

Advertising

The action of calling public attention to products, services, or events, typically through paid announcements in various media platforms.

Margin Of Safety

It represents the difference between actual or budgeted sales and the break-even point. It indicates how much sales can fall before a business incurs a loss.

Contribution Format

A specific income statement format that separates fixed costs from variable costs to compute contribution margin, which helps in decision-making.